GPSOLO July - August 2008
Medicare, Medicaid, and SSI
As your clients advance in age, they are faced with a host of new issues in their lives. They also need to deal with government programs for the elderly with which they are unlikely to be familiar. All too often, lawyers are no more familiar with these programs than their clients. This article will give a brief introduction to three government programs affecting the lives of a large number of older people: Medicare, Medicaid, and Supplemental Security Income (SSI). Each of these programs has complex rules and regulations that this article will not attempt to cover in detail. However, we hope this article contains sufficient basic information for lawyers to provide useful advice to clients on when and how each of these programs may meet their needs.
One federal program likely applies to almost all your senior clients: Medicare. This federally sponsored health insurance program provides coverage for more than 44 million seniors age 65 and older as well as younger individuals with disabilities. There is no income or asset limit. This is a program worth knowing about in order to assist your clients, your loved ones, and, someday, sooner than you may think, you.
Those with a work history will qualify for Medicare upon reaching age 65 (please note that this age threshold is not connected to the increase in the Social Security retirement age). Individuals with disabilities under age 65 also can receive Medicare benefits 24 months after their first Social Security disability payment.
The first step when learning about Medicare is knowing which “part” is which. Part A, often referred to as “hospital insurance,” pays for inpatient hospital care, hospice care, inpatient care in a skilled nursing facility for a limited period immediately following a hospital stay, and home health care services. Part B, “medical insurance,” provides coverage for doctors’ visits, laboratory and X-ray services, durable medical equipment, and some other outpatient and home health services. Most seniors qualify for free Part A coverage based on their own or a spouse’s work history, and then pay a monthly premium (in 2008, $96.40 or more depending on the previous year’s income) to obtain Part B coverage, with the premium deducted from the Social Security benefit. Individuals over age 65 who are not otherwise eligible get Medicare coverage by paying a monthly premium (in 2008, $423 for Part A and $96.40 or more for Part B).
Together, Parts A and B are known as “original,” “traditional,” or “fee-for-service” Medicare. Participants are free to choose any doctor who accepts Medicare. Medicare requires patients to pay for a portion of the cost of care through deductibles and co-payments, which can be substantial. Traditional Medicare doesn’t cover all health needs (e.g., it doesn’t pay for eyeglasses or dental fees). Another huge gap is long-term care—which is why, as explained below, many seniors who need nursing home care eventually depend on Medicaid.
If you have low-income clients who do not automatically qualify for free Part A coverage owing to limited work history or who can’t afford the Part B premiums, they should apply for Medicare Savings Programs (MSPs), some of the least well known (and most under enrolled) federal health benefit programs. For people with limited assets whose monthly incomes are less than 135 percent of the federal poverty level, MSPs help pay for Medicare premiums and may assist with cost sharing.
As an alternative to the “traditional” Medicare, there is Medicare Part C, also known as “Medicare Advantage” (formerly “Medicare+Choice”). This program provides similar substantive coverage to original Medicare but does so through private insurance companies such as managed care organizations. These privately sponsored plans offer different cost structures and benefit packages than fee-for-service Medicare. For example, a managed care organization may charge lower co-payments but require members to go through a gatekeeper for referrals to specialty care. An analysis of whether private Medicare plans are truly an “advantage” is important and will depend on your client’s particular medical needs and preferences. Anyone considering enrolling should do so carefully, after reading the fine print and comparing options. In recent years, thanks to increased federal subsidies to private plans, the number and variety of Medicare Advantage products have proliferated—as have complaints about unsavory marketing and sales tactics.
The newest addition to Medicare is Part D prescription drug coverage. In order to get drug coverage, Medicare beneficiaries must choose from among dozens of private plans sponsored by drug insurance companies. They can choose to combine original Medicare with a stand-alone Part D drug policy or sign up for a Medicare Advantage plan that includes drug coverage.
As with Medicare Advantage, it pays to comparison shop when choosing a Part D plan. Just looking at monthly premiums and deductibles won’t tell the whole story. Does the plan’s formulary cover all needed drugs? Will the plan place additional restrictions on drug use, such as limiting dosages or requiring patients to try less-expensive alternatives before getting a prescription for a pricey pill? What will happen if the beneficiary hits the infamous “doughnut hole,” a gap in coverage when drug costs reach $2,510?
