• Social Security Law
  • The Social Security Act
    • Benefits for Retirees
      • Retirement and Survivors Insurance
      • Railroad Retirement System
    • Disability Benefits
      • RSDHI Disability Insurance
      • Supplemental Security Income
    • Medicare
      • Medicare Parts A & B
      • Costs Not Covered by Medicare
    • Medicaid
    • Other State Assistance
  • Applying for Benefits
  • Right to Appeal
  • Resources

Millions of people in the United States rely on some form of financial assistance from the government. People with disabilities are eligible for such assistance, as are people in lower income brackets. As workers age, they begin to reap the benefits of years in the workforce, receiving the retirement assistance commonly referred to as "Social Security." This chapter describes the Federal Social Security Act and the major programs created thereunder. Other issues of interest to senior citizens are addressed in the Elder Law Chapter.

Congress passed the Social Security Act in 1935 to create a very broad social safety net for all United States workers and their families. Originally intended to provide financial support for elderly workers who could no longer perform gainful labor, Social Security has expanded to include workers with disabilities, dependents of persons qualified to receive Social Security, and survivors (widows, widowers, or children) of someone who died but had become legally eligible to receive Social Security. Thus, depending on a person's circumstances, he or she may be eligible for Social Security benefits at any age.

The public benefit programs started by the Social Security Act and its amendments are financed generally by taxes levied on workers. Employers automatically deduct a portion of each worker's paycheck and match that amount with money from their business or organization. As of 1995, 7.65 percent of the employee's gross salary went to Social Security. This deduction usually is labeled "FICA" for the Federal Insurance Contributions Act, which authorizes the payroll tax. A person's employer also is required to contribute 7.65 percent of the employee's gross salary to Social Security. Self-employed workers are responsible for paying the entire amount themselves. If a person is self-employed, he or she pays 15.3 percent of his or her taxable income to Social Security, but half of that is deductible from federal income tax as a business expense.

Of the money received from Social Security payroll taxes, the largest portion goes to pay retirement benefits; smaller portions pay disability benefits and Medicare. As of 1995, there were approximately 141 million people paying into Social Security.

The three largest programs within the Social Security Act are Retirement, Survivors, and Disability Health Insurance (RSDHI); Supplemental Security Income (SSI); and Medicaid. RSDHI is the name of the federal government's benefits program for workers and retirees, and RSDHI itself contains three separate programs to cover retirement, disability, and health insurance (Medicare).

These three programs are extremely complex. Although detailed descriptions are beyond the scope of this chapter, a general familiarity with them is helpful for understanding one's entitlements.

Benefits for Retirees

Retirement and Survivors Insurance

Despite the fact that Retirement and Survivors Insurance (RSI) is only one branch of RSDHI, which in turn is only one branch of the Social Security Act, when most people refer to "Social Security" they actually mean RSI. Payments from RSI are the Social Security checks that millions of Americans receive each month. This was not intended to be a person's sole source of income, but to supplement other income sources such as pensions, insurance, savings, and investments. However, for many, RSI is their only source of income.

A worker gains RSI coverage by performing covered employment for a certain amount of time. The term "covered employment" means most types of work including full- or part-time wage or salaried work; self-employment; farm work; membership in the United States Armed Services; employment in private nonprofit organizations; most domestic work; and most federal, state, and local government employment. The only major exceptions are railroad employees separately covered by the Railroad Retirement System, federal workers hired before 1984, and certain religious workers. The rules of eligibility and benefit amounts are quite complex and provide limited coverage for spouses, children, and survivors.

