Sometimes Disability Benefits Can Be a Bad Thing

Social Security Disability Insurance (SSDI) is a federal program that provides cash assistance to people with disabilities who are unable to participate in sustained gainful activities. Unlike some programs, like Supplemental Security Income (SSI) and Medicaid, SSDI provides benefits to people regardless of their financial circumstances. Because SSDI is an insurance program that most workers contribute to through payroll taxes, as long as an SSDI recipient is not earning much money from working, he can have unearned income (income not earned by working) and unlimited resources and still receive SSDI. On top of the cash benefit, people receiving SSDI also qualify for Medicare benefits once they have been eligible for SSDI for 24 months.

All this makes SSDI an attractive government benefit, but there is a serious drawback. If you are receiving SSI or Medicaid benefits, which do have very strict income and resource limits, receipt of SSDI could cause you to lose your SSI or Medicaid benefits. In some cases, the cash benefit provided by SSDI can't come close to making up for the loss of Medicaid.

Medicaid is a very comprehensive health insurance program, covering everything from psychological care and prescription drugs to hospital visits and preventative medicine. Some people with serious disabilities would literally not be able to survive were it not for Medicaids coverage of their extremely expensive care. Eligibility for Medicaid is based both on medical necessity and a person's income and resources, and if a person is even slightly over the Medicaid income threshold, he often won't be able to immediately qualify for benefits. (Many Medicaid beneficiaries are eligible for Medicaid because they receive SSI benefits, and a loss of SSI due to excess income could also cause a loss of Medicaid.)

Unfortunately, SSDI benefits are countable income for Medicaid and SSI purposes, so someone receiving Medicaid who then begins to receive SSDI could be over income and lose his Medicaid coverage. Because Medicare benefits don't begin until 24 months from the SSDI eligibility date, a person who loses Medicaid due to SSDI could be without health insurance for a substantial period of time.

If you are receiving SSI or Medicaid and are interested in applying for SSDI, it is vital to review the repercussions with your special needs planner in advance of filing an application for SSDI benefits. Not every person who begins to receive SSDI will lose her Medicaid services. For example, something called the "Pickle Amendment" can allow certain SSDI recipients to preserve their Medicaid eligibility even though they are over SSI's income limits. And not every Medicaid beneficiary relies on Medicaid to the point where the loss of benefits would be catastrophic, but why take the chance? Talk to your special needs planner today.

Article Last Modified: 04/12/2013