How States Transition to New Medicaid Income Standards Could Impact Coverage for Kids and Families

By Martha Heberlein

The ACA established a new Modified Adjusted Gross Income (MAGI) standard that will be used to determine income eligibility in Medicaid, CHIP, and for premium tax credits. Under this new approach, states are required to convert their existing Medicaid and CHIP eligibility standards to account for the elimination of income disregards and ensure continued coverage at pre-ACA levels. A recent solicitation from CMS suggests some methodologies for how this might be done and last week we submitted comments on the proposals.

This conversion will determine eligibility going forward and the stakes are incredibly high (and perhaps the greatest for children), as the new MAGI-equivalent standards will set the bar for children’s public coverage through 2019 and beyond. Many of the disregards and deductions now in place are extremely valuable to families, particularly working families, having the effect of allowing them to secure Medicaid coverage at income levels that are in excess of net income standards.

If the conversion is done poorly or inconsistently across states, eligibility levels could, in effect, be lower than they were prior to passage of the ACA – a result that would be in direct conflict with the intent of the law. If done properly, the conversion will allow states to use a more simplified measure of family income when evaluating eligibility without causing children or other family members to miss out on coverage as a result of the loss of such disregards and deductions.

In addition to highlighting the importance of an accurate conversion, our comments recommend that –

  • any methodology result in at least the same number of people qualifying for coverage and suggest revisions to both of the proposed methodologies;
  • the conversion methods should be evaluated over time and allow for modification if there is evidence they are causing children or others to miss out on coverage; and
  • the minimum eligibility thresholds also be converted to MAGI-equivalent standards to protect existing coverage, especially for parents.