The New World of MAGI Income
Tricia Brooks
Arizona Assister Training
September 2014
Warning!
o This training gets into the policy
weeds of how household and
income are counted under MAGI!
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What is MAGI-based eligibility?
• Modified Adjusted Gross Income
- Not a number; it’s a methodology for
determining eligibility
- Determines who’s counted in the
household and whose income counts
toward eligibility
• Rooted in tax law
• Replaced prior Medicaid income,
disregards and household counting rules as
of January 1, 2014
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Why new rules?
•
•
•
Eliminate potential gaps between coverage options by
aligning eligibility for premium tax credits (PTCs) with
Medicaid
Simplify the eligibility process and provide consistent
rules across states
Move toward real time eligibility with reliance on
electronic data sources
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Which groups are subject to MAGI?
Children
Parents and
caretaker relatives
Pregnant women
People with disabilities
and seniors needing
long term care
Newly eligible adults
(aka Medicaid expansion)
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Medicaid/ Arizona AHCCCS Eligibility
States were required to
convert old standards to
new MAGI rules.
MAGI moves toward
electronic, real-time eligibility
determination.
Income Limit
Eligibility Criteria
Verification
Children < 1 year
152% FPL
Electronic *
Children 1 – 5
146% FPL
Citizenship/Immigr
ation Status
Children 6 - 18
138% FPL
Income
Electronic *
Pregnant Women
161% FPL
Age/DOB
Self-Attestation **
Adults
138% FPL
Household
Self-Attestation **
SSN
Electronic *
Pregnancy
Self Attestation **
State Residency
Electronic *
* If cannot be verified electronically, paper documentation required.
** If discrepancy between electronic sources, paper documentation
required.
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Three Steps for Assessing Eligibility
• Determine if non-filer, tax-filer, taxStep 1 dependent, or exception for Medicaid
• Determine household size based on
Step 2 applicable tax-filer, non-filer or exception rules
• Add the MAGI income of all the relevant
Step 3 members of the individual’s household.
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Step 1
•
•
•
•
•
•
• Key Points about Household Size
Rules are different for tax-filers and non-filers.
Only tax-filers are eligible for PTCs/CSRs, and married
couples must file jointly.
Tax-filer rules apply to both PTCs/CSRs and Medicaid.
Non-filer rules apply only to Medicaid.
There are 5 exceptions for tax filers or tax dependents;
non-filer rules apply to Medicaid in these situations.
Household size may be different for different members of
the family, and different for Marketplace vs. Medicaid.
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Tax Filers: Household Composition
•
Household = all
individuals in the
tax filing unit
- Tax-filer
- Spouse
- Tax dependents
•
•
Qualifying child
Qualified
relatives
- Exclude “not
lawfully present”
in the household
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Non-Filers: Household Composition
General Rule: Household = all individuals living together
who are related (more like old Medicaid rules)
Children
Adults
– Adult
– Spouse
– Children under 19
• Biological, adopted or step
– Would not include qualified
relatives
– Child
– Child’s parents (including
step-parents)
– Children’s siblings
• Biological, adopted or step
– Child’s spouse if married and
living with the child.
– The child’s children, if living
with the child.
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Exceptions to tax-filer rules for Medicaid:
Non-filer rules apply in these situations
①
②
③
④
⑤
Child claimed on non-custodial
parent taxes
Child living with unmarried parents
or parents filing separate tax returns
Any tax dependent (child or
qualified relative) claimed by
someone other than a parent or
spouse
Married couples living together filing
separately
Pregnant women
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① Child (under 19) claimed as tax dependent
by non-custodial parent
• Medicaid eligibility for the
child only is based on the
custodial parent’s household.
• For premium tax credits, the
child’s eligibility is based on
the income of the parent
who claims the child.
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Example Exception 1 – Alan, Judith and Jake
Alan and Judith are
divorced and both file
taxes. They have a son,
Jake, who lives with Alan,
but is claimed by Judith on
her tax return.
Marketplace Household
Medicaid Household
Alan
Household of 1, Alan
Household 1, Alan
Jake
Household of 2, Judith and Jake
Household of 2, Alan and Jake
Judith
Household of 2, Judith and Jake
Household of 2, Judith and Jake
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② Child living with both parents who are
unmarried or file taxes separately
• Both parents are included
in the child’s household for
Medicaid
• For PTCs, the child’s
eligibility is based on the
tax filing parent’s
household and income if
the parents are unmarried
• If married filing separately, the family is not eligible
for PTC
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Example Exception 2– Ross and Rachel
Ross and Rachel are not
married, and file separate tax
returns. They live together with
their daughter, Emma. Ross
claims Emma on his tax return.
Marketplace Household
Medicaid Household
Ross
Household of 2, Ross and Emma
Household of 2, Ross and Emma
Emma
Household of 2, Ross and Emma
Household of 3, Ross, Rachel and Emma
Rachel
Household of 1, Rachel
Household of 1, Rachel
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③ Individual claimed as tax dependent by
someone other than a parent or spouse
• Qualifying child
- For example, child living
with a grandparent
• Other qualifying relative
- For example, grandmother
living with son’s family
• For Medicaid, use nonfiler rules for that person
only
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Example Tax Dependent – Will Smith/Banks
Will Smith lives with his Uncle
Phillip’s family. The Banks have 3
biological children. Will is claimed
as a tax dependent on the Banks’
tax return, in addition to the other
5 members of the family.
