Using Medicaid to Support Working Age Adults with Serious Mental Illnesses in the Community: A Handbook. Medicaid for SSI Cash Assistance Beneficiaries

01/24/2005

Medicaid eligibility for people with disabilities is tied very closely to eligibility for SSI cash assistance, the federally administered program that ensures a nationally uniform income floor for persons who are elderly, who are blind, or who have disabilities.5 In many states, SSI beneficiaries are automatically eligible for Medicaid. However, there are some states (called 209(b) states) where Medicaid eligibility for people with disabilities is more restrictive than SSI requirements or where SSI beneficiaries are required to apply separately for Medicaid (“SSI-criteria states). In 209(b) states, SSI beneficiaries still must be granted Medicaid eligibility once they satisfy certain requirements (described below).

In order to be eligible for SSI, a non-elderly adult (age 18 to 64) must have a severe, medically determinable physical or mental impairment or impairments. The impairments that are the basis for SSI eligibility (and SSDI eligibility) are contained in the “Listings of Impairment” that are promulgated by and periodically revised by the Social Security Administration.6 The impairments in the Listings are similar to diagnoses. (The box, “SSI and SSDI”, (below) describes the similarities and differences between the two programs.)

For example, the Listings of Mental Impairments were drafted to parallel the Diagnostic and Statistical Manual, which is used to diagnose mental disorders, including mental illnesses such as schizophrenic, affective, and anxiety disorders.7 Not all impairments qualify a person for SSI. For example, individuals for whom “drug addiction or alcoholism is the contributing factor material to their disability” are not eligible for SSI and, therefore, ineligible for Medicaid on the basis of their disability.

Having a severe impairment (including a serious mental illness) is not sufficient to make a person eligible for SSI. In the case of adults,8 the impairment must be judged to be so severe that a person not only is unable to perform his or her previous work but “cannot, considering his [her] age, education and work experience, engage in any other kind of substantial gainful work.”

In 2005, a person’s inability to work is defined in part as having earnings less than $830 per month net of income-related work expenses. Earnings above this level are considered by regulation as evidence of a person’s ability to engage in substantial gainful activity (SGA).9 SSI eligibility is based on an individual’s having a listed severe impairment that causes the person to be unable to engage in regular work where the individual earns more than the SGA standard.

SSI and SSDI
The SSI program sometimes is confused with the Social Security Disability Insurance (SSDI) program.10 SSI and SSDI both provide assistance to individuals with severe impairments who are unable to work. The SSDI program makes payments to medically disabled individuals who have worked and paid Social Security taxes for a minimum number of years. SSI eligibility does not hinge on a person's previously paid Social Security taxes; children also can qualify for SSI. An individual's SSDI entitlement is based on work history. SSDI payments also are made to the "adult disabled children" of deceased or retired workers. Some individuals receive both SSI and SSDI payments, when the amount of their SSDI entitlement is less than the standard SSI payment. Adults with disabilities who apply for Social Security benefits are evaluated to determine whether they qualify for either program; individuals who are determined eligible are assigned to the SSDI program if they qualify and SSI if not. Because SSI and SSDI disability criteria are the same, SSDI-only beneficiaries may also qualify for Medicaid based on disability but usually in the "optional" eligibility groups. SSDI-only beneficiaries have income that is higher than the income standard associated with SSI eligibility.

In 2001, there were 5.2 million "disabled worker" SSDI beneficiaries, 28 percent of whom had mental disorders other than mental retardation. In comparison, there were 3.8 million SSI beneficiaries between the ages of 18 and 64, including 35 percent who had mental disorders other than mental retardation.11 There were approximately 1.2 million individuals between the ages of 18 and 64 who received both SSI and SSDI public assistance benefits.12

The SSI program was created and structured to provide support to persons who have especially severe disabilities. Consequently, not all persons who have serious mental illnesses qualify for SSI. Anyone who does not meet SSI disability criteria cannot receive Medicaid in a disability category of eligibility, even if they have extensive medical needs or high medical bills. There are special exceptions that allow Medicaid eligibility for certain former child beneficiaries of SSI disability benefits as well as for persons who do not meet one or more of the usual SSI disability criteria because they earn more than $830 per month. These exceptions are discussed later in the chapter.

Thirty-nine states and the District of Columbia grant Medicaid to all individuals in any month in which they receive an SSI payment.13 Of these, thirty-three do so automatically, based on a list of SSI beneficiaries compiled by the federal Social Security Administration and transmitted to the states.14 The other seven states15 (known as SSI-criteria states) require that SSI beneficiaries file a separate application with the state for Medicaid benefits. The remaining 11 states16 follow what is known as the 209(b) exception option (described below) which allows them to provide Medicaid to SSI beneficiaries only if they meet the state’s criteria, which may be more restrictive than SSI.

General Rule: SSI Income and Resource Eligibility

In states where Medicaid eligibility is directly tied to receipt of SSI, SSI income and resource eligibility rules are followed. The general income eligibility rule for SSI specifies the level of “countable income” at or below which a person is financially eligible for benefits. Countable income includes cash income plus certain in-kind goods or services a person receives in a given month, minus certain amounts that are exempt from the SSI benefit calculation (discussed more fully below).

