Fundamentals of SSI, SSDI, Medicaid and Medicare Eligibility
Host: Jonathan I. Shenkman, President & Chief Investment Officer of ParkBridge Wealth Management (Contact: jonathan@parkbridgewealth.com)
Presenter: Amy C. O’Hara, CELA, Partner, Littman Krooks LLP (Contact: Littman Krooks LLP)
Jonathan Shenkman: Welcome everybody. Good morning. Welcome to the Parkbridge Wealth Management Fall Webinar Series. This program is entitled Fundamentals of SSI, SSDI, Medicaid and Medicare Eligibility. As always, my name is Jonathan Shenkman. I'm the president and Chief Investment Officer of Parkbridge Wealth Management. In that role I serve in a fiduciary capacity to help my clients achieve their financial objectives.
The goal of my program is to bring professionals together to help them better serve their clients, and this is done by educating attendees on the latest topics in wealth planning and by encouraging collaboration between a client's attorney, CPA, and financial advisor where appropriate. My practice focuses on working with high net worth families, businesses, and not-for-profits. I manage individual investment portfolios, trust accounts, corporate retirement plans and endowments to help my clients achieve their financial goals.
In addition to the 20 or so events I run every year, I also do a fair amount of writing on the topics of investing and financial planning. You can read my work in a variety of periodicals, including Barrons, CNBC, Forbes, Kiplinger, the Wall Street Journal and Trust and Estates Magazine to name just a few.
You can see all my work on my website at parkbridgewealth.com/articles, or by following me on social media at Jonathan on Money. Additionally, you can check out my weekly podcast which is also called Jonathan on Money, and you can listen to that on Apple, Spotify or wherever you get your podcasts.
Today, we're privileged to hear from Amy O'Hara, partner at Littman Krooks, based in Westchester, New York. Amy focuses her practice on special needs planning, trusts and estates, elder law and personal injury settlement consulting. She's a sought-after lecturer, and frequently speaks to advocacy organizations on the importance of proper planning for families of children with special needs.
She regularly publishes articles relating to elder law estate and special needs planning. Amy is certified as an elder law attorney by the National Elder Law Foundation as a member of the National Academy of Elder Law Attorneys. She's the treasurer of the Board of Directors of the Special Needs Alliance, a national not-for-profit organization dedicated to assisting families with special needs planning, and today Amy will be speaking about fundamentals of SSI, SSDI, Medicaid and Medicare eligibility. And with that introduction I'll now turn the program over to Amy.
Amy O'Hara: Thank you, Jonathan, for having me again. Today as Jonathan just mentioned, I'm going to do a very brief overview of supplemental security income which is often referred to as SSI, Social Security Disability Insurance (SSDI), and where it comes a lot of times in my practice is children of parents who receive social security through what's called a CDB benefit, or what used to be a DAC benefit. That's a childhood disability benefit also referred to as a disabled adult child benefit.
And Medicare and Medicaid - I regularly meet with individuals that will say Medicare when they need Medicaid, Medicaid when they need Medicare, and SSI when they mean SSDI. So I'm hoping to just provide a little overview of these various programs.
Let's start with supplemental security income. This is a Federal program administered through the Social Security Administration. It's a cash assistance program. Fortunately we have a lot of 2025 numbers that I'm able to give to you today. Not as much for the Medicaid yet - we don't have those numbers finalized yet, but we do for a lot of these federal programs.
What SSI does is provide cash assistance of up to $967 a month for an individual if they qualify. Although the benefit may seem minor in terms of the cash assistance, the impact of SSI status is substantial, since many needs-based programs are tied to SSI. I practice here in New York, and as Jonathan mentioned, I have a significant special needs practice where these children and adult children are reliant on this SSI because it opens the door with Medicaid to a lot of other programs.
In order to receive SSI, the individual needs to be age 65 or older, not eligible for social security retirement benefits (which I'm not covering today), be blind or disabled. And so in my practice, I'm typically dealing with individuals with disabilities that qualify for SSI.
In a couple of these programs that I'm going to talk about today, it's the SSA disability definition. And this is the definition in terms of the disability: An individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity (meaning really work, being able to work) by reason of any medically determinable physical or mental impairment which can be expected to result in death, or which has lasted, or can be expected to last for continuous period of not less than 12 months.
The qualifications, as I mentioned before - you need to be aged, blind, or disabled, no more than $2,000 of countable resources which are assets. This number has been around since 1984. The SSI program has been with us since around 1972. But this asset limit, unlike a lot of other numbers in social security that get the COLA increase - I think we just got the COLA increase of 2.6 percent for the coming year - this $2,000 asset test has not increased. There's been attempts in Congress to increase this number to $10,000, which is where it would be if it was on par with the COLA increase, but not successful.
