A 70-year-old woman moves in with her adult son after a stroke. Her only income is $1,200 a month in Social Security. She applies for ABD Medicaid — New Jersey’s Medicaid program for the aged, blind, and disabled — and is told she is over the income limit, which in 2026 is $1,330 for a single person. But she earns only $1,200 a month. How is she over income?
The answer is a rule called In-Kind Support and Maintenance, or ISM. It is one of the most commonly misapplied rules in the Medicaid and SSI world, and one of the most fixable. In many cases, a written lease and a monthly rent payment is all it takes to bring an otherwise-qualifying applicant into eligibility. The problem is that many New Jersey counties are still applying an old version of the rule — even though federal regulations changed nationwide in September 2024 to become significantly more favorable to applicants.
What Is In-Kind Support and Maintenance?
ISM is the Social Security Administration’s term for non-cash assistance provided to an SSI or Medicaid recipient in the form of shelter. When someone else provides or pays for your housing — rent, mortgage payments, utilities, real property taxes, garbage collection — SSA treats that assistance as a form of income, even though no money actually changes hands. That imputed income counts against program income limits.
Food was also part of ISM calculations until September 30, 2024, when SSA eliminated it. Food assistance from any source — whether a family member buys groceries, takes someone to dinner, or otherwise provides meals — is no longer counted as income for SSI or Medicaid purposes. Only shelter remains.
ISM is relevant to both SSI and ABD Medicaid in New Jersey. SSI recipients are automatically eligible for NJ Medicaid. But individuals who do not receive SSI — those whose Social Security income exceeds the SSI limit but who are still below the ABD Medicaid income threshold — can be knocked over that threshold by ISM, even though their actual cash income is within the limit. For more background on how SSI and ABD Medicaid interact in New Jersey, see my post on SSI and Medicaid Eligibility in New Jersey.
How ISM Is Valued: The VTR and PMV
ISM is valued using one of two methods, depending on the living arrangement.
The Value of the One-Third Reduction (VTR) applies when the applicant lives in another person’s household and receives both shelter and all meals from the household. Under the VTR, SSA reduces the SSI benefit by exactly one-third of the Federal Benefit Rate — a flat reduction regardless of what the support is actually worth.
In all other shelter-related ISM situations, SSA uses the Presumed Maximum Value (PMV) rule. The PMV is a cap on the amount of ISM that can be imputed — for 2026, it is $351.33 per month (one-third of the federal SSI benefit rate plus $20). Even if a person receives more in free rent, the maximum income SSA will impute is the PMV. For an ABD Medicaid applicant who is not on SSI, the PMV is added to their actual cash income for purposes of the eligibility calculation.
| 📋 Example: Maria, age 70, lives with her son and pays no rent. Her only income is $1,200/month in Social Security. Without a lease: SSA imputes $351.33 in ISM shelter. Maria’s countable income = $1,551.33. She is over the 2026 ABD Medicaid income limit despite having no additional cash income. With a qualifying lease: No ISM is imputed. Maria’s countable income remains $1,200/month — within the ABD Medicaid limit. |
The Fix: The Business Arrangement Rule
This is where the 2024 rule change matters most. Under the revised federal regulation effective September 30, 2024, SSA will not charge ISM in the form of room or rent if the applicant pays rent under a “business arrangement.”
| 📌 2024 Rule Change (20 CFR 416.1130(b)): A business arrangement now exists — and no ISM is charged — when the monthly rent required under the lease equals or exceeds the Presumed Maximum Value (PMV). This standard applies nationwide, to all applicants and recipients, regardless of who the landlord is — including a family member. The PMV for 2026 is $351.33/month. |
The practical consequence is significant. Before September 30, 2024, a New Jersey applicant living with a family member needed to pay their fair share of full market rent to avoid ISM — which could easily be $1,500 or more per month in many NJ markets. Under the current rule, rent at or above the PMV — currently $351.33 — is sufficient to establish a business arrangement and eliminate ISM entirely, regardless of what the market rent would be.
The rent must be paid under a genuine written lease and must actually be paid each month. SSA will verify the arrangement. A paper lease with no money changing hands will not survive scrutiny.
Why NJ Counties Are Still Getting This Wrong
| ⚠️ Important: Many NJ counties are still applying the pre-September 2024 ISM rules — requiring a fair share of rent at full market value rather than the PMV. This is denying benefits to applicants who are legally entitled to them. |
The September 30, 2024 changes are federal regulatory changes that apply uniformly in New Jersey. Common errors being made post-2024 include: 1) continuing to require evidence of the applicant’s payment of their fair share of housing expenses, rather than the PMV, 2) continuing to request utility bills when that documentation is irrelevant, and 3) rejecting rental agreements. These are not technical errors with minor consequences. They result in real people being wrongly denied ABD Medicaid coverage they are legally entitled to.
What to Do If You Are Denied Based on ISM
If an ABD Medicaid application is denied — or an existing benefit is terminated — on the basis of ISM, the first step is to review the denial notice. New Jersey is required to explain the basis for the denial and the calculation used. If ISM was applied incorrectly, the applicant has the right to request a fair hearing.
What the Lease Needs to Include
To establish a business arrangement and eliminate ISM, the rental agreement should be in writing and reflect a genuine arrangement. At minimum, the lease should include:
- The names of the landlord and tenant
- The address and description of the space being rented
- The monthly rent amount — at or above the PMV ($351.33 in 2026)
- The lease term (month-to-month is acceptable)
- A statement on whether it is inclusive of utilities including gas, electric, water, garbage, etc.
- Signatures of both parties and the date of execution
Rent must actually be paid each month and documented. Payment by check or money order with a clear notation that it is a rent payment is recommended. Electronic transfers through Zelle, Venmo, or PayPal may be accepted but should include a note identifying the payment as rent for the relevant period. Such payments should be consistent (made around the same date each month) and partial payments should be avoided. Cash payments without documentation create evidentiary problems and should be avoided.
Final Thoughts
The ISM rules affect some of the most financially vulnerable people in New Jersey — elderly individuals and people with disabilities living on fixed incomes in family households. For this population, ABD Medicaid is not a secondary benefit. It covers their medical care, prescriptions, and often their long-term care services. The fix — a written lease with documented monthly rent at or above the PMV — is one of the simplest solutions in elder law and benefits planning.