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New Rental Assistance Rule May Open Benefits to More Seniors

The Social Security Administration (SSA) has published a final rule simplifying and expanding its rental subsidy program for Supplemental Security Income (SSI).

Effective September 30, 2024, the new rule is likely to allow more people to qualify for SSI. In addition, some current SSI recipients may see an increase in their monthly benefit amount as a result. The rule change is part of a broader agency effort to streamline certain aspects of the SSI program.

SSI applicants and recipients may want to talk to their elder law lawyer about the new rule if they have questions about how it affects them.

How Do You Qualify for SSI?

SSI is a federal public benefits program that provides a modest monthly benefit to qualifying recipients. It serves older adults across the United States who meet strict income and resource limits. People with disabilities who have limited income and resources also may qualify. In most states, to be eligible for SSI, an individual must have less than $2,000 to their name.

SSI Rental Assistance Explained

Income affects more than whether an individual is eligible for SSI benefits. It also has an impact on the SSI recipient’s benefit amount.

The SSA’s definition of income includes not only “earned” income from a job and “unearned” income such as gifted cash, but also what SSA calls “items received in-kind,” including shelter given to an individual or that someone else pays for.

A rental subsidy can result in a lower SSI payment for current recipients. It may also disqualify someone from receiving SSI because their income is too high.

However, SSI is now changing how it calculates the rental subsidy amount. The new rule will expand an exception that previously only applied in seven states but starting in September 2024 will apply nationwide.

How Rental Subsidy Is Calculated – The Current Rule

If an individual pays a monthly required rent charge that equals or exceeds the current market rental value (CMRV) in their area, a “business arrangement” exists under SSA rules. This means that the SSA does not see the SSI applicant or recipient as receiving rental assistance.

SSA regulations consider a person to be receiving a rental subsidy — a type of unearned income — if they are paying a monthly rent amount for a property that is less than the CMRV where they live. This commonly occurs when somebody is living with a family member who charges them less for rent than what they would pay on the open market.

For example, consider an SSI recipient who lives with their sibling, paying a monthly rental rate of $400. If the CMRV in their area is $800, the amount of rental assistance would be $400.

However, the SSA imposes a regulatory cap, called a Presumed Maximum Value (PMV), on the rental subsidy amount that can be assessed; that amount is $334.33 for 2024. The SSA also has an unearned income exclusion of $20 per month.

Using the example above, imagine a landlord accepting $400 per month instead of the CMRV of $800. The amount that the SSA would count as rental assistance would be $314.33 ($334.33 PMV minus the $20 general income exclusion amount).

Assuming a maximum monthly SSI payment of $943 in 2024, and assuming there is no other countable income, the recipient’s benefit amount would be reduced to $628.67 ($943 minus $314.44).

Exception

Following court cases that challenged the SSA’s rental subsidy rule, exceptions were provided in seven states — Texas, Connecticut, New York, Vermont, Illinois, Indiana, and Wisconsin.

In these states, a “business arrangement” still exists. However, the rental subsidy does not count as income if the monthly rental rate equals or exceeds the PMV, instead of the CMRV.

Apply this exception to the example above: An SSI recipient in Connecticut pays $400 per month instead of the CMRV of $800 per month. They would not have their rental subsidy count as income because the $400 payment is more than the $334.44 PMV for 2024.

The SSA notes that in the seven excepted states, application of the rental subsidy exception generally results in a higher SSI payment amount.

New Rule Applies SSI Rental Subsidy Exception Nationwide

The SSA announced in April 2024 that the new rule would make the state-specific rental subsidy exception national policy for SSI applicants and recipients.

According to the SSA, the policy change will increase the benefit amount for some recipients and allow more people to qualify for SSI payments. However, it will not affect how much SSA pays per month (a maximum of $943 in 2024).

Even with this exception, though, some applicants could see their monthly benefit amount reduced; others may not qualify. The actual formula that the SSA uses is complicated and includes the number of household members, as well as other sources of income.

The rental subsidy rule change is the latest SSA effort to remove barriers to accessing SSI payments. Also in the fall of 2024, the agency will no longer use food an applicant or recipient receives from friends, family, and community support networks as part of its “in-kind support and maintenance” calculations. And in April, SSA published a rule changing how it factors support from other public assistance programs, such as SNAP, when determining beneficiary payments.

More than 7 million individuals received federal SSI benefits in January 2023, with payments averaging $654 per month. During calendar year 2022, 172,000 individuals applied for SSI benefits based on age, while 1.23 million applied based on blindness or disability. Approximately 522,000 applicants received SSI benefits in 2022, a decrease of 1 percent compared to 2021.

