For the most part, the Affordable Care Act aligns the way that Medicaid determines eligibility based on the same Modified Adjusted Gross Income (MAGI) rules used to determine eligibility for financial assistance in the Marketplace. But there are exceptions in Medicaid as I outlined in this blog. The differences can mean that an individual is denied both Medicaid and premium tax credits to purchase a qualified health plan in the Marketplace.
I recently was asked for help on a case like this that includes a child with a serious health condition who seems to be caught between a rock and a hard place because of the differences in rules. Here’s the scenario: Mom and Dad are divorced but continue to live together to share parenting of their two children. Dad claims one child as a tax dependent, and both are enrolled in a Marketplace plan based on Dad’s income and a household of two. Mom claims the other child – the one with a serious health condition – as a tax dependent but Mom’s income is under 100% FPL.
One of the five exceptions to MAGI rules for Medicaid is that when a child lives in a household with both parents regardless of their marital or tax filing status, non-tax rules apply. So in this case, Medicaid determined the child ineligible by counting both Mom and Dad’s income and a household of four. But the child was also determined ineligible for Marketplace assistance because only Mom’s income counts and it’s under the 100% FPL threshold at which tax credits begin.
Here’s the obscure rule that helps protect this child from this unfair situation:
“42 CFR 435.603(i) If the household income of an individual determined in accordance with this section results in financial ineligibility for Medicaid and the household income of such individual determined in accordance with 26 CFR 1.36B-1(e) is below 100 percent FPL, Medicaid financial eligibility will be determined in accordance with 26 CFR 1.36B-1(e).”
For those of you that don’t want to look up 26 CFR 1/36B-1, it is a section of IRS code that defines family and household income for calculating premium tax credits in the following manner:
“A taxpayer’s family means the individuals for whom a taxpayer properly claims a deduction for a personal exemption under section 151 for the taxable year. Family size means the number of individuals in the family.”
What does this mean?
The tax rules should be applied to the child’s eligibility for Medicaid meaning that only Mom’s income should be counted and it should be a household of two. Using the tax rules, and not applying the Medicaid exceptions, the child would be eligible for Medicaid.
We don’t know how many states are aware of this rule, and whether or not it is being applied as intended. I suspect cases such as this may require filing an appeal, and perhaps even getting CMS to intervene, if necessary.
It won’t help all adults with income below 100% FPL in states that have not expanded Medicaid. But no child should slip through the cracks in these situations because every state covers kids well above 100% FPL.
A special thanks to the Robert Wood Johnson Foundation for its support of our work on providing feedback to HHS and highlighting how ACA implementation is impacting consumers.