TN 20 (04-13)

HI 03020.015 Periods for Which We Count Income

This section describes how we compute income for determining eligibility for the Medicare Part D prescription drug subsidy.

A. Process for income counting

1. General rule for income counting

For purposes of determining subsidy eligibility and whether the individual qualifies for a full or partial subsidy, we consider all of the countable income the individual and living-with spouse receive (or expect to receive) for a period of 12 months. The subsidy determination system uses the income reported on the subsidy application and projects it for 12 months starting from the subsidy computation month.

The subsidy computation month is the month that the individual files an application for subsidy and is entitled to HI or SMI or both for that month.

  • If the individual files on May 22, 2012 and is entitled to HI or SMI or both for May 2012, the subsidy computation month is May 2012.

  • If the individual files in May 2012 and is not yet entitled to HI or SMI or both in May 2012, the subsidy determination system puts the case in “conditional” status awaiting HI/SMI entitlement. For example, if the individual files for subsidy in May 2012 and becomes entitled to HI or SMI or both in June 2012, the subsidy computation month is June 2012.

This annualized amount of income is compared to the annual Federal Poverty Guideline income limit (FPL) in effect at the time the application is processed to determine eligibility and percentage of subsidy. (For a chart with the FPL income limits, see “Eligibility for Extra Help (Prescription Drug Low Income Subsidy) HI 03001.020C.3.

2. Income counting not linked to a calendar year

Although we base the computation of income for subsidy eligibility on a 12-month income projection, we do not link the computation to a particular calendar year. The subsidy determination system uses the 12-month projection of income because the Department of Health and Human Services issues the FPL income limits as annual income limits.

When an individual files for subsidy, we compare the 12-month projection of income to the current year’s FPL income limit. If the individual’s projected income is under the limit, he or she will continue to be eligible for subsidy until a redetermination or a subsidy-changing event is processed. When the redetermination or subsidy-changing event is processed, the system determines whether there is a change in eligibility or subsidy percentage.

EXAMPLE: Ms. Smith files for subsidy in August. The subsidy determination system uses the income reported on her application in August and projects it for 12 months starting from the subsidy computation month without regard to the expected increase in her income due to the January Cost-of-Living Adjustment (COLA), or the expected increase in the FPL limits due to the annual FPL update (usually in February). We use his type of computation because the individual’s income for next January and next year’s FPL amount are not known in August when the claim is processed.

3. Income counting for initial claims

For an individual who files an initial claim for subsidy, the subsidy determination system computes income based on a 12-month period starting from the subsidy computation month.

EXAMPLE: Mr. Howard, who is already entitled to Medicare A and B, files for subsidy on May 7, 2012. His eligibility for subsidy is determined based on the income reported on his application starting with May 2012. The subsidy determination system projects his anticipated income for 12 months starting with May 2012 and compares that annualized amount to the 2012 FPL income limits for a one-person household.

4. Income counting for redeterminations

When we compute an individual’s income for a redetermination, the subsidy determination system computes the income based on a 12-month projection of income and compares the income to the FPL limit in effect at the time of the determination. (For more information about subsidy redeterminations, see “Redetermination of Eligibility” HI 03050.011.)

EXAMPLE: In late August 2012, SSA mails a scheduled redetermination to Mr. Jones. He completes the form, which indicates a change in his income and sends it back to SSA on September 19, 2012. SSA redetermines Mr. Jones’ eligibility based on the income he reported on September 19, 2012. The subsidy determination system uses the income on this report, projects it for 12 months, and compares this annualized amount to the 2012 FPL income limits to determine his subsidy percentage. If the change he reported affects his eligibility or the amount of his subsidy, the effective date of the change will be January 2013.

5. Income counting for subsidy-changing events

When we use a computation of the individual’s income to process a subsidy-changing event, the subsidy determination system computes income based on a 12-month projection of the income and compares it to the FPL limit in effect at the time of the determination. (For more information about subsidy changing events, see “Processing Reports of Change and Subsidy Changing Events (SCEs)” HI 03050.005.)

EXAMPLE: On June 8, 2012, Ms. Johnson reports to SSA that she was divorced on May 15, 2012. The divorce, which is a subsidy-changing event, requires SSA to redetermine her eligibility for subsidy as of July 2012 (the month after the month SSA received the report of the divorce). Her continuing eligibility is determined based on her expected income starting from July 2012. The subsidy determination system uses her income as of July 2012, projects it for 12 months, and compares this annualized amount to the 2012 FPL to determine her eligibility and subsidy percentage.

6. Income counting for other events

When we use the computation of an individual’s income to process an “other event,” the subsidy determination system computes income based on a 12-month projection of the income and compares it to the FPL limit in effect at the time of the determination. (For more information about “other events”, see “Processing Reports of Change and Subsidy Changing Events (SCEs)” HI 03050.005.)