In 2005, the maximum monthly federal SSI benefit for persons with no more than $20 in other income is $579 for an individual and $869 for a couple.17 These maximum payment amounts are also known as the “Federal Benefit Rate” (FBR). Persons with income from other sources (e.g., Social Security or a pension) receive a lesser amount -- equal to the difference between the full SSI benefit rate and the amount of their countable income from other sources. For example, the SSI benefit for an individual with countable income of $540 would be only $39 per month. The general rule also defines countable resources as cash or other property, including real property, that (a) were acquired at some time in the past, (b) the individual has the right to access, and (c) could be converted to cash and used to cover current basic living needs. Individuals with up to $2000 ($3000 for a couple) in countable resources can qualify for SSI.18 SSI resource limits often serve as the basis for Medicaid resource eligibility.

Exceptions to the General Rule

There are two major exceptions to the general SSI income and resource eligibility rules: the state 209(b) option and protection for certain former SSI beneficiaries.

State 209(b) option19

Medicaid for the “Aged, Blind, and Disabled” historically had always been linked to receipt of cash assistance benefits. When SSI replaced state-only programs of aid for older persons and people with disabilities in 1972, it was expected to lead to large increases in the number of beneficiaries. The 209(b) option was enacted along with SSI in 1972 to allow states to avoid similarly large increases in Medicaid enrollment and costs. At present, there are eleven 209(b) option states.

Many Medicaid eligibility rules under the 209(b) option follow SSI rules. But states may choose, instead, to use some or all of the more restrictive Medicaid rules that were in effect in their state on January 1, 1972, shortly before SSI was enacted. Typically these states have retained at least some of their pre-SSI rules concerning countable income or resources. Only a few use more stringent criteria for determining blindness or disability.20

In general, 209(b) states have lower income and/or resource standards than states that key eligibility to the SSI FBR. Federal rules require that all 209(b) states counterbalance the potential negative effects of the 209(b) option on SSI beneficiaries. Any residents who are elderly, blind, or have disabilities -- including those with too much income for SSI -- must be allowed to “spend down” to the state’s Medicaid income standard if their expenses for medical services so erode their income that their “net” remaining income would be less than a standard set by the state. This requirement creates a medically needy-like program for this population, even in states that have not chosen specifically to cover the medically needy as an option, as is the case in Indiana, Missouri, and Ohio. Spend-down rules for 209(b) are virtually identical to spend-down rules for the medically needy (discussed below).

Medicaid protection for certain former SSI beneficiaries

Federal law also requires all states, including 209(b) states, to provide Medicaid to former SSI beneficiaries who would, but for increases in their Social Security benefits, continue to be eligible for SSI.21 Congress passed this provision in 1986 to ensure that annual Social Security increases -- intended to improve people’s lives -- did not harm this group by causing them to lose Medicaid as well as SSI.22 These individuals are treated as if they are still receiving SSI. Most of the individuals affected have incomes just marginally above the income levels at which they might qualify for SSI and Medicaid. In fact, many persons who could qualify for Medicaid under these provisions do not apply for the program, most likely because they are not aware of them. Improved understanding of these protections may help increase the Medicaid enrollment of this group.

Countable Income or Resources

The concept of countable income and resources may seem arcane but is important. As noted previously, neither SSI nor Medicaid determine eligibility by comparing a person’s total income and resources to the dollar thresholds that apply in the person’s eligibility category. Rather, both programs count only certain types and amounts. For this reason, an individual can have total income or resources that are higher than the nominal eligibility limits (i.e., higher than $579 in total income or $2000 in total resources for SSI) and still qualify for benefits.

SSI Rules

SSI rules reduce a person’s gross income in calculating countable income in three important ways. First, SSI disregards the first $20 of every applicant/recipient’s income, regardless of source. Second -- and of great significance to people with disabilities who work -- SSI provides an additional disregard of earnings from work, amounting to the first $65 plus one-half of the remaining earnings amount. This disregard of earned income contrasts with the treatment of unearned income (e.g., pensions or SSDI payments). Except for the basic $20 disregard, in general all unearned income is countable and reduces a person’s SSI payment.

Unearned income in excess of $599 (the $579 FBR plus the $20 universal disregard) precludes eligibility for SSI and thereby Medicaid, unless the state has another disability-related eligibility group for which the person qualifies. In the case of earned income, however, a significant portion is disregarded. SSI rules also contain additional work incentives, which are described in “SSI and People with Disabilities Who Work” on the next page.

Third, spouses or children with disabilities in families with other non-disabled members who are ineligible can qualify for SSI at higher gross amounts of family income. In such households, SSI counts only the portion of the non-disabled family member’s income that is left after SSI subtracts amounts to cover their basic needs. SSI also may apply several other special-purpose reductions.

Example: SSI Treatment of Earned Income
If an individual with a disability has a job that pays $700 per month and has no other unearned income, then SSI rules treat the person's earnings in the following fashion:

Gross income: $700

Disregards:
  • First $20 +
  • Additional $65 of earnings
  • One-half of remaining earnings (1/2 X $615.00 = $307.50)

Countable Income: $307.50

This person would receive a $271.50 SSI benefit ($579 - $307.50). Combined with the individual's earnings, the person would have $971.50 available ($700 in earnings plus the SSI benefit). Because the person is receiving an SSI benefit, she/he would also have Medicaid coverage.

SSI rules also reduce gross resources in determining whether resources are below the SSI $2,000/$3,000 thresholds, by exempting the home (regardless of value) and (within limits) such things as an auto, household goods, surrender value of life insurance, burial funds, and property that is essential to self-support.23

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