So you really have to be impoverished in order to qualify for this type of program for SSI. Now there are certain assets that don't count towards that $2,000 resource, and that includes a primary residence, a vehicle, life insurance with a face value of $1,500 and a burial space in fund.
In my practice, I'll deal a lot with individuals with disabilities, and so they may have what's called an ABLE account, which I may have spoken about on this series before. That's an account where you could have up to $100,000 in that account if you meet all the eligibility requirements for an ABLE account, and still be eligible for SSI.
Also a properly drafted and executed special needs trust, whether it's first party or third party is also exempt and not counted. So Mom and Dad do their estate planning and properly fund a third party supplemental needs trust that's not counted as the beneficiary's assets in terms of that $2,000 limit enabling them to qualify for SSI.
The individual needs to have limited income. Now there's a lot of rules on how they count what income they count and what they don't count. Child support - this is where I am counseling a lot of clients, I work with various matrimonial attorneys in dealing with divorce and separation and child support - child support counts as income to the child, even if the parent is getting it. So we have to do some proper planning, and we have to have that child support irrevocably assigned by a court order to a first party special needs trust in order for it not to count, enabling the adult child - and usually when we're talking about children, it's they're 18 or over - in order to qualify for this, because at that point they're not looking at Mom and Dad's assets. Because when they're minors, they're looking at Mom and Dad's assets, thereby typically, unless their family is purely impoverished, they're not going to qualify. So it's when that child becomes an adult in their own right, Mom and Dad's assets and income are no longer looked at.
US citizenship is required or qualified alien status, and not confined to prison or a mental institution.
Now there is a look back of 36 months on any transfers. Where this comes about in my practice a lot is, I'll meet with the family and we'll be talking about transition planning because their child's turning 18 and fairly soon. So we're looking at whether this child will be able to sign advance directives, or do we have to go through guardianship, and here's the whole host of benefits.
And then lo and behold, we're talking about planning and the child is sitting there with a $100,000 custodian account or sometimes more, sometimes less. Mom and Dad say, "We'll just transfer it to ourselves" - not to mention that's not their money, so there's issues there whether they can or cannot transfer that to themselves. But there is a 36 month look back on transfers. So if Mom and Dad moved assets that were the child's, or if someone got a windfall or inheritance and moved money, there's a look back for 36 months, and the penalty is calculated at $967 per month - one month of ineligibility for every $967 given away.
Now, if somebody has that custodian account and it was properly transferred to an ABLE account - but we're only limited to putting $18,000 a year, this in the New Year $19,000 - or into a properly drafted first party trust that's exempt, there's no penalty associated with that.
Moving on to Social Security Disability Insurance - we have a lot of adult children who will move from SSI to SSDI, which is the goal oftentimes if they have a significant disability and they're not able to work or they are able to work but have a limited income. The basic eligibility for someone who is working and becomes disabled later in life through an accident or incapacity - that SSA definition that I mentioned in my earlier slides applies to eligibility for SSDI. They need to have paid FICA taxes for at least 40 quarters and worked 10 years or more. They have not reached full retirement age, and there's a 5 month waiting period before they could be eligible for SSDI, except for ALS - the 5 month waiting period is waived.
After 24 months of SSDI entitlement, the individual is eligible for Medicare, which I'll talk about in a few minutes. There is no resource test - unlike SSI that I mentioned before, with SSDI it does not matter what you have in your bank account or investments as to whether you qualify for this program. Your assets are disregarded. They're really looking at earned income here.
A disabled child is entitled to that CDB or DAC benefit on the social security record of a parent, provided that the child is or was a dependent of the parent, the child's not married, and the child is 18 years or older and under a disability which began before the age of 22. That's a critical point - that disability has to be documented and proven before they turn age 22. I will deal with families whose children have mental health disorders, and sometimes they don't present themselves, or they don't have documentary proof until after 22, and it's really difficult to get that eligibility. We try to go back and work on the record.
Our practice - we don't do actual applications for social security because the Social Security Administration is quite strict on attorneys' fees and how you could bill for helping individuals apply through the Social Security Administration. But we certainly counsel clients in terms of how these programs work.
The parent also, in terms of eligibility for the child, needs to meet one of these following conditions: they're currently receiving disability benefits, they're entitled to and receiving retirement benefits, or they've passed away and they fully met the FICA requirements at the time of their death.
