Using Medicaid to Support Working Age Adults with Serious Mental Illnesses in the Community: A Handbook. Medicaid Eligibility for Individuals with Serious Mental Illnesses: Added Challenges


There often are added challenges in securing and maintaining Medicaid eligibility for working-age adults with serious mental illnesses. Some of these challenges are shared by people with other disabilities but many are experienced more frequently by individuals with serious mental illnesses.

Qualifying for SSI/SSDI

The processes and steps involved in securing and maintaining SSI/SSDI eligibility are by no means simple and frequently are time-consuming. They can be especially challenging for individuals with mental impairments, regardless of type. For persons with serious mental illnesses, it is often important that they have assistance in navigating the application and eligibility determination process. When such assistance is not available from involved family members or other allies, it may be provided by the public mental health system or local advocacy organizations and peer support networks. For example, many mental health agencies employ benefit specialists to assist individuals in the application process. Such assistance is a critical capability in programs that serve homeless individuals. Connecting individuals with serious mental illnesses to public benefits is also a central function of service coordinators (case managers). Especially in states that do not automatically link Medicaid and SSI eligibility, assistance may be necessary to help individuals to secure Medicaid eligibility once SSI eligibility has been obtained.

Equally important is a person’s maintaining eligibility once it has been secured. There are reporting requirements that both SSI and SSDI beneficiaries must meet in order to continue their benefits. Again, especially in states that do not interlock Medicaid and SSI eligibility, there also are periodic reporting requirements that individuals must fulfill in order to maintain their Medicaid eligibility. In the case of individuals who are eligible for Medicaid, Medicaid-funded case management services (discussed in Chapter 4) can be employed to assist individuals in maintaining their eligibility (as well as access to other benefit programs).

Individuals who receive SSI or SSDI benefits are subject to periodic continuing disability review. Neither SSI nor SSDI eligibility is granted on a permanent basis. Continuing disability reviews assess whether individuals continue to meet eligibility criteria. The frequency of such reviews varies, but they usually take place every three to five years, depending on the nature of the person’s disability. A review may result in a determination that a person is “medically improved.” Such a determination results in a termination of SSI/SSDI benefits, which in turn leads to a loss of Medicaid benefits unless the individual is covered under the TWWIIA medically improved group. This occurs because, in the disability eligibility group, Medicaid eligibility is interlocked with SSI/SSDI disability criteria. Some individuals with serious mental illnesses experience improvements but episodically encounter problems. Individuals who have been determined by the Social Security Administration to be medically improved can apply for reinstatement in the event that their situation worsens. However, after the reinstatement period runs out, they must re-apply for benefits.

Individuals with Dual Disorders

As previously noted, individuals whose impairment is assessed as stemming from alcohol or drug abuse cannot qualify for SSI/SSDI. A high percentage of individuals with serious mental illnesses have dual disorders (i.e., they both have a serious mental illness and experience substance abuse). In the case of these individuals, there are special challenges in securing eligibility for SSI/SSDI. Substance abuse that accompanies a serious mental illness does not necessarily disqualify an individual from SSI/SSDI. In order to secure or maintain SSI/SSDI eligibility for these individuals, it is necessary that the person’s physician or psychiatrist indicate that mental illness is the contributing factor to the person’s impairment.48


Numerous individuals with serious mental illnesses experience incarceration. In general, incarceration causes benefits like SSI or Medicaid to be terminated or suspended. When a person is released (whether on parole or probation), reconnecting to benefits can be very important so that the individual can obtain supports in order to resume life in the community.50

When an SSI beneficiary is incarcerated, his/her benefits generally cease immediately. When incarceration is for fewer than twelve consecutive months, the person is placed in suspended status. Individuals in this status may have their benefits reinstated upon release. If the Social Security Administration is notified in advance of release, the person’s SSI benefit can be reinstated quickly. However, people incarcerated for more than twelve months must re-apply for SSI. In the case of SSDI, benefits are suspended following conviction and confinement in jail for 30 or more days. SSDI benefits are immediately reinstated once release has been verified. In the case of persons who were not receiving SSI/SSDI before they were incarcerated, they may apply for benefits prior to release. In some states and localities, offender programs work with these individuals prior to release to assist their obtaining benefits.

Because of the linkage between Medicaid eligibility and receipt of SSI assistance, incarceration also poses challenges with respect to securing Medicaid for individuals who have been incarcerated. Federal law prohibits states from making Medicaid payments for services furnished to incarcerated individuals. There also are issues concerning Medicaid eligibility when a person is released. If a person was eligible for Medicaid before being incarcerated, a state may suspend the person’s eligibility during the period of incarceration and reinstate it once the person is released (provided, of course, that the person meets applicable eligibility criteria). However, the practice in many states is to terminate eligibility outright when a person is incarcerated. In the case of individuals who receive SSI after release, Medicaid eligibility will be reinstated automatically once SSI benefits are authorized, but only in states where Medicaid eligibility is automatic for SSI beneficiaries. Elsewhere, and in the case of individuals who obtain Medicaid eligibility via other optional groups, securing Medicaid eligibility requires the person to reapply.

There are a variety of steps that states take to reconnect incarcerated persons to benefits as soon after release as possible. Some of these steps include jails and prisons entering into pre-release agreements with the Social Security Administration, continuing involvement with incarcerated individuals by community agencies and offender programs, and simplifying Medicaid eligibility determination processes.51

Effects of Institutionalization on Medicaid Eligibility

When a person with a serious mental illness is institutionalized, additional challenges can arise. Federal law governing the SSI program prohibits the payment of SSI benefits to “inmates of public institutions.” Under this policy, individuals between the ages of 22-64 in long-term stay status at state mental health facilities may not receive SSI benefits (however, SSDI beneficiaries continue to receive benefits in these facilities).52 SSI eligibility is unaffected in the case of persons who are served in other Medicaid-funded settings (e.g., nursing facilities), in some other types of residential settings, or when persons are institutionalized for short periods (up to three months). Once SSI benefits stop, the connection between receipt of SSI benefits and Medicaid can be disrupted. When a person is discharged from a facility, the steps necessary to reinstate both SSI payments and Medicaid eligibility are similar to those involved in securing benefits for incarcerated persons.

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