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 amount 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 fully insured workers 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

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

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.

To receive SSI, a person must be 65 years of age or older, be blind or disabled, and 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 $2,000)
• One car (worth less than $4,500)
• Income tax refunds
• The value of food stamps
• A portion of monthly earnings

When the federal government created SSI, it replaced many state-administered welfare programs for the elderly, blind, and disabled. The State of Illinois chose to continue its own program to supplement SSI benefits. This program is known as State Supplemental Payments (SSP). SSP provides additional assistance to qualified elderly, blind, and disabled persons, including those whose income levels are above the SSI standards. The purpose of SSP is to help very poor Illinois residents who are unable to work but whose needs are not met by other federal or state programs.

Medicare

Medicare should not be confused with Medicaid. Medicaid is a program administered by the Social Security Administration to pay doctor and hospital bills of people with limited income and assets. 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 for an understanding of Medicare.

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 can only be provided by a member of the HMO's health care network. Medicare recipients lose the freedom to consult any health care provider of their choice.

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

Each state has wide latitude to decide how Medicaid operates within the state. In Illinois, Medicaid is administered by the Illinois Department of Public Aid. To receive Medicaid, a person must have assets with a low value and very low income as determined by a complex formula. In Illinois, a person generally cannot have more than $3,000 in assets or more than $591 income per month, although there is a complex formula applied that considers the applicant's unique situation. There are several assets the formula does not count. Assets not counted include

• Homestead
• Automobile necessary for employment or otherwise to produce income, to receive health care, or essential for transporting a person with disabilities
• Income-producing property
• Household goods and personal effects

A person can reduce his or her assets to the point that he or she qualifies for Medicaid. As long as transfers are compensated, it is legal to restructure one's assets and income with the intent of qualifying for Medicaid. For example, it is permissible for a person to invest all of his or her available cash in a larger homestead or to expand a business in order to reduce his or her counted assets below $3,000. It is not permissible simply to give the available cash to family members or friends.

A person whose income is above Medicaid limits might be able to qualify for Medicaid under a spend-down provision. The spend-down is equal to the amount a person's income is over Medicaid limits. Medicaid occasionally agrees to cover the amount that a person's medical bills exceed a patient's spend-down.

Restructuring assets to qualify for Medicaid can be an especially attractive option for senior citizens, even if they already qualify for Medicare. Medicaid coverage is better for persons living in nursing homes because Medicaid 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 restructure their assets and income to qualify for Medicaid.

Other State Assistance

In Illinois, two additional programs help older people and people with disabilities pay for their Medicare coverage. In order to be eligible for these programs, an individual must have assets of no more than $4,000 and must live in Illinois. The Qualified Medicare Beneficiary Program (QMB) assists those who have Part A Hospital Insurance and whose income is at 100 percent or less than the federal poverty level. The Specified Low-Income Medicare Beneficiary Program (SLMB) covers Part B Medical Insurance for individuals with incomes between 100 percent and 110 percent of the poverty level. These programs are run by the Illinois Department of Public Aid.

• 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 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

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 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 the following:

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.go.

The Illinois Department of Public Aid, Division of Medical Programs, Prescott E. Bloom Building, 201 South Grand Avenue East, Springfield, IL 62763, phone: (217) 782-2570 or toll-free: (800) 252-8635, also provides information about Medicaid, Medicare, SSI, and SSP.

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