Generally, a person begins receiving RSI benefits at age 65; however, a worker has the option of initiating benefits at age 62. All benefits are based on what is called the primary insurance amount (PIA): the amount a worker is entitled to if he or she retires exactly at age 65. The amount of the monthly check varies, depending on how much the worker made each year. The higher his or her pay, the higher the benefits, up to a maximum dollar amount. A person who initiates benefits at age 62 receives a reduced monthly amount equal to a percentage of his or her PIA. This is a permanent reduction that amounts to approximately seven percent of the PIA for each year a person receives benefits before age 65. Postponing the receipt of benefits until after age 65 can entitle a worker to receive higher monthly amounts. Cost-of-living increases are built into the system so that the monthly amount automatically increases each year as the national cost of living rises.

Family members receive benefits based on the worker's retirement benefits. The spouse of an eligible worker draws spousal benefits on the worker's account--usually one-half of the worker's PIA--if the spouse is at least 62 years old or cares for a child eligible for child's benefits on the worker's account. Other bases for family eligibility are:

• Spousal benefits for a divorced spouse if he or she was married to the insured worker for at least ten continuous years and has not remarried

• Full benefits for a surviving widow or widower of a fully insured worker from age 65

• A one-time death benefit (currently $255) for surviving relatives of a fully insured worker who apply within two years of the worker's death

• Benefits for the child or grandchild of an insured worker if he or she was dependent on the worker when benefits began, is unmarried, and:

• is 18 years old or younger

• is 19 years old or younger but enrolled as a full-time elementary or secondary school student, or

• is older than 18 years but became disabled before reaching age 22

As a general rule, an eligible individual must apply for RSI benefits in order to receive them. Failure to apply for benefits as soon as one is entitled to them can forfeit earned benefits.

Railroad Retirement System

The Railroad Retirement System is a federal income insurance program specifically for workers in the railroad industry. Originally, this system was independent of the Social Security Administration, but in 1974 the two programs integrated. The integration was not entirely smooth, however, which has led to complex and confusing rules that are often the source of errors in awarding benefits.

Most of the rules for Railroad Retirement closely parallel those for RSI. A retired railroad worker is eligible for monthly benefits if he or she worked for a railroad employer for at least ten years before reaching age 65. As with RSI, a worker can opt to retire earlier at age 62 but will receive reduced benefits. Anyone with fewer than ten years employment in the railroad industry is ineligible for railroad benefits, but the years of railroad employment can be added to years of non-railroad employment for purposes of calculating RSI benefits.

Some railroad workers who retired before January 1, 1975, are entitled to draw both full RSI benefits and full Railroad Retirement benefits. Most other workers, however, have their RSI benefits reduced by the amount of the Railroad benefits.

Disability Benefits

The federal government has two disability benefit programs administered by the Social Security Administration for qualified applicants: RSDHI Disability Insurance and Supplemental Security Income (SSI). These two programs are similar and are governed by many of the same rules. An individual who qualifies for one program occasionally can receive benefits from both programs simultaneously.

Both RSDHI and SSI programs define disability as "inability to engage in any substantial gainful activity by reason of any medically determined physical or mental impairment which can be expected to last for a continuous period of not less than 12 months." The physical or mental disability must be "of such severity" that an applicant not only is unable to do the work he or she did previously, but is unable to engage in any kind of gainful work.

The applicant for either RSDHI disability or SSI has the burden of proving by medical evidence that he or she is disabled or blind. Most applicants must wait five full months before their benefits begin. Each applicant's case is reviewed periodically to determine whether his or her condition has improved to the point that he or she is able to resume working.

RSDHI Disability Insurance

RSDHI Disability Insurance provides benefits for workers with substantial work histories in covered employment who are unable to continue work because they have become disabled before reaching age 25. The term "covered employment" includes most types of work. The disabled worker and his or her dependents usually are eligible for RSDHI disability benefits. In some cases, disabled survivors of an insured worker can receive benefits.

Supplemental Security Income

SSI is a nationwide income maintenance program designed to help persons with limited income and assets and who are elderly, blind, or disabled. Although SSI is administered by the Social Security Administration, it is not funded by Social Security taxes. Unlike Social Security, SSI is based on need. A person's work record is not relevant in determining eligibility for SSI. Thus, a disabled person under age 65 who has not worked a sufficient amount of time to qualify for RSDHI disability may be eligible to receive SSI disability benefits.

