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Issue Alert - DHHS incorrectly budgeting minor's income from RSDI

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Date:

Mar 11, 2016

Program Area:

Medicaid, MI Child and federal marketplace

Issue Summary:

Social Security income includes retirement, survivor benefits, and disability payments. In most cases it is counted as income for purposes of determining eligibility for health insurance using MAGI budgeting. However, for minor children receiving RSDI on a parent's work record, this income should almost never be counted.

Persons Affected:

Families applying for or receiving Medicaid, MI Child or private health insurance with minor children who receive Social Security benefits based on a parent's work record.

For More Information:

Lisa Ruby Michigan Poverty Law Program 220 E. Huron #600A Ann Arbor, MI 48104 734-998-6100 ext.117 lruby@mplp.org


Background

There are two types of benefits that a child might receive from the Social Security Administration (SSA). One is Supplemental Security Income, or SSI. SSI may be awarded to a minor child who meets the disability criteria and income and asset tests set by the SSA.  The other type of Social Security benefit is Retirement Survivors Disability Insurance, or RSDI. RSDI benefits are awarded based on the earnings of an individual during their lifetime and are available to their dependents. Dependents are most often spouses and children. 

Under federal and state laws, modified adjusted gross income (MAGI) is used to determine eligibility for health insurance programs. These programs can be under the federal marketplace or state insurance programs such as Medicaid or MI Child (in Michigan).  Countable income is used to assess what programs individuals are eligible for and, if a family is in the federal marketplace, the amount of tax subsidies that will be awarded.

What's Happening?

The state appears to be counting the RSDI income received by minor children who are not required to file taxes. This is illegal and is resulting in children being given Medicaid with a spenddown. 

All types of Social Security income, whether taxable or not, received by a tax filer counts toward household income for eligibility purposes for both Medicaid and Marketplace financial assistance. By including non-taxable Social Security income in MAGI income, some individuals who are not required to file taxes may be denied Medicaid for too much income. In order to qualify for Marketplace financial assistance in these circumstances, the individuals must attest that they will file taxes for the applicable coverage year. It does not matter that they have not previously filed.

For children and tax dependents, Social Security income only counts toward the total household income if the individual is required to file a federal income tax return. For example, a child’s survivor benefits or RSDI, even if the check is made out to the parent or guardian, only count if the child is required to file taxes. In 2015, the tax-filing threshold for children is $6,300 in earned income or $1,000 in unearned income, and $3,950 for other tax dependents. Under IRS rules, only taxable Social Security is used to determine if an individual meets the tax-filing threshold. A single individual has taxable Social Security income only if half of the Social Security income plus other income exceeds $25,000. Therefore, if a child or tax dependent’s only income is Social Security benefits, it is unlikely that the individual would be required to file a federal income tax return, and the Social Security benefits will not be included in the total household income. However, if the dependent is required to file income taxes (for example, due to earnings from a summer job), then all of the dependent’s income, including the non-taxable Social Security benefits, will be included in the total household income. 

 

Please see http://ccf.georgetown.edu/wp-content/uploads/2015/01/Getting-MAGI-Right_Jan-30-2015.pdf for additional information.

What Should Advocates Do?

Be sure to review the sources of income received by a family who is applying for or receiving health insurance through Medicaid or the federal marketplace. Verify that income from RSDI is not being counted if the recipient is not required to file a tax return. Be especially vigilant when children are receiving these benefits, as it is highly unlikely that they will be tax filers.

What Should Clients Do?

Give accurate information regarding the source of income for all members of your family. If you feel that income is being incorrectly counted due the reasons set forth in this issue alert, request a hearing and contact an attorney.  The Michigan Poverty Law Program is interested in hearing about these cases and may be able to assist you. Your local Legal Aid office is also a good source for advice and possible representation.

Finding Help

Most legal aid and legal services offices handle these types of cases, and they do not charge a fee. You can locate various sources of legal and related services, including the free legal aid office that serves your county, at MichiganLegalAid.org. You can also look in the yellow pages under "attorneys" or call the toll-free lawyer referral number, (800) 968-0738.