Medical Expense Deduction: Issues and Best Practices

Ty JonesAASD Conference

September 23, 2013

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Our Plan for Today 1.Overview of Medical Expense Deduction

Policy 2.Advocates’ Perspective 3.Lessons from South Dakota4. Q & A

Why Talk About this Deduction?• The excess medical deduction plays an important role in

targeting food assistance to households with high out of pocket medical costs.

• The excess medical expense deduction is one of the most underutilized of the SNAP income deductions.

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Share of Elderly or Disabled Households Claiming Medical

Expense Deduction

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8%

92%

SNAP House-holds with Elderly or Disabled Members =12,256,213

SNAP House-holds Claim-ing Medical Expense De-duction = 996,594

Wide Variation Across States in Share of Eligible Claiming the Deduction

U.S. Total Kansas Colorado South Dakota0%

5%

10%

15%

20%

25%

11.6%

1.4%

10.2%

22.7%

Shar

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hou

seho

lds w

ith e

lder

ly/d

isabl

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laim

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g th

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edic

al d

educ

tion

Source: USDA Household Characteristics Data, 2011

Why Aren’t More Households Claiming the Deduction?

• State policies & procedures • Participant and advocate lack of awareness

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Types of Medical Expenses that Qualify

Allowed Expenses• Medical and dental

services,• Hospital bills,• Prescriptions,• Medical equipment,• Transportation to & from

medical services/treatment

• Attendant or home health aide

• Medical insurance premiums or Medicare supplemental insurance policies

Disallowed Expenses

• Expenses incurred that include the cost of a special diet,

• Costs of health and accident policies,

• Medical expenses covered by vendor payments, and

• Medical expenses covered by reimbursements.

State Applications Can Help Households Claim the Deduction

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Application Design Can Hinder the Deduction Use

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Verification Policy Can Be a Barrier• Federal regulations require:–The amount of any medical expenses deductible shall be verified prior to initial certification.–Other factors such as the allowable services provided or the eligibility of the person incurring the cost, shall be verified, if questionable.

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Paper Verification is Not the Only Way• Clients and advocates identify verification as a key

barrier to eligible households claiming medical expenses.

• States and workers often only accept paper documentation.– No specific document can be required. – Other forms of verification could work also, collateral

contacts.– State agencies have a duty to assist with verification 11

Strategies to Ensure Eligible Households Claim Medical Expenses

States are assessing the medical expense take-up rates and reviewing their policy and procedures.– Require verification only at initial certification. – Lift unnecessary restrictions on allowable medical

expenses– Standard Medical Expense Deduction waiver– Outreach to senior and disabled individuals and advocacy

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Standardized Medical Deduction Waiver

• A waiver from USDA started in 2005• Currently 14 State agencies are operating with

these waivers• Designed to:– Test the impact of increasing access to SNAP by the

elderly and disabled– Increase administrative efficiency– Reduce the risk of quality control errors.

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Standard Medical Deduction Waiver in 14 States

What’s A Successful Standard Medical Deduction?

• Increases use of medical expense deduction amongst eligible households, directing more food assistance to vulnerable seniors and people with disabilities.

• Households with extreme medical expenses continue to claim actuals.

• Offset to rest of SNAP population is minimum.• Increases administrative efficiency.

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Caveat Emptor: Standard Medical Deduction Waivers Aren’t A Silver Bullet • Cost-Neutrality

Determination• Offset Dilemma• Gathering Data• Constraints on Staff

Time• Risks to households

with high medical costs

What is Cost Neutrality?

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Cost of Standard Medical Deduction

Federal Government Cost

Benefits to Participants

Offset(SUA, income)

Increased Benefits to Participants

Standard Medical Deduction

Possible Downsides To Standard Medical Deduction

Cost of Standard Medical Deduction

Federal GovernmentCost

Benefit Cut to Other SNAP Participants

Offset(SUA, income)

Increased Benefits to Participants

Standard Medical Deduction

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So What’s a State To Do?• Gather Data

– How many claim the deduction now?• Assess Barriers• Set Clear Policy and Expectations– Verifications– Assess impacts on households with high medical costs

• Review Training• Engage Advocates and Assisters

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