To receive SSI, a person must be 65 years of age or older, blind, or disabled, and must have financial need. The formula for determining SSI eligibility and benefits takes into account both income level and assets. When calculating a person's income, the government includes earnings; Social Security benefits; payments from pensions; any non-cash items like food, clothing, or shelter; and items that the individual may own. Some things, however, are exempt from consideration, such as:

• A person's home (regardless of its value)

• Household goods and personal property (worth less than $2000)

• One car (worth less than $4500)

• Income tax refunds

• The value of food stamps

• A portion of monthly earnings

A person qualifying on the basis of blindness or disability must be referred to vocational rehabilitation services. If the disability is related to alcohol or drug dependency, the applicant may be required to enroll in an appropriate treatment program or risk losing eligibility. Residence in a public institution, such as a prison or certain hospitals, disqualifies an applicant. If a person receives SSI, he or she also may be eligible for other benefits, such as food stamps and Medicaid, discussed below.

Medicare

Medicare is a federal program administered by the Social Security Administration designed to cover some basic medical and health care costs of eligible individuals over age 65 as well as may people with disabilities. Medicare has become an enormous federal program, providing billions of dollars in coverage every year.

Medicare should not be confused with Medicaid. Medicaid is a program funded by the federal and state governments to pay doctor and hospital bills of people with limited income and assets. Medicaid is discussed below. Medicare benefits are available to qualified individuals regardless of financial need. Because Medicare is closely linked to RSI, Disability Insurance, and Railroad Disability benefits, a basic understanding of the eligibility requirements and application procedures for those programs is helpful to an understanding of Medicare.

Medicare Parts A & B

Medicare has two basic divisions, called Part A and Part B. Medicare Part A, commonly known as Hospital Insurance, covers medically necessary hospital and related health care. Included in Part A are costs for such expenses as inpatient hospital care necessitated by acute illness, skilled nursing home care, certified hospice care for the terminally ill, inpatient psychiatric care, and care in the home by a certified home health care provider. People qualify for Hospital Insurance when they turn 65 or if they are covered by Social Security or Railroad Retirement benefits.

Medicare Part B, commonly known as Medical Insurance, is a voluntary health insurance program designed to cover some of the costs not covered by Medicare Part A, such as outpatient hospital services, outpatient physical therapy, speech pathology services, necessary ambulance service, and medical equipment. Unlike Part A, which is paid for out of Social Security taxes and is free to anyone who qualifies, Part B is an optional program that carries a monthly premium of under $50.

The federal government contracts with private insurance companies to handle routine claims processing, payment, and other functions under Parts A and B. Medicare recipients have the right to choose how they will receive hospital, doctor, and other health care services covered by Medicare. One option is the traditional fee-for-service system. Under this system, the recipient visits a hospital or doctor of his or her choice and pays a fee for any services provided. Medicare will pay a percentage of that fee, but the recipient is responsible for certain deductible and coinsurance payments. Most people covered by a fee-for-service Medicare plan also have private insurance (commonly called Medigap) to supplement their Medicare coverage.

Another option is to use a health maintenance organization (HMO). HMOs offer a wide range of health care services in exchange for a fixed premium paid in advance. Medicare recipients enrolled in an HMO rarely require additional Medigap insurance because the HMO plan itself supplements Medicare. One drawback of an HMO, however, is that health care services may be provided only by a member of the HMO's health care network. Medicare recipients lose the freedom to consult any health care provider of their choice.

