It’s helpful for all Medicaid and CHIP stakeholders to generally understand that starting in January 2014 there will be new ways to count income and household size to determine Medicaid eligibility based on the new ACA rules. While not everyone needs to dive into these policy weeds, there are a number of reasons it’s important for some stakeholders to understand the details. To this extent, there is a new helpful policy brief from the State Health Access Reform Evaluation program at SHADAC and authored by John Czajka at Mathematica that works through the process of translating modified adjusted gross income (MAGI) to currently monthly income.
Getting it right will certainly impact adults with income on the cusp between Medicaid and eligibility for lower premiums and cost-sharing in the exchange. But it may be even more impactful for children at higher income levels since some certain sources of income currently counted for Medicaid and CHIP (i.e. worker’s compensation) is excluded from MAGI and some pre-tax deductions (like childcare and contributions to certain retirement plans) that are allowed in MAGI are not currently deducted in Medicaid. Hence, some children who do not qualify under current rules, may be eligible under MAGI. To a lesser extent, the converse may be true, specifically for families with stepparent income, which is often excluded from Medicaid and CHIP today but counts toward MAGI.
Why does MAGI income have to be translated to current monthly income? MAGI represents annual income based on tax filings but federal regulations require that Medicaid eligibility be based on current (point-in-time) monthly income. Determining “current” monthly income is not simply a matter of dividing MAGI by 12 months to calculate an “average” monthly income. States must understand what income counts and what gets excluded or deducted in order to make the policy and system changes to convert to MAGI-based eligibility.
Why is it important to understand how MAGI converts to current monthly income?
- Medicaid stakeholders know from experience that eligibility workers and state systems don’t always get it right. In particular, as we launch new data-driven, real-time IT systems, assessing whether the system is determining eligibility correctly requires the ability to figure out what the outcome should be.
- The differences between the annual and current monthly MAGI will not generally impact the lowest-income families who do not file tax returns because differences won’t impact their eligibility for Medicaid. However, it definitely matters to those on the cusp between Medicaid and eligibility for premium tax credits to subsidize coverage in the exchange. And, the impact on children, as noted above, may be even more significant.
Who needs to understand how to convert MAGI to current monthly income? The most expert application assisters and legal aid professionals must be able to identify when eligibility has been incorrectly determined. This is particularly important so that people who rightfully belong in Medicaid or CHIP get enrolled.
Czajka’s brief points out that “the conversion of annual MAGI to monthly income for determining Medicaid eligibility remains one of the more challenging problems confronting states in preparing for Medicaid eligibility in 2014.” Given this challenge, paying attention to how your state is interpreting and implementing policies that determine MAGI-based income is yet another thing for that “to-do” list.
Editor’s Note: Please see Tricia Brook’s “Getting MAGI Right” blog series for further information.