EXAMPLE: In February 2012, Mr. Jones reports to SSA that he stopped working and has no other income besides his Title II benefits. Although this reduction in income could affect the amount of Part D subsidy he receives, this is not one of the six subsidy changing events. If the income change he reported affects his eligibility or the amount of his subsidy, the effective date of the change will be January 2013.

The SSA 800# agent, service representative (SR), or claims representative (CR) will make an input to record this event on the Medicare database. SSA will mail a redetermination form SSA-1026-OCR-SM-REDE to Mr. Jones in August 2012. The subsidy determination system will use the income on this report, project it for 12 months, and determine his subsidy percentage by comparing the annualized amount to the FPL income limit in effect at the time of the determination.

B. Examples of income computations for individuals and couples

The following examples describe how the subsidy determination system computes income when determining eligibility for the subsidy. Each of these examples assumes that the individuals have resources below the eligibility limit.

1. Single individual applies for subsidy

In the first year that the individual applies for the subsidy, we count the income that the individual expects to receive in the 12-month period starting from the subsidy computation month. The subsidy computation month in this example is June 2012 because the individual filed a subsidy application and is entitled to HI/SMI in the same month.

EXAMPLE: Ms. White will be 65 on June 12, 2012. She files for retirement insurance benefits (RIB), Medicare, and for the Part D subsidy on April 14, 2012. She is working full-time, but plans to stop work and will receive her final paycheck on May 15, 2012. On Question 10, she states that she will earn wages of $11,300 in 2012. And on Question 13 she indicates a stop-work month of May 2012. Her social security benefit will be $1,050 per month and she has no other income.

Her eligibility for the subsidy is determined based on her expected income for a period of 12 months starting with her subsidy computation month, which is June 2012. The subsidy determination system uses the income reported on her application and projects it for 12 months starting in June 2012. Her annualized countable income will be $12,360 ($1,050 x 12 months minus the $240 exclusion). The subsidy determination system compares this amount to the 2012 FPL limits for a one-person household and results in a determination that she is eligible for a 100% subsidy because her countable income is less than 135% of the FPL.

NOTE: Wages do not count for the purpose of determining her eligibility, because she stopped working prior to her subsidy computation month (June 2012). Based on the stop-work month alleged by Ms. White on her application, the subsidy determination system is able to determine that she has no countable wages.

If Ms. White continued to work, all of her wages or estimated wages for the calendar year in which she is filing would be input along with a stop work date (if applicable). The subsidy determination system will project her earnings to determine the annualized countable income.

2. Married couple when both apply for subsidy

When both members of a married couple, who live together, file for subsidy, we count the income and resources of both spouses. We count the income they expect to receive in the 12-month period starting from the subsidy computation month.

EXAMPLE: Mr. and Mrs. Green are both over 65 and already entitled to HI/SMI. They apply for the Part D subsidy in March 2012. Mrs. Green’s social security benefit is $1,030 per month. Mr. Green’s government pension is $700 per month. The subsidy determination system uses the income reported on their application and projects it for 12 months starting in March 2012. Their annualized countable income is $20,520 ($12,360 + $8400 minus the $240 exclusion). The subsidy determination system compares this amount to the 2012 FPL for a 2-person household. They are both eligible for 75% subsidy.

3. Married couple when the second spouse applies subsequently

When one member of a living-together married couple files for Part D subsidy, we count the income and resources of both spouses. We count the income they both expect to receive in the 12-month period starting from the subsidy computation month. If the second member of the couple later files for subsidy, we determine that spouse’s eligibility for subsidy by counting the income of both spouses starting in the month that the second spouse files. When these individuals are redetermined, we will determine their eligibility as a couple.

EXAMPLE: Mr. Martin, age 69, is already entitled to HI/SMI when he applies for Part D subsidy on June 5, 2012. Mrs. Martin, his living-with spouse, is not applying for subsidy in June. Mr. Martin’s eligibility for Part D subsidy is determined based on his and Mrs. Martin’s income. He receives $900 per month and she receives $650 per month in social security benefits. The subsidy determination system uses the couple’s income reported on their application and projects it for 12 months starting with the subsidy computation month for Mr. Martin, which is June 2012.

Mrs. Martin applies for the subsidy in October 2012 when she becomes entitled to HI/SMI. We make a determination of Mrs. Martin’s eligibility based on the expected income of both members of the couple starting from October 2012. To determine Mrs. Martin’s eligibility, the subsidy determination system uses the couple’s income reported on her application and projects it for 12 months starting in October 2012. Mr. Martin‘s subsidy is not changed when Mrs. Martin’s application is processed. Their two individual records will be reconciled at the next redetermination.

C. References

  • HI 03020.055 Income Limits for Subsidy Eligibility

  • HI 03050.005 Processing Reports of Change and Subsidy Changing Events (SCEs)

  • HI 03050.011 Redetermination of Eligibility


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