Full question: I care for my adult disabled children in my home, and I receive Medicaid waiver payments through the IRIS Program in the state of Wisconsin for doing so. Our fiscal agent is iLIFE in Milwaukee, WI. I’ve been a caregiver with the IRIS Program since 2013 when our youngest turned 18. I’ve always filled my annual W2 forms in with EXEMPT since I am a live-in caregiver. In 2020, I took early retirement from the college I was working at (due to COVID-19 issues). I started receiving Social Security retirement funds last year. However, I am now being told by SSA that I have been overpaid last year because of the Medicaid waiver payments made to me. When applying for SS benefits last year, I specifically asked someone at our local SSA office whether or not these IRIS of Wisconsin waiver payments count as income. I was told “no”. They are not “earned income”. The payments are for the care of eligible individuals under a state Medicaid Home and Community-Based Services waiver program described in section 1915(c) of the Social Security Act designated as “difficulty of care payments” under Notice 2014-7, which are excluded from my gross income. I had to file a Request for Reconsideration (Appeal) with the Social Security Administration. Now I’m waiting to hear what is really accurate about these waiver payments. Do you think I will have to repay the overpayment? Do you think the waiver payments are counted as earned income when SSA figures out my monthly retirement benefits going forward? I don’t know how to receive more clarity on this issue. Thank you for any help you can give me.

Hi there,

Our research indicates that Medicare waiver payments are not considered income for purposes of the SSA earnings test.

Also, based on IRS Notice 2014-7, as of January 3, 2014, the IRS will treat certain Medicaid waiver payments as difficulty of care payments excludable from gross income under section 131 of the Internal Revenue Code.

Best of luck,
Martha

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