Coordination of Social Security disability benefits with qualification for Medicaid

Sharon worked for 35 years before retiring at age 56. At age 61, she became incompetent due to early onset Alzheimer’s and was placed in a memory care unit of a nursing home. Following retirement, Sharon has had no income and has used up all of her savings. Her guardian has applied for Medicaid to pay for the expenses of that long-term care. Sharon could qualify for Social Security Disability (SSDI) benefits of the maximum monthly amount of $2,687.00. If she does qualify, will these benefits jeopardize her qualification for Medicaid?

In order to qualify for Medicaid, gross income from all sources must be $2,205.00 or less per month. Since Sharon’s SSDI benefits are $2,687.00 a month, it will be necessary to establish a Qualified Income Trust, known as a Miller Trust, in order for her to obtain Medicaid. All of Sharon’s disability check will be deposited into the Miller Trust. That money can be used to pay Medicare premiums and medical expenses that Medicare does not pay. Sharon will be able to maintain a small allowance for incidentals and the rest will go to the nursing home. She will still qualify for Medicaid, and Medicaid will pay the rest of the cost of the long-term care.

The process to obtain SSDI benefits generally takes a number of months, even a year or more. The successful applicant will be entitled to benefits paid in a lump sum of up to 12 months prior to the application. There is a five-month period following onset of disability in which the applicant is not entitled to any benefits.

For instance, should Sharon establish her onset of disability as two years prior to her application, the maximum number of payments prior to the application will be $2,687.00 times 12 or $32,244.00, even though she was disabled for 24 months prior to her application. If Sharon establishes that her onset of disability is nine months prior to her application, she will be eligible for SSDI for back payments before her application of $2,687.00 times 4 or $10, 744.00. In either case, the total amount of her past due lump-sum benefits will also depend upon the number of months before she receives a successful decision. If she has to go through the entire process of denial, reconsideration and hearing and hires an attorney, the attorney will receive 25% of these past due payments.

In any case, Sharon’s SSDI past-due benefits will be more than $2,000.00, the Medicaid limit for resources. Since Sharon is not competent to establish one for herself, her guardian can establish a Special Needs Trust (SNT) into which can be deposited all the SSDI benefits in excess of $2,000.00. With the SNT established, Sharon will still qualify for Medicaid.

Note to Readers: After a reader expressed a desire to meet the persons described in last week’s column, I feel it necessary to remind readers – once again – that all of the incidents described in these columns are hypothetical. The names used are fictional. The columns never reveal the exact circumstances of real persons. Attorneys are bound by confidentiality rules not to disclose private information of their clients. Even when a client has given permission to use his or her situation, I have never presented their exact cases, nor have I ever used real names.

Sandra W. Reed is an attorney with Katten & Benson, an Elder Law firm in Fort Worth. She lives and practices in beautiful Somervell County, near Chalk Mountain.

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