Supplemental Security Income for the Aged, Blind, and Disabled; What Is Not Income

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Social Security Administration

RIN 0960-AB09

20 CFR Part 416

Supplemental Security Income for the Aged, Blind, and Disabled;

What Is Not Income

AGENCY: Social Security Administration, HHS.

ACTION: Final rules.

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SUMMARY: These final rules revise the regulations as to what is

considered not to be income under the supplemental security income

(SSI) program in the following instance. The final rules conform SSI

policy to a number of court rulings that have required the Social

Security Administration (SSA) to consider Department of Veterans

Affairs (DVA) payments resulting from unusual medical expenses not to

be income for SSI purposes. Previously, DVA payments resulting from

unusual medical expenses were considered needs-based pension or

compensation payments and, therefore, income for SSI purposes except in

the Ninth Circuit where SSA's Acquiescence Ruling 86-1(9) applies and

in the Eleventh Circuit and the State of Indiana where courts have

invalidated SSI policy. These regulations implement on a national basis

a treatment of DVA payments resulting from unusual medical expenses

that generally will be more advantageous to recipients than current

national policy.

EFFECTIVE DATE: July 1, 1994.

FOR FURTHER INFORMATION CONTACT: Duane Heaton, Legal Assistant, 3-B-1

Operations Building, 6401 Security Boulevard, Baltimore, MD 21235,

(410) 965-8470.

SUPPLEMENTARY INFORMATION: These regulations affect the SSI program

under title XVI of the Social Security Act (the Act), as amended and

the Medicaid program under title XIX of the Act to the extent that

Medicaid eligibility is based on title XVI eligibility. The purpose of

the SSI program is to provide a minimum income level for aged, blind,

and disabled people who do not have income or resources above levels

specified in the Act. The regulations change what is considered not to

be income under the SSI program.

The DVA considers veterans' unusual medical expenses by deducting

them from any countable income when computing some needs-based pension

and compensation payments. (Unusual medical expenses are unreimbursed

medical expenditures that exceed 5 percent of the applicable maximum

annual DVA basic payment rate. This rate does not include an aid and

attendance component.) Unusual medical expenses may result in a higher

monthly DVA payment, an extra payment, or an increase in a payment.

These DVA payments were treated as needs-based pension or compensation

payments and, under Sec. 416.1121(a), as income for SSI purposes.

In the case of Summy v. Schweiker, 688 F.2d 1233 (1982), the Ninth

Circuit Court of Appeals held that these additional DVA payments

represented reimbursement for medical expenses, and, therefore, were

not income for SSI purposes under Sec. 416.1109(a). This section, which

exempted third-party reimbursement for medical expenses from income,

was subsequently revised and now appears at Sec. 416.1103(a). We are

adding Sec. 416.1103(a)(7), which refers to DVA payments resulting from

unusual medical expenses, to the list of medical care or services that

are excluded from the definition of income. By doing this, we are

recognizing that the nature of such payments is analogous to that of

other forms of medical care or services that are currently not income

under Sec. 416.1103(a).

SSA published Acquiescence Ruling 86-1(9) to apply the Summy

holding within the Ninth Circuit. Upon publication of these

regulations, Acquiescence Ruling 86-1(9) will be withdrawn. While the

regulatory change will generally benefit SSI recipients, it may result

in reduced benefits or ineligibility for a small number of SSI

recipients. Under section 1614(f) of the Act, the income and resources

of spouses and parents who are not eligible for SSI are considered to

the extent determined by the Secretary as the income and resources of

their spouses and children who live with them and are eligible for SSI

benefits. This is known as deeming. We do not count any of the income

of an ineligible spouse or parent who receives payments from a needs-

based public income maintenance program because to do so would defeat

the purpose of such a program.

Presently, DVA payments resulting from unusual medical expenses are

considered needs-based public income maintenance payments, and we do

not count under SSI deeming rules any income of an ineligible spouse or

parent which was counted or excluded in figuring these payments (see

Sec. 416.1161(a)(2)). Under these final regulations, DVA payments

resulting from unusual medical expenses will be considered

reimbursement for medical expenses and not needs-based pension or

compensation payments. For an individual who receives only such

payments, receipt of such payments will no longer preclude our counting

as income to the SSI recipient part of the income of an ineligible

spouse or parent used in computing such payment.

Example: Jenny, a disabled child who is eligible for SSI benefits,

lives with her father, Mr. Morton, who received both a DVA pension

based on need and a title II Social Security benefit. In determining

how much income to deem to the child, none of Mr. Morton's title II

benefit was considered income deemable to Jenny because the DVA had

already counted Mr. Morton's title II benefit in figuring the amount of

his DVA needs-based pension payment. In January 1992, Mr. Morton

reported an increase in his title II benefit to the DVA and the amount

of the increase precluded him from receiving further DVA pension

payments. Because no DVA needs-based pension payment was being made,

Mr. Morton's title II benefit was deemable as income to Jenny,

resulting in a reduction of her SSI payment. In December 1992, Mr.

Morton filed an annual report with the DVA reflecting both his title II

income and evidence of his payment of unusual medical expenses. The DVA

recomputed his income for the period January 1992 through December 1992

based on the evidence of unusual medical expenses and issued him a one-

time payment. Under the prior policy, we would recalculate Jenny's SSI

payment for the period January 1992 through December 1992 in order not

to deem to Jenny any of Mr. Morton's title II benefit used by the DVA

in determining a needs-based pension payment. However, under these

final regulations, for deeming purposes, we will not recalculate

Jenny's SSI benefit and will continue to consider Mr. Morton's title II

benefit for the period January 1992 through December 1992 as income

available to Jenny. The DVA payment resulting from unusual medical

expenses will no longer be considered a public income-maintenance

payment so we will not exclude any income used in calculating it, but

instead we will consider the payment reimbursement for medical expenses

and not income.

