The Medicare Act of 2003, which authorized the Medicareendorsed Prescription Drug Discount Card and a $600 per year credit (called Transitional Assistance, or TA) for low-income beneficiaries, includes a provision stating that discounted prices and TA should not affect an individual’s eligibility for, or the amount of, benefits from other federal programs.

A little more than a week ago, the Centers for Medicare and Medicaid Services (CMS) interpreted this provision to prohibit the Food Stamp program, run by the U.S. Department of Agriculture (USDA), from reducing the amount of food stamps an individual would receive because of a change in that individual’s medical expense deduction for calculating the food stamp benefit.  That is to say, if your medical expenses prior to receiving TA were $200/month in prescription drugs and your $600 TA credit now pays for most of that $200, you still can deduct the full $200.  Thus, you get the full value of the TA without any corresponding offset or reduction in other benefits.  This seems to be what Congress intended in the Medicare Act.

More than ten federal assistance programs for low-income individuals include a medical expenses deduction similar to that of the Food Stamp program.  CMS’s interpretation with respect to food stamps should apply to all those programs, including the “Medically Needy” portion of the Medicaid program.

CMS, however, has taken a different position with respect to the Medically Needy “spend down” for Medicaid eligibility. (See CMA Weekly Alert of June 3, 2004).  In a Question & Answer section on the Medicare agency’s website (in response to the question of whether the $600 can be deducted as an incurred medical expense when determining the amount an individual’s spend down amount) CMS says that medical expenses can be deducted only when the person pays for or incurs the expense and is not reimbursed (except from a public program of the State or a political subdivision).  Since the $600 is a Federal subsidy, says CMS, the individual does not incur an expense and so it cannot be deducted. This Q&A was last updated June 9, 2004, and is available for viewing at:

CMS is apparently revisiting this question, in light of its guidance to USDA. A different Q&A document, also on the CMS website, announces that, as of June 15, 2004, its policy with respect to medically needy spend down and transitional assistance “is currently under review.”  See

Advocates would like to see CMS issue clear directions to all affected federal programs that concur with its recent guidance to USDA. The CMS directions should be consistent and should accord with the Congressional intent not to allow the new Medicare Discount Drug Card to affect other federal program benefits.

Stay tuned for further developments.

© Copyright, Center for Medicare Advocacy, Inc.