Most Medicare beneficiaries can make decisions to enroll or switch plans only during certain times. Generally, an individual can enroll during the first three months of eligibility and subsequently during specified annual enrollment periods. Individuals who don’t have creditable employer or retiree coverage yet decide to postpone Medicare enrollment may find themselves paying a permanent penalty when they finally decide to enroll.
Low-income Medicare beneficiaries can get extra help paying for their drug costs through the low-income subsidy (LIS) program. Anyone who qualifies for Medicaid or SSI will automatically receive LIS, as will participants in the MSPs described above. Others may apply through the Social Security Administration. The LIS provides a huge benefit for those who qualify for the full subsidy level and are enrolled in a standard, lower-cost plan: These beneficiaries have no doughnut hole gap and pay no premiums, no deductibles, and only nominal cost sharing. LIS beneficiaries also enjoy the flexibility to switch plans throughout the year.
As a sole practitioner, you may not have the time to be conversant with all of the changing options available to Medicare beneficiaries. A wealth of information is online. In particular, the “Plan Finder” at www.medicare.gov allows you to compare and contrast different plans. Be warned: Information on the Plan Finder can be daunting even for Medicare experts, and clients who are easily confused or who are not computer savvy may be easily overwhelmed. We recommend referring your clients to your State Health Insurance Assistance Program (SHIP), a federally funded organization that provides free and independent education and counseling for Medicare beneficiaries. (The SHIP in your state may be known by a different name, such as HICAP, SHIBA, or SHINE.) Find your state’s SHIP phone number at www.hapnetwork.org/ship-locator.
Medicaid is commonly summed up as simply being the “program for the poor,” and general practitioners may be inclined to think that they are unlikely to receive questions about its coverage. The fact is, however, that the program is a very dynamic one that provides vital insurance to more than 50 million people, and any attorney who has any clients with a potential need for nursing facility care should actually expect to receive a question about Medicaid. Why? Because Medicaid is the single largest purchaser of nursing facility (NF) and other long-term care (LTC) services in the nation. Medicare pays only for 100 days of NF care, and only when the care immediately follows a three-day hospital stay. Long-term care insurance, meanwhile, has not yet gained a foothold in the LTC arena, and its high premiums may continue to discourage many from purchase. With NF care costing between $6,000 and $10,000 a month, Medicaid has filled a critical vacuum for those who cannot afford its high costs.
So in the event that you are asked about Medicaid LTC coverage, what are the basics to know? First, here are some facts about Medicaid broadly. Medicaid is a federal-state partnership. Currently every state and the District of Columbia participate in Medicaid, receiving a federal match of not less than 50 percent for the costs it incurs for the coverage it provides. Medicaid eligibility is need-based, meaning all people qualifying have to meet a financial eligibility test. For virtually anybody seeking to qualify, the first step in the process will be a visit to the local department of social services office to fill out an application.
For Medicaid LTC coverage, what information will the application ask for? Monthly income for starters, although you should know that income is generally not a problem for people trying to qualify. Clients with a monthly income that is less than the base monthly charge at the NFs in their locality can become income-eligible.
The ease with which this happens, however, depends on the state. States are either “medically needy” states or “income cap” states. In medically needy states, clients will be income-eligible if their income is simply less than the charges incurred at the facility. In the income cap states, however, clients will have to set up an “income trust.” This method is obviously a more technical one, but either way, income is not too much of a sticking point in the Medicaid LTC eligibility process.
The resource tabulation, however, can be. The application will ask for a list of all of the client’s assets (or “resources”), the sum total of which cannot be greater than $2,000 (a few states have slightly higher caps). Stocks, bonds, savings, and checking accounts, as well as real property not serving as the primary residence, are included in the “resource” definition (more on the primary residence below). Quite a few people, as you can imagine, do not have a resource total as low as $2,000 at, or shortly before, application.