The above example describes how we will apply the Summy decision

nationwide under the SSI program. This change in the treatment of DVA

payments for unusual medical expenses also affects how income is

determined under the Medicaid program under title XIX of the Act.

We published a notice of proposed rulemaking (NPRM) on August 24,

1988 (53 FR 32252). That NPRM included proposed SSA and Health Care

Financing Administration (HCFA) regulations on the treatment of DVA

payments for unusual medical expenses under the SSI program as well as

under the Medicaid program under title XIX of the Act. SSA coordinated

and combined the NPRM with HCFA because, generally, the Medicaid

statute uses the methodologies and treatment of income of the cash

assistance programs such as SSI as the baseline for determining

eligibility for Medicaid. Thus, in defining income for Medicaid

eligibility purposes, the SSI treatment of DVA payments for unusual

medical expenses would usually be applied.

Based on the public comments and subsequent court decisions, the

Medicaid portion of the final regulations required further

consideration. As a result, SSA decided to proceed separately with the

SSI portion of the final regulations. We based this decision on the

need to provide uniform national policy in this area. These changes in

SSI income rules will affect the Medicaid program in those States which

use SSI income rules in their Medicaid program.

Comments Received Following Publication of the NPRM

When these regulations were published as an NPRM, interested

parties were given 60 days to submit comments. We received 13 letters:

3 from State or local governmental entities, 4 from special interest

organizations, and 6 from individuals. Several commenters wrote merely

to support the proposed regulations; one indicated that the proposed

regulations are unnecessary; and others, while supporting the proposed

regulations, suggested changes. Many of the commenters addressed issues

regarding the Medicaid aspects of the NPRM. The issues raised by those

commenters are not within the purview of these final SSI regulations

and have been referred to HCFA for appropriate response. We have

summarized the SSI issues raised by the commenters and responded to

these comments below.

Comment: One commenter suggested that the phrase ``pension or

compensation payments'' is more appropriate than the phrase ``pension

payments'' which we used in the preamble to the NPRM, because DVA

Dependency and Indemnity Compensation payments are also increased for

unusual medical expenses.

Response: We agree that the phrase ``pension payments'' should be

clarified to more accurately describe DVA payments. In addition, we

have emphasized that these payments are based on need by replacing the

word ``pension'' with the phrase ``needs-based pension or

compensation'' in the description of the rule change in this preamble.

Comment: One commenter stated that the Medicaid regulations would

defeat the purpose of the DVA payments. In support of this statement

the commenter referred to a September 14, 1978, Federal Register

document which provides:

``Where the SSI program reduces its payments to take into

account assistance of this type (medical or social) furnished under

other governmental programs, SSI is, in effect, nullifying or

frustrating achievement of those other programs' purposes.''

In referring to the above Federal Register statement, the commenter

stated that ``this longstanding principle prohibiting the nullification

of other benefits available to a recipient would be violated (for

Medicaid purposes) if the DVA reimbursement for unusual medical

expenses were to be included as income in the post-eligibility

determination of the recipients' contribution to cost of care.''

Response: The Federal Register statement to which the commenter has

referred was made in the context of the SSI program and not the

Medicaid program. In the context of the SSI program, the SSI program

provides funds to meet an individual's food, clothing, and shelter

needs, not medical or social service needs. One of the express purposes

of these final rules is to revise SSI regulations so as not to count

certain DVA payments in determining eligibility for and the amount of

the SSI payments. To the extent the commenter is referencing the

Medicaid program, this comment has been referred to HCFA for

appropriate response. Other than the change explained above to the

preamble to the regulations, we are adopting these SSI regulations as

proposed.

Regulatory Procedures

Executive Order 12866

The Office of Management and Budget has reviewed these rules and

determined they do not meet the criteria for a significant regulatory

action under E.O. 12866.

Regulatory Flexibility Act

We certify that these regulations will not have a significant

economic impact on a substantial number of small entities because they

affect only individuals. Therefore, a regulatory flexibility analysis

as provided in Pub. L. 96-354, the Regulatory Flexibility Act, is not

required.

Paperwork Reduction Act of 1980

These regulations impose no additional reporting and recordkeeping

requirements necessitating clearance by the Office of Management and

Budget.

(Catalog of Federal Domestic Assistance: Program No. 93.807,

Supplemental Security Income)

List of Subjects in 20 CFR Part 416

Administrative practice and procedure, Aged, Blind, Disability

benefits, Public assistance programs, Reporting and recordkeeping

requirements, Supplemental security income.

Dated: August 18, 1993.

Lawrence H. Thompson,

Principal Deputy Commissioner of Social Security.

Approved: August 30, 1993.

Dona E. Shalala,

Secretary of Health and Human Services.

Note: This document was received by the Office of the Federal

Register on June 28, 1994.

For the reasons set out in the preamble, part 416 of Title 20 of

the Code of Federal Regulations is amended as follows:

1. The authority citation for subpart K of part 416 continues to

read as follows:

Authority: Secs. 1102, 1602, 1611, 1612, 1613, 1614(f), 1621,

and 1631 of the Social Security Act; 42 U.S.C. 1302, 1381a, 1382,

1382a, 1382b, 1382c(f), 1382j, and 1383; sec. 211 of Pub. L. 93-66,

87 Stat. 154.

2. In Sec. 416.1103, a new paragraph (a)(7) is added to read as

follows:

Sec. 416.1103 What is not income.

* * * * *

(a) * * *

(7) Payments from the Department of Veterans Affairs resulting from

unusual medical expenses.

* * * * *

[FR Doc. 94-16050 Filed 6-30-94; 8:45 am]

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