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FAQs

What happens to special Medicaid beneficiaries when other income is involved?

The challenge for these special Medicaid beneficiaries is predicting when the individual involved will lose Medicaid coverage. There is no easy way to predict because it depends entirely on how much of the Social Security benefit is excluded, and on how much and what types of other income the beneficiary receives.

Both 1634 and SSI eligibility States treat income the same way that the SSI program treats income. The SSI income rules divide income into two categories: earned and unearned. Unearned income has a profound effect on SSI entitlement. Only up to $20 of unearned income may be excluded when calculating SSI payments or SSI related Medicaid eligibility.

Earned income is treated more favorably. First, if the $20 exclusion was not used on unearned income, it may be deducted from earnings. Next, $65 of earnings is excluded as income. Deductions may be made due to student status. Also, the cost of items or services necessary for work, related to the disability, and paid out of pocket may be deducted. What’s left is divided in half, and additional deductions for work expenses paid out of pocket by blind individuals, or income dedicated to Plans for Achieving Self-Support (PASS) may be subtracted. Only what is left after these deductions counts against an individual’s SSI payment, or eligibility for Medicaid in States that use SSI rules for Medicaid entitlement.

Examples of Special Medicaid Beneficiaries with Other Income
Casey - SSDI:

In the previous examples, different amounts of the Social Security benefit were excluded for each person. Casey, for example, had $18 of his SSDI excluded for Medicaid eligibility purposes. Excluding that $18 allowed Casey’s unearned income to be below the Medicaid eligibility threshold. When making the determination, the state Medicaid agency would then deduct the $20 general income exclusion, leaving Casey with $544 in countable unearned income. If the state Medicaid limit were $552, Casey would be able to have countable income of up to $8, (the difference between the countable SSDI and the state income limit) before his Medicaid would be at risk. As Casey’s benefits increase in the future, his exclusion also would increase. Thus Casey’s unearned income is treated as if it had remained at the level it was prior to the increase that stopped SSI entitlement. In Casey’s example, that means his SSDI would be counted as if it were $564 indefinitely.

One essential factor to remember is that this exclusion only applies if the result of the calculation is Medicaid entitlement. If Casey’s countable income exceeded the SSI income limit, then the amount of Casey’s benefit that was previously excluded would be added back in when determining entitlement under any other Medicaid eligibility group. If, for example, Casey were given an inherited annuity that gave him $100 more a month in unearned income, the Medicaid agency would consider Casey to have $672 in unearned income, not $664. Adding the excluded amount back in becomes more important with larger excluded amounts, as you will see in the rest of the examples.
Lucy – CDB:
In the previous example, the Medicaid agency excluded $250 of Lucy’s unearned income. The state Medicaid countable income cap would be the same as SSI. If this happened in 2005, for example, Lucy would not be eligible for Medicaid if her total countable income exceeded $579. Lucy has $500 in unearned income after the $250 of additional Childhood Disability Benefits is excluded. The Medicaid agency will deduct the $20 general exclusion from that remaining $500. That means that Lucy’s countable income from her CDB benefits is $480. If Lucy has other countable income over $99, it would cause her countable income total to exceed the SSI limit of $579. Lucy would lose eligibility to Medicaid as a special Medicaid beneficiary. If that were to happen, the state Medicaid agency would use all of Lucy’s unearned income, the whole $750, when calculating eligibility under other possible Medicaid groups.
Cindy – CDB:
Cindy is in a better position. Since initial entitlement to Childhood Disability Benefits eliminated her entitlement to SSI, the whole amount may be excluded by the state Medicaid agency when determining eligibility as a special Medicaid beneficiary. That means Cindy could have other countable income that totals $579 and still retain her Medicaid eligibility. If her other countable income exceeds that threshold, however, the state Medicaid agency would simply add the $600 of CDB benefits back in when making eligibility determinations under other Medicaid groups.
Katherine – DWB:
Katherine also went from full SSI to a full disabled Widow’s benefit. Like Cindy, Katherine will be eligible for Medicaid unless her other countable income exceeds the current SSI income threshold of $579. Unlike Cindy, however, Katherine is only eligible for Medicaid under this provision until her Medicare entitlement begins.

POMS Resources:

FAQ Disclaimer: The VCU-BARC FAQ Pages are general information provided as a public service. The contents do not necessarily represent the policy, interpretations or opinion of the Social Security Administration (SSA). The information contained here is intended to inform readers of issues that may affect Social Security and/or other public assistance benefits. Because individual circumstances differ, the reader should not rely on any information here as being specifically applicable to an individual's situation.