Costs Not Covered by Medicare

Medicare never was intended to provide comprehensive coverage for all medical needs of America's elderly population, but rather was intended to supplement private resources. Many health services are not covered by Medicare. For example, Medicare does not pay for:

• Custodial care intended to help the patient with his or her daily living needs--such as bathing, walking, or exercising--provided by someone without medical training

• Dentures or routine dental care

• Eyeglasses, hearing aids, and examinations to prescribe or fit them

• Nursing home care (except skilled nursing care)

• Prescription drugs

• Routine physical checkups and related tests (except for some screening procedures, such as Pap smears and mammograms)

• Most immunization shots

• Services outside the United States

• Personal comfort items

Medicaid

As noted, Medicaid and Medicare are separate programs with similar names. While Medicare is funded and administered entirely by the federal government to provide health care to elderly persons and people with disabilities, Medicaid is a cooperative program funded partly by the federal government and partly by the individual states and administered primarily by the states. It provides health care to needy persons. Each state has wide latitude to decide how Medicaid operates within the state. In Texas, Medicaid is administered by the Texas Department of Human Services.

The federal government's role in Medicaid is quite limited. It pays a percentage of the cost of each state's health care program for indigent people and ensures that every state's program complies with various federal requirements. The amount of money a state receives from the federal government is called the Federal Financial Participation (FFP). Each state's FFP is determined by a formula based on the state's per capita income and the amount of medical services the state chooses to provide to needy people within the state. Many people qualify for Medicaid, Medicare, and other forms of assistance that often are administered in an overlapping or cooperative fashion. To receive Medicaid, a person must have assets with a low value and a very low income, as determined by a complex formula.

In Texas, there are several ways to qualify for Medicaid. A person who qualifies for Supplemental Security Income (SSI), Aid to Families with Dependent Children (AFDC), or the Medically Needy program automatically qualifies for Medicaid also. In addition, a person who is blind or has a disability, or who is 65 years of age or older, may qualify if all SSI requirements except for the income requirement are met. Children and pregnant women who do not qualify for AFDC, recent refugees to Texas, and people who live in certain nursing home facilities often qualify for Medicaid even if they do not meet all of the criteria to obtain federal benefits such as AFDC or SSI.

To qualify, generally a person may not have more than $2000 in assets, although there is a complex formula applied that considers the applicant's unique situation. There are several assets that the formula does not count, including:

• Homestead

• Automobile necessary for employment or otherwise to produce income, to receive health care, or essential for transporting a person with disabilities; or an automobile worth $4500 or less

• Income-producing property

• Household goods and personal effects worth $2000 or less

• Burial funds

• Life insurance, the total face value of which is $1500 or less per person

• Term and burial insurance

• Livestock for home consumption or maintained as part of a trade or business

• Annuities

A person is allowed to reduce his or her assets with the intent of qualifying for Medicaid as long as reductions are made in accordance with Medicaid rules. Generally, this means transfers must be compensated. For example, it is permissible for a person to invest all of his or her available cash in a larger homestead in order to reduce his or her counted assets below $2000. It is not permissible simply to give the available cash to family members or friends. Restructuring assets to qualify for Medicaid may be an especially attractive option for older consumers of health care services, even if they already qualify for Medicare. Medicaid coverage is better for persons living in nursing homes because it pays for a wider variety of nursing care services and for a longer period of time than Medicare. Lawyers who specialize in Medicaid have experience in advising clients how to qualify for Medicaid.

Other State Assistance

In Texas, additional programs help older people and people with disabilities pay for their Medicare coverage. For example, to ensure that certain Medicare-entitled Texans receive full protection, the Texas Department of Human Services pays their Part B premiums under the Buy-In Program. In addition, programs such as the Qualified Medicare Beneficiaries (QMB) and Medicaid Qualified Medicare Beneficiaries (MQMB) programs provide for the Department's payment of an individual's Medicare deductible and coinsurance amounts.