Understanding Social Security Benefits Can Be Difficult. An Attorney Can Help.

While the new SSI rule may be advantageous for many low-income, older Americans, terms like “PMV,” “CMRV,” and “in-kind” support are not necessarily intuitive. They may add to the confusion around an already long and challenging SSI benefits process.

To make sure the value of your rental subsidy is accurately determined, and that you receive the SSI benefits you’re entitled to, get in touch with your elder law attorney.

Feds Simplify and Clarify Various Medicaid Rules for States

Thanks to a new rule recently finalized by the federal government, obtaining and renewing health care coverage under the Medicaid program is set to become easier for millions of Americans.

What Is Medicaid?

Medicaid provides people living on limited income with access to health care services. Enrollees must meet strict financial guidelines to qualify. In most states, you must have $2,000 or less in assets to your name to be eligible for Medicaid.

As a joint federal-state program, Medicaid allows states to set their own eligibility criteria and service coverage guidelines, so programs – as well as the criteria to qualify for them – tend to vary across states.

Policy Changes

In April 2024, the Centers for Medicare and Medicaid Services (CMS) officially published the second part of its new two-part rule.

The new rule seeks to standardize some of the application and renewal processes that Medicaid enrollees will follow, regardless of the state in which they live. As part of an effort to make documentation policies more consistent across states, it also updates language about electronic recordkeeping for state agencies, which has not seen revisions since the late 1980s.

Several of the new changes are of specific interest to Medicaid enrollees aged 65 and older and those who are living with a disability.

Among its provisions are the following points related to Medicaid:

• Enrollees who are aged 65 and older or living with a disability will no longer have to appear in person for their renewal interviews.
• Medicaid recipients seeking to renew their coverage will have 30 days to return any necessary documentation to their state Medicaid agency.
• Medicaid recipients will not have to go through the renewal process more than once every 12 months (with certain exceptions).
• First-time Medicaid applicants will have at least 15 calendar days to provide any additional information requested to complete their application. The state will have, at most, 45 calendar days to determine an applicant’s eligibility.
• State Medicaid agencies must take steps to update contact information for an enrollee who may have moved before they pursue termination of that person’s coverage.
• The CMS is also extending the re-enrollment timeline for people who lost their Medicaid coverage during the unwinding period following the end of the COVID-19 public health emergency. The deadline to re-enroll is shifting from July 31, 2024, to November 30, 2024.

Other updates include streamlining the amount of information applicants need to submit and requiring state agencies to accept renewals via snail mail and phone as well as online or in person. These changes will begin to take effect in June 2024. Estimates suggest that the new rule will result in boosting Medicaid enrollment by 1.33 million people by the year 2028.

“Our North Star is ensuring that everyone who is eligible for coverage can enroll and keep that coverage,” CMS Administrator Chiquita Brooks-LaSure said in a news release. “Our work must start and end by breaking down barriers that prevent eligible people from connecting to coverage.”

For more information about this historic rule, access the fact sheet from CMS.

Connect With an Elder Law Attorney

Understanding the ins and outs of Medicaid can be overwhelming. For guidance on applying or qualifying for Medicaid in your state, be sure to work with your elder law attorney. 

Proposed Medicare Bill to Help Seniors With Medical Costs

In the ever-evolving landscape of health care, one critical challenge has been ensuring that Medicare recipients receive the coverage they need without undue financial burdens. A new legislative effort aims to address a particularly perplexing issue: the distinction between hospital observation status and inpatient status, and its effects on Medicare coverage.

Understanding Observation Status

Observation status is a classification hospitals use to determine the billing for Medicare patients. When a patient is under observation, the hospital technically considers them outpatients. (This is the case even though the patient may stay overnight or for several days in a hospital bed and receive similar care to that of an inpatient.) An inpatient is someone who has been formally admitted to the hospital.

Characteristics of Observation Status

• Temporary and Evaluative: Observation status is generally intended for patients who need short-term monitoring or further testing to determine if they should be admitted as an inpatient or if they can be discharged.
• Billing Implications: Since observation status is classified as outpatient care, patients may face higher out-of-pocket costs compared to inpatient stays, especially if they need to transition to a skilled nursing facility for further care.
• Clinical and Financial Effects: Observation status can affect clinical decisions and financial burdens for patients, as it often leads to confusion and unexpected expenses due to its distinction from inpatient care.

Challenges With Observation Status

The main challenge with observation status lies in its effect on Medicare coverage. Under current Medicare rules, time spent under observation does not count toward the three-day inpatient stay requirement for skilled nursing facility (SNF) coverage. This can lead to significant out-of-pocket costs for patients who need skilled nursing care after leaving the hospital but who did not meet the inpatient criteria.