So how can an applicant eventually qualify? There are a number of ways in which the client may properly reduce asset totals to attain eligibility, but one method prohibited by federal law is the wholesale gifting away of resources. The Medicaid LTC applicant will have to list in the application any asset transfers made for less than fair market value in the previous three years (this is called the “look-back” period, and a recent federal law mandates that it be extended to five years by 2011). Cash gifts to grandchildren, real property transfers for less than the market price, and certain annuity purchases are all included in this mix. And what happens if the Medicaid applicant has made transfers during the look-back period? Eligibility penalties are assessed, which means that an applicant seeking to reduce resources through gifts, and thereby attain eligibility, is not likely to accomplish very much.
But what if the Medicaid LTC applicant is married? Will the couple have to reduce all assets so the frail spouse can get coverage? No. Federal law protects the “well” spouse (called the “community spouse”) from impoverishment by guaranteeing him or her a minimum share of the couple’s combined resources (generally 50 percent, up to a maximum of roughly $100,000). The community spouse also may keep all of the income in his or her own name and will be entitled to a share of the frail spouse’s income if that income is insufficient to maintain himself or herself in the community. On the flip side, the frail spouse will have to account on the application for all of the transfers made by either spouse during the look-back period. It should be noted that there is no such protection for the community spouse in a lesbian or gay relationship, even if the state in which they reside recognizes their relationship. (See the article “Growing Old with a Lesbian or Gay Partner” on page 20.)
What about the primary residence? Will home ownership impact eligibility? No. The Medicaid applicant’s home is an exempt resource in the eligibility screening. However, once eligibility is established, a single individual will not be able to use income for any upkeep of the home. Furthermore, the state may place a lien on the home equal to the amount it has incurred for care (which will increase each month the Medicaid enrollee receives coverage).
If the Medicaid enrollee is married and the community spouse is living in the home, the state may not place a lien on the property. But this does not mean that the state is foreclosed from attempting to recoup its costs. The federal law actually mandates that states try to recoup their Medicaid LTC expenditures through the estates of those who received coverage (“Medicaid estate recovery”). If the enrollee is single when he or she passes away, the process is relatively easy for the state. If the enrollee predeceases his or her spouse, things can get more complicated, as states frequently have tried to recoup their costs from the estates of Medicaid LTC enrollees’ surviving spouses.
Putting all of this aside, another thing you should know is that Medicaid does not limit its LTC coverage to NF care. States are relying increasingly on delivering care in the community through home- and community-based services (HCBS) programs. Although consumers, as you can imagine, prefer HCBS programs, and although these programs are not new, states have historically relied far more heavily on NF for delivery. But with HCBS typically costing less than NF care, and with the increase in demand that is expected to coincide with the aging of the baby boom generation, states are expanding their HCBS programs. Thus, any client inquiring about Medicaid’s LTC coverage should be advised that there may be opportunities to receive a package of LTC in the community in lieu of a facility.
This is the very broad-brushed portrait of Medicaid LTC coverage. It is an area of the law that many lawyers, especially those doing estate work, are now involved in. But a word of caution on addressing a client’s Medicaid LTC eligibility issues is in order: The Medicaid eligibility and post-eligibility process are loaded with technical issues, and a virtual science has been made out of reconciling compliance with Medicaid’s rules prohibiting pre-eligibility transfers and assisting clients in using their own money to help a spouse or other family member.
Therefore, spend some time getting to know the ins and outs of Medicaid before advising a client on these issues. One place to start is with the National Academy of Elder Law Attorneys, Inc. ( www.naela.com), membership in which includes both a mentoring program and a members-only listserve on which clients’ Medicaid issues are discussed.
Supplemental Security Income
The Supplemental Security Income (SSI) program provides critical support for the most vulnerable group of older people in America, those whose income from Social Security and other sources is insufficient to meet the basic needs of subsistence. SSI is a federal program administered by the Social Security Administration (SSA). Currently it provides a modest monthly cash benefit for more than 7 million aged, blind, and disabled people in the United States. In most states receipt of SSI benefits also confers automatic eligibility for full Medicaid benefits. Unlike Medicaid, SSI benefits are not subject to estate recovery.