What does this mean? So before I mentioned with SSI that a child is able to get up to $967 a month, but there's a lot of strings attached to that program. With this type of program the child is entitled to 50% of the parent's benefits. So if the parent is receiving $4,000 a month, the child can get $2,000 a month. If the parent is deceased, the child actually gets 75% of the parent's benefit which could be $3,000 a month. So it's a lot more cash coming in. The child only claims under one parent, and sometimes the lower earning parent may apply first, and so the child can start collecting under that lower earning parent and then switch over to the higher earner parent when that parent eventually starts collecting.
Now, where this becomes very important - yes, you get that cash benefit, but the child can receive Medicare, which is the same Medicare that we all are entitled to at age 65, which I'll get to in a minute. When we're looking at beneficiaries or children who have lifelong disabilities and are not going to have work earnings in their own right, other than sometimes limited work earnings, it's a matter of being able to capitalize and take advantage of these benefits that are available to them. In terms of health insurance, these children are often on their parents' health insurance for many years, even beyond age 26, sometimes 29, and sometimes even longer. But when that parent no longer has the health insurance, we don't always like to rely on Medicaid solely for health insurance purposes, and this Medicare is a really good alternative. So yes, we get the benefit of the Social Security Disability income coming in, but for a lot of my clients, the key is for their child to get that Medicare eligibility.
Every once in a while I'll have clients that'll have both SSI and SSDI. It's rare - it's when the SSDI work record is quite low. If the SSDI is not up to $967 a month - let's say they only get $300 a month - then they could also get SSI, an additional $667 a month to bring them up to that $967. That happens not that often, but it does happen from time to time.
Moving on to Medicare - Medicare, unlike the Social Security Administration which is its own standalone organization under the US Federal Government, is a Federal program administered through the Centers for Medicare and Medicaid Services, otherwise referred to as CMS, under the US Department of Health and Human Services.
It's a health insurance program for persons age 65 and older and SSDI recipients. Oftentimes when I'm working with families, we're looking at how their child can become eligible for Medicare, and often the children are what we refer to as dual eligible - they'll have Medicare for health insurance coverage and Medicaid for all the programs and services, and even to pick up what Medicare doesn't pay for.
There are 4 components to Medicare: Part A which is hospital care, Part B which is physician and outpatient care, Part C which is a hybrid combining Parts A and B, and Part D which is the drug benefit.
Medicare enrollment has a 7-month enrollment period that begins 3 months before the 65th birthday and ends 3 months after. If missed, you can enroll during a general enrollment period between January 1st and March 31st with coverage beginning July 1st. There is a late penalty if not enrolled during that 7-month period - 10% of the monthly Part B premium for every 12-month period not enrolled, and it's permanent. It does not go away. It sticks with you for life, and it's really hard to appeal. You could appeal it, but individuals are often not successful.
However, if you're actively working and receiving employer health coverage, there's no late penalty if the coverage is as generous as Medicare. Once that employer health-related insurance coverage ends, there's a special 8-month enrollment period starting the first day after the employer coverage ends.
To break down these different Medicare parts: Part A is hospital insurance. It covers inpatient hospital stays, hospice, limited skilled nursing, and limited home health care costs. It's not going to be your program to cover long-term care expenses, receiving home health at home or in a nursing home.
There's no premium if you've paid at least 40 quarters of Medicare taxes and worked 10 years or more. A benefit period begins the first day an individual's in a hospital or skilled nursing facility and ends when they're out for 60 days in a row. If the individual returns to the hospital after 60 days, a new benefit period starts and the deductible happens again. There are unlimited benefit periods.
For 2025, there's a $1,676 deductible for each benefit period. Days 0 through 60 have no copay, and days 61 through 90 have a $419 a day copay. Some Medigap policies will pick that up, not all of them. After 90 days, an individual has 60 lifetime reserve days of extra hospital days that can be used over their lifetime. Lifetime reserve days may be applied to one or more benefit periods, but each day may only be used once, with an $838 per day copay.
For skilled nursing facilities, it covers up to 100 days per benefit period, provided there's a qualifying 3-day hospital stay. That's key, because sometimes individuals will be sitting in the emergency room or be there for observation status at the hospital, and that does not start the 3-day hospital stay.
There's a 30-day period prior to skilled nursing admission. For example, if I fall and break my hip, and I'm in the hospital for 5 days, I meet the qualifying hospital stay. But then if I say I want to go home, thinking I could get my care at home - if within 30 days I realize I'm actually not getting the right care at home and need to go for rehab in a nursing home, I have that right, but it has to be within 30 days.