“When seniors require hospitalization, their focus should be on their health and getting well, not on how they were admitted,” Sen. Susan Collins (R-ME), a co-sponsor of the bill, said in a news release. “Yet currently, many older Americans face severe financial consequences due to the distinction between an observation stay and inpatient admittance.”

Medicare’s Three-Day Stay Rule

Medicare’s three-day stay rule is a policy that requires a patient to have a minimum of a three-day inpatient hospital stay to qualify for Medicare Part A coverage of SNF care. This rule has significant implications for patients and their access to necessary post-acute care services.

Details of the Three-Day Stay Rule

• Inpatient Requirement: To be eligible for coverage of SNF care under Medicare Part A, you must have been an inpatient for at least three consecutive days.
• Exclusion of Observation Days: Days spent under observation status, even if in the hospital, do not count toward this three-day requirement. This can potentially disqualify patients from SNF coverage despite having spent time in the hospital.
• Financial Consequences: Patients who do not meet the three-day inpatient requirement may face substantial costs for SNF care. This can be financially burdensome and limit access to necessary rehabilitative services.

The Effect on Patients

The three-day stay rule can create a significant barrier for patients who require SNF care after a hospital stay. Many patients who have been under observation status might not meet the inpatient criteria. As a result, they may fail to qualify for Medicare coverage of subsequent skilled nursing care. This often leads to out-of-pocket expenses that can be challenging for many, particularly older adults on fixed incomes.

The Improving Access to Medicare Coverage Act

The Improving Access to Medicare Coverage Act is a bipartisan legislative proposal introduced to amend a critical shortcoming in Medicare coverage related to hospital stays. The primary goal of the bill is to ensure that time spent under observation status in a hospital counts toward the necessary days for Medicare coverage of subsequent SNF care.

Key Provisions

• Observation Status Inclusion: The Act proposes that observation status counts toward the three-day hospital stay requirement for Medicare coverage of SNF care.

• Patient Protection: By addressing the observation status issue, the Act aims to protect patients from unexpected high costs associated with not meeting the inpatient requirement for Medicare Part A coverage of SNF care.

• Improved Coverage and Access: The Act seeks to ensure that Medicare recipients have better access to necessary post-acute care services without the financial strain caused by the current policy limitations.

The introduction of this Act highlights the need for a more equitable system that recognizes the reality of hospital care, where observation status can often involve the same level of care and duration as inpatient status.

How the Act Addresses the Issues

The Improving Access to Medicare Coverage Act aims to rectify the disparities caused by the current policy by including observation status in the calculation of the three-day hospital stay. This change is intended to:

• Enhance Equity: By counting observation days toward the three-day requirement, the bill would provide a more equitable system that acknowledges the reality of patient care needs.

• Reduce Financial Burden: The Act would alleviate the unexpected costs associated with the current exclusion of observation status, making post-acute care more affordable for Medicare beneficiaries.
• Improve Access to Care: Ensuring that more patients qualify for Medicare-covered SNF care would improve access to necessary rehabilitative services, promoting better health outcomes and quality of life for older adults.

“This bipartisan bill would deem time spent in observation status as inpatient care for the purpose of the Medicare three-day prior hospital stay requirement for skilled nursing care, which will help insulate older Americans from undue out-of-pocket costs and ensure that they get the care that they need,” said Sen. Collins.

The Improving Access to Medicare Coverage Act represents a significant step toward addressing the complexities and inequities of Medicare coverage related to hospital stays. By including observation status in the calculation of the three-day inpatient requirement, the Act seeks to ensure that patients receive the care they need without facing unnecessary financial burdens. This legislative effort underscores the importance of continually assessing and updating health care policies to meet the needs of the population and to provide fair, comprehensive access to essential health services.

Learn More About Medicare

You can learn more about Medicare benefits and your rights by contacting your elder law attorney today. They can discuss your specific situation and your options with you.

Promissory Notes and Medicaid Planning

Medicaid planning is often a complex process aimed at preserving a person’s assets while qualifying for Medicaid benefits. Finding a way to pay for long-term care costs without depleting all your hard-earned assets is a key part of Medicaid planning.

One strategy for protecting assets and qualifying for Medicaid that has gained attention in recent years is the use of promissory notes. This article will provide an explanation of promissory notes in the context of Medicaid planning, including their purpose, legality, implications, and considerations. Note that not all states allow promissory notes. Consult with an experienced elder law attorney before using one.

What Are Promissory Notes?

A promissory note is a legally binding document that outlines the terms of a loan agreement between two parties: the lender (creditor) and the borrower (debtor). It includes details such as the loan amount, interest rate, repayment schedule, and any other relevant terms and conditions. Promissory notes are commonly used in various financial transactions, including loans between individuals, businesses, and financial institutions.