In order to be eligible for SSI, a person must reside in the United States, meet a stringent income and resource test, and be either age 65 or over or qualify as blind or disabled under the standards of the Social Security Act. If a person is eligible and has no other income, the federal government pays (in 2008) a monthly benefit of $637 for an individual and $956 for an eligible couple, with these figures adjusted for inflation each year. Some states choose to supplement the federal benefit with state supplementary payments. Thus, for example, the basic combined federal and state monthly benefit rate in California in 2008 is $870 for an individual ($954 if blind) and $1,524 for an eligible couple ($1,751 if blind).
Why is SSI Important? Attorneys are sometimes asked by clients how they can provide financial help to an aging parent, sibling, disabled adult child, or other relative who is receiving or potentially eligible for SSI without unduly jeopardizing that person’s SSI eligibility or the amount of benefits. Most attorneys are understandably reluctant to provide any advice because they are not familiar with the governing statute and regulations and often they do not know where to refer the person for further information. Although the SSI program has more than its fair share of complex rules, an attorney can readily gain enough basic knowledge of the program to avoid potential pitfalls and provide valuable advice to a client on ways to significantly improve the financial well-being of family members on SSI while preserving benefits.
An SSI recipient cannot have more than $2,000 ($3,000 for an eligible couple) in available resources (i.e., cash or anything the individual could convert to cash to use for the individual’s support and maintenance). However, certain items are excluded as resources. The most common exclusions include: (1) the home in which the individual resides, regardless of value, (2) an automobile used for transportation of a household member, (3) household goods and personal effects, (4) a burial space, and (5) life insurance with face value not to exceed $1,500. Although there are numerous other exclusions, they are of less general applicability.
Resources are counted on the first day of each month and only then. This may seem like a minor technical point, but it is of tremendous importance. It means that if an SSI recipient receives a significant amount of cash in excess of the resource limit, it will never count as a resource for SSI purposes if the person spends down to the resource limit before the end of the month. Two important caveats to note are that the person must be able to account for how the money was spent and cannot give it away. (More on this last point later.)
In order to receive SSI, an individual must have monthly “countable income” less than the SSI payment level. Thus an individual living alone in Florida (which provides no state supplementation) must have countable income of less than $637 per month in order to receive SSI and will receive a grant equal to the difference between countable income and $637. But what is countable income? There are three important things to remember about the term. The first and foremost is that “income” is itself a term of art. The second is that not all income is counted. The third is that there are different rules for counting earned and unearned income. The rule for unearned income is simple. All but the first $20 per month is counted. The rules for earned income are far more generous; less than half of earned income is counted for SSI purposes. However, the earned income rules will not be dealt with in this brief summary both because they are more complex and because the percentage of aged SSI recipients with earned income is insignificant.
So, what is “income”? The answer to this question is most important if you want to provide financial assistance to someone on SSI. The SSI regulations define income as “anything you receive in cash or in kind that you can use to meet your needs for food and shelter.” This means that in-kind gifts, other than gifts of food or shelter, are not income for SSI purposes and thus do not affect SSI eligibility or amount of benefits. Thus, someone who wants to help a parent receiving SSI can directly pay for such items as clothing, household furniture, airline tickets, an automobile, or automobile insurance without affecting the parent’s receipt of SSI. On the other hand, gifts of cash to pay for these items will result in a dollar-for-dollar reduction in the SSI grant.
However, it is important to keep this in perspective. The one-time receipt of a large sum of cash is no more of a disaster for an SSI recipient than it is for anyone else, which is to say it should be welcomed. Recipients simply must remember three things: (1) promptly report receipt of the money to the SSA, (2) pay back to the SSA the amount of benefits received in that month if the cash is sufficient to render the person ineligible for the month, and (3) spend down to the resource limit before the end of the month to avoid an additional month of ineligibility.
What if clients seek advice on whether they should apply as a couple or as individuals? Tell them not to worry—the choice isn’t theirs. If two people of opposite sex are married or both are leading people to believe they are husband and wife, and both are categorically eligible (i.e., both are either over 65 or disabled), they are required to apply as a couple. On the other hand, if one spouse is 66 and the other is 64 and not disabled, then the older spouse must apply as an individual.