Medicare does not pay for non-skilled assistance of activities of daily living which make up the majority of long-term care services. They'll pay for rehab maximum of 100 days. The average is about 22 days. During days 1 through 20, there's no copay, and then days 21 through 100, there's a $209.50 per day copay that some Medigap policies will pick up.
Medicare Part B is medical insurance - your doctors, outpatient coverage, durable medical equipment, vaccines, wellness visits. The new premium for 2025 is $185 a month, but for income above $106,000 you could pay up to $628.90 a month - it jumps quickly after income is over $106,000. There's a $257 a year deductible and a 20% copay.
Medigap insurance is supplemental insurance through a private company that helps cover out-of-pocket expenses such as copays and deductibles. AARP offers Medigap policies. A lot of times State and Federal Government and New York City will offer retirees Medigap insurance as part of their retiree benefit, and sometimes they don't have to pay premiums. Sometimes if they're old school policies, they'll even pay your Medicare Part B premium. But you must have original Medicare, not Advantage.
Medicare Part C is your Medicare Advantage plan. Somebody on a listserv this week said Medicare Advantage plan is neither Medicare nor an advantage, and I agree with that. It's a separate company, and it's an alternative to original Medicare. You don't have Parts A and B that I just talked about - you have a separate policy. It's attractive to some people because it offers a wider range of benefits, including vision, dental, hearing that original Medicare doesn't cover. But I encounter many situations with clients when they want to move to different parts of the country and they're realizing that their Medicare Advantage plan is not working for them, and if they have some health issues it just becomes exceedingly stressful for them in terms of proper coverage. So I'm always cautioning clients with this type of benefit.
There was a big article in the Wall Street Journal a couple of days ago talking about the Medicare Advantage plan.
Part D is your prescription drug coverage offered by insurance companies. Something new for 2025 - there's going to be a $2,000 cap on out-of-pocket spending on drug coverage.
Moving on to Medicaid - Medicaid is a joint Federal and State program administered through State agencies. Here in New York, we actually have it administered through our county agencies. There are federal minimum standards, but States allow flexibility. It's a means-tested program looking at an individual's assets and income.
As I've hinted a few times, in my world with clients, we're looking at Medicaid not for general medical coverage, but more for long-term care expenses or for children who have adult children with lifelong disabilities and need supports through the government. Here in New York, we have a State agency called OPWDD that provides day programs, residential services, all aspects of programming, and an individual often needs to be eligible for Medicaid for that.
Medicaid is a payer of last resort, so you always have to exhaust whatever other insurances may be available assets.
Eligibility criteria:
- Must be US citizen or among certain categories of qualified alien status
- Resident of the state providing Medicaid benefits (no time requirement)
- Must be aged, blind or disabled, or income eligible under the Affordable Care Act
At least once a month, we get a phone call: "Mom retired to Florida, she needs to move back up here, she's in a facility we want to apply for Medicaid." We can't apply for Medicaid here until she's actually a resident in New York. She could establish residency right away and then submit for a Medicaid application.
Amy O'Hara: Now, with ACA Medicaid eligibility - that's beyond today's program. We often refer to that as MAGI Medicaid. There's no asset test, but we're looking at an individual's modified adjusted gross income to determine their eligibility for affordable Medicaid under the Affordable Care Act, which is really more for health insurance purposes, not the long-term care or disability services I mentioned before.
For Medicaid resource and income limits - these are New York numbers - you need to have non-exempt assets between $2,000-$31,000, limited income, and you can have exempt assets. Your home equity limit, funeral burial agreements, retirement accounts. Here in New York, we have the advantage of having our IRAs, 403Bs, and so forth exempt as long as they're in payout status - they don't count towards that asset limit. Also, there's different spousal planning we could take advantage of when we're looking for long-term care coverage. These are 2024 numbers - I don't have the 2025 numbers yet.
Jonathan Shenkman: Thank you so much, Amy. If anyone has specific questions, new business opportunities, or any other issues they'd like to discuss, please feel free to reach out directly to Amy or myself where appropriate. I'll include her contact information in the follow-up email of this program. As mentioned at the onset, the goal of these programs is to stay up to date on timely wealth management-related topics and to collaborate where appropriate. I think we can all agree that the clients who are best prepared are the ones served by a team of knowledgeable advisors.
Three more quick items: First, my fall webinar series continues on November 26th on last-minute 2024 wealth planning ideas. Second, you can follow my work on X or Instagram at Jonathan on Money, listen to my weekly podcast called Jonathan on Money, and watch my practical planning videos on YouTube. Third, please take 30 seconds to fill out my survey at the end of this program. With that, this concludes today's session. Please stay safe and healthy and have a wonderful day.
Amy O'Hara: Thank you.