Promissory Notes in Medicaid Planning

Medicaid is a public assistance program that assists individuals with limited income and resources in obtaining health insurance. It also serves as the primary way for millions of seniors in the United States to pay for long-term care services.

To qualify for Medicaid in most states, you must have no more than $2,000 in so-called “countable” assets to your name. Typically, five years before you apply, you may “spend down” your excess assets to bring them under this $2,000 threshold. Transferring assets within this five-year window of applying for Medicaid can otherwise result in a penalty period during which you may not be able to receive benefits.

Of course, not everyone plans this far ahead, as many people do not expect they will need long-term care. A Medicaid applicant may use a promissory note to transfer assets to other individuals, such as their children, while still complying with Medicaid eligibility requirements. By transferring assets through a promissory note, they can effectively reduce their countable assets, thereby helping them meet Medicaid's asset limit criteria.

How Do Promissory Notes Work in Medicaid Planning?

A person seeking Medicaid benefits might opt to transfer some of their assets to a family member, typically a child, in exchange for a promissory note. Assets can also be transferred to a trust. The beneficiaries of a person’s trust are often their children.

When the assets are transferred, a legally binding promissory note is created. The promissory note lays out the terms of the loan, including the principal amount, interest rate, repayment schedule, and other relevant information.

The borrower agrees to repay the loan according to the terms outlined in the promissory note, usually through regular installment payments over a specified period.

By transferring assets by way of a loan and creating a promissory note for the loan, the person seeking Medicaid benefits effectively reduces their countable assets, potentially qualifying them for Medicaid coverage.

Legal Considerations

Though promissory notes can be a valuable tool in Medicaid planning, it's important to ensure compliance with state and federal laws and regulations. As mentioned, Medicaid has strict rules regarding asset transfers and eligibility. Improper use of promissory notes could result in penalties or loss of benefits.

Key legal considerations include the following:

• Fair Market Value: The terms of the promissory note, including the loan amount and interest rate, should reflect fair market value to avoid scrutiny from Medicaid authorities.
• Payments: Payments on the loan must be made in equal amounts during the term of the loan with no deferral of payments and no balloon payments. (A balloon payment is a large payment made at the end of a loan’s term, after making much smaller payments along the way.)
• Term of the Loan: The term (length of time) of the loan must not last longer than the anticipated life of the lender.
• Debt Cancellation: The debt cannot be cancelled upon the lender’s death.
• Arm’s Length Transaction: The transaction should be conducted as an “arm’s length” transaction, meaning it should be carried out as if the parties were unrelated and dealing with each other at arm’s length.
• Look-Back Period: As stated above, Medicaid has a look-back period during which asset transfers are subject to scrutiny. In most states, the look-back period is five years. Any transfers made within this period may affect Medicaid eligibility, so it’s essential to plan accordingly.
• State-Specific Regulations: Medicaid rules vary from state to state, so it's crucial to consult with an experienced attorney familiar with Medicaid regulations in your state to ensure compliance.

Benefits of Using Promissory Notes in Medicaid Planning

Promissory notes offer several potential benefits in Medicaid planning, including the following:

• Asset Preservation: By transferring assets through a promissory note, individuals can preserve their wealth while still qualifying for Medicaid benefits to cover long-term care expenses.
• Control: The lender retains control over the repayment schedule and can customize the terms of the promissory note to suit their needs.
• Family Involvement: Promissory notes provide an opportunity for family members to participate in Medicaid planning and contribute to the financial well-being of their loved ones.

Risks of Using Promissory Notes in Medicaid Planning

When considering the benefits of using promissory notes in Medicaid planning you should also consider the risks, which could include the following:

• Regulatory Scrutiny: Improperly structured promissory notes may attract scrutiny from Medicaid authorities, potentially resulting in penalties or disqualification from benefits.
• Complexity: Medicaid planning involving promissory notes can be complex and requires careful consideration of legal and financial implications.
• Tax Implications: Transferring assets through promissory notes may have tax implications for the lender and the borrower, so it’s essential to seek professional tax advice.

Will a Promissory Note Work for Your Medicaid Planning?

Promissory notes can be a valuable tool in your Medicaid planning process. They could allow you to transfer assets while maintaining Medicaid eligibility. However, it’s crucial to navigate this strategy carefully, ensuring compliance with applicable laws and regulations.

Contact your elder law attorney today to talk further about gaining acceptance into the Medicaid program. They can help you determine whether including a promissory note in your planning will work for your situation. Elder law attorneys also can walk you through other benefits that may be available to you and help you understand how you can qualify for coverage.