There are three situations in which a portion of the income and resources of another person will be deemed to someone apply for or receiving SSI: spousal deeming, alien sponsor deeming, and parent-to-child deeming. Spousal deeming applies when one spouse is over 65 or disabled and applies for SSI and lives with a spouse who is under 65 and not disabled. It only applies when they live together, not when they live apart. Alien sponsor deeming only applies to sponsored immigrants. The length of time a sponsored alien is subject to sponsor deeming varies according to the alien’s date of entry and work history, among other factors. Parent-to-child deeming applies through age 18, but only if parent and child live together. There is no child-to-parent deeming.
The SSI program has a transfer penalty of up to 36 months of ineligibility, which, in some ways, is much more severe than the Medicaid transfer penalty. Unlike the Medicaid penalty, which applies only to those seeking long-term care services, the SSI penalty applies to anyone applying for or receiving SSI. The penalty applies to transfers for less than fair market value in the period commencing three years prior to the date of application for SSI unless the person can show that the transfer was for a purpose other than qualifying for SSI. A relatively small transfer can result in a severe penalty. For example, if an SSI recipient in Florida gives away $2,000, this can result in a penalty of three months of ineligibility. The number of months of ineligibility is determined by taking the amount of the uncompensated transfer and dividing it by the individual’s combined federal/state payment rate and rounding down to the nearest whole number.
The SSA maintains an excellent website ( www.ssa.gov) with informational material on a variety of topics relating to the SSI program, as well as the other programs administered by the agency. It includes informational material in 15 other languages. Also available on the SSA website are large portions of the employee manual, or POMS, which contains detailed descriptions of SSA policies and procedures. The SSA also puts out a publication entitled “Understanding Supplemental Security Income,” which deals with many common issues in question-and-answer format. It is updated annually and is available both on the SSA website and in print format.
National Senior Citizens Law Center
For more than 35 years the National Senior Citizens Law Center (NSCLC) has been at the forefront of legal advocacy to promote the independence and well-being of low-income elderly individuals and people with disabilities. NSCLC focuses on the two most fundamental issues facing the aging and disability communities: ensuring adequate income to meet basic needs and having access to quality health care.
In the course of these 35 years, NSCLC has gained wide recognition for its expertise and successful advocacy in several subject areas of critical importance to low-income elderly individuals. These include long-term care (nursing homes and assisted living as well as home care), Social Security, Supplemental Security Income (SSI), Medicaid, and Medicare (particularly on issues affecting so-called dual eligibles—those who are eligible for both Medicare and Medicaid). In addition, the Herbert Semmel Federal Rights Project was established to deal with concerns regarding judicial doctrines that limit the ability of private citizens to enforce state and federal laws enacted for their protection. In each of these areas, NSCLC engages in impact litigation, advocates before Congress and administrative agencies, and provides technical assistance and continuing legal education programs.
NSCLC maintains offices in Washington, D.C., and Los Angeles and Oakland, California. NSCLC also provides publications for attorneys, including the biweekly NSCLC Washington Weekly, which contains brief summaries of current developments affecting the elderly. NSCLC publishes material for consumers in the area of long-term care, including The Baby Boomer’s Guide to Nursing Home Care and Twenty Common Nursing Home Problems—and How to Resolve Them.
Further information on NSCLC can be found on the center’s website, www.nsclc.org.
Gene Coffey is a staff attorney at the National Senior Citizens Law Center (NSCLC) in Washington, D.C., and has been providing legal representation to Medicaid beneficiaries since 1997. Gerald McIntyre is directing attorney at NSCLC’s Los Angeles office and has more than 30 years of experience in legal services advocacy. Anna Rich is a staff attorney with NSCLC’s Oakland, California, office, where she provides advocacy and support on behalf of dually eligible individuals receiving Medicare prescription drug coverage and also participates in litigation on behalf of low-income seniors. To contact the authors or for more information about NSCLC, visit www.nsclc.org.