To apply for Social Security benefits, a person should visit his or her local Social Security office and fill out an application. By calling the Social Security Administration's toll-free number, a person can obtain the address of the closest office and set up an appointment with a Social Security representative. For retirement benefits, it is advisable to begin the application process several months before a person wants to start receiving benefits. A person who becomes disabled should apply for benefits immediately; usually, benefits do not begin until the sixth month of the disability. Anyone applying for benefits should take to the office:

• Social Security card or number

• Birth certificate

• Tax information, such as his or her most recent W-2 form or tax return

• Information about his or her home, such as real estate title

• Income and other ownership information, such as payroll slips, bank books, insurance policies, and vehicle registration

• Marriage certificate, spouse's birth certificate and spouse's Social Security number (if spouse is applying for benefits)

• Children's birth certificates and Social Security numbers (if applying for children's benefits)

• Military discharge papers

All documents must be originals or certified copies. If a person does not have all of the necessary documents, the Social Security Administration offers assistance in locating the missing information.

Application for Medicaid should be made at an office of the Texas Department of Human Services. Applicants are required to provide much of the same information.

Filling out an application does not automatically entitle a person to benefits. A person may be denied benefits because his or her application is incomplete, or because he or she does not qualify due to age, disability status, or for some other reason. The Social Security Administration notifies people that their benefits have been denied by sending notice by letter. If a person disagrees with a decision of the Social Security Administration regarding benefits, he or she has the right to appeal and to be represented by an attorney.

There are three steps to the administrative appeals process. The first step is reconsideration. An Administration representative (someone other than the person who made the original decision) reconsiders the matter and issues an opinion. If, on reconsideration, the decision is negative again, the second step is a hearing before an administrative law judge. At this stage, the claimant has the right to subpoena and cross-examine witnesses, present evidence, and read relevant files. After listening to both sides, the administrative law judge issues a decision. In most cases, this will end the matter, but if the decision is negative and the claimant wishes to press his or her claim, the third and final step is the Appeals Council. If the Appeals Council decides to review the case (its jurisdiction is discretionary), it conducts a "paper" review of the entire matter. This means it issues a decision based on the files accumulated in the two previous steps. There is no additional opportunity to testify, although the appellant may submit additional documentation if necessary.

It is important to know that there are time limits in which to make an appeal. If a person is interested in appealing a decision regarding benefits, he or she should not delay in contacting the nearest Social Security Administration office.

The Social Security Administration operates a toll-free, 24-hour telephone service to provide recorded information on Social Security and related government benefit programs, including estimates of retirement benefits. Most questions about Social Security should be addressed to the Social Security Administration. To reach a service representative, call (800) 772-1213 between the hours of 7:00 a.m. and 7:00 p.m. on business days.

The Social Security Administration also publishes a number of booklets, forms, and pamphlets designed to explain different types of government benefits, all of which are available free of charge. They include:

• Disability (Publication No. 05-10029)

• Medicare (Publication No. 05-10043)

• Retirement (Publication No. 05-10035)

• SSI Supplemental Security Income (Publication No. 05-11000)

• Survivors (Publication No. 05-10084)

• The Appeals Process (Publication No. 05-10041)

• Understanding Social Security (Publication No. 05-10024)

• You May Be Able To Get SSI (Publication No. 05-11069)

These and other publications are available at any local Social Security office or by calling the toll-free telephone number above.

For on-line information, visit the Social Security Administration's World Wide Web Site: http://www.ssa.gov.

The Internal Revenue Service, 1111 Constitution Avenue N.W., Washington, DC 20224, (800) 829-3676, offers a free publication entitled Social Security Benefits and Equivalent Railroad Retirement Benefits (Publication No. 915).

To apply for benefits, identify a local office, or obtain A User's Guide: MEDICAID (1991), a free booklet, contact the Texas Department of Human Services, P.O. Box 149030, Austin, TX 78714-9030, (512) 438-3011.

The Office of the Attorney General, Medicaid Fraud Control Unit, P.O. Box 12548, Austin, TX 78711-2548, (512) 463-2011 or (800) 252-8011, publishes a free pamphlet, What You Can Do About Medicaid Fraud.