Marketplace Household
Medicaid Household
Will
Household of 6, Will and all 5 Banks
Household of 1, Will
Banks Family
Members
Household of 6, Will and all 5 Banks
Household of 6, Will and all 5 Banks
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④ Married couples living together but
filing taxes separately
•
•
For Medicaid, married couples living
together are included in each other’s
household regardless of whether they
are tax-filers or non-filers
Married couples must file jointly to
qualify for PTCs
Marketplace Household
Medicaid Household
Lucy
Not eligible, not filing jointly
Household of 2
Ricky
Not eligible, not filing jointly
Household of 2
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⑤ Pregnant Women
• For Medicaid, the pregnant woman’s
household includes the the number
of babies expected
• However, for other family members,
Arizona only counts the pregnant
woman as one person
• If the pregnant woman files taxes or
is a tax dependent, tax-filer rules
apply, you just increase the
household size for the number of
babies in determining her eligibility
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Ross and Rachel are having another baby
Ross and Rachel are not married.
They live together and have one
child, Emma, and Rachel is pregnant.
Ross claims Emma on his taxes and
Rachel files separately.
Marketplace Household
Medicaid Household
Ross
Household of 2, Ross and Emma
Household of 2, Ross and Emma
Emma
Household of 2, Ross and Emma
Household of 3, Ross, Rachel and Emma
Rachel
Household of 1, Rachel
Household of 2, Rachel plus baby
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Step
2A
• Who’s income counts?
Generally, the MAGI income of
all individuals must be counted
toward household income
Income of tax dependents is
NOT included if they are not
EXPECTED to file taxes.
The filing threshold for
children for 2014 is
$6,100 for earned
income, $1,000 for
unearned income; for
other tax dependents, it’s
$3,950
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Step
2B
• What income counts?
Adjusted Gross Income
from line 31 on 1040
+ Excluded foreign
income
+ Tax exempt interest
+ Non-taxable Social
Security benefits
Taxable
Income
Sources
= MAGI
Adjustments
to Income
Adjusted
Gross
Income
(AGI)
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What income counts?
•
•
•
•
•
•
•
•
Counted
Wages and tips
Unemployment
Pensions and annuities
Net business/farm income
Dividends and taxable
interest
Alimony received
Rents and royalties received
Social Security retirement
or survivor benefits (both
taxable and non-taxable)
Not Counted
• TANF
• SSI (disability)
• Child support
• Gifts
• Qualified scholarship (for
tuition only)
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What deductions/adjustments count?
Most common:
• Alimony paid
• Student interest
• IRA contribution
• Moving expenses
• Other deductions
are listed (lines 2335 on 1040)
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Changes to How Income is Counted in Medicaid
INCOME SOURCE
PRE-MAGI MEDICAID
MAGI MEDICAID
Self-employment
Not all business expenses (i.e.
depreciation) were deductible
NET INCOME/PROFIT
Counted with all tax deductible
expenses and business losses
(line 31 of schedule C or line 34
from schedule F)
Pre-tax deductions or salary
deferrals (flex spending
accounts, childcare, 401(k))
Included in gross income
Not included in gross income
Child support received
Counted as income
Not counted as income
Alimony paid
Not deducted from income
Deducted from income
Veterans’ benefits
Counted as income
Not counted as income
Workers’ compensation
Counted as income
Not counted as income
Step-parent income
State option but not always
counted toward child’s eligibility
Counted as household income
TANF and SSI
Counted as income
Not counted as income
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Differences in how income is calculated for
Medicaid that do not apply to PTCs/CSRs
•
•
For new applicants, Medicaid looks at “current
monthly income”
• Scholarships and other education awards not counted
• Native American income does not count
• Lump sum payments counted only in month received
PTC eligibility is based on “projected annual income”
for applicable tax year
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Deduct pre-tax contributions/salary deferrals
when reporting income
Certain employee contribution to benefits that are deducted
from wages before federal taxes are calculated. Taxes are
calculated on the reduced wage and are therefore lower.
Common pre-tax contributions
Dependent Care
Medical Flex
Spending
Accounts
401(k) or 403(b)
Retirement Accounts
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How to identify pre-tax deductions?
On Pay Stubs:
Difference
between gross
wages and gross
“taxable” wages.
Or list of
deductions
taken.
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Examples – Pre-tax Deductions
Example 1
Mary is a single Mom
with a 2-year daughter.
She earns $1,900 per
month (144% FPL) and
receives $500 per
month in child support.
She also has $200 per
week taken out for
child-care.
• Is Mary eligible for
AHCCCS?
Example 2
John is a single male.
He earns $45,000 per
year but contributes
$5,000 to his
retirement account.
•What is John’s income
based on MAGI?
Example 3
John is single and
earns $17,000 (146%
FPL). The company he
works for doesn’t have
a retirement account
but he deposits $100
each month into an IRA
•What is John’s income
based on MAGI?
•Is John eligible for
AHCCCS?
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How about Social Security income?
For adults…
For children…
• All social security benefits (not
SSI) whether taxable or not
count toward MAGI
• When a child is claimed as a
tax dependent by someone
other than a parent or spouse,
the child’s survivor benefits
and SSDI count toward
household income only if the
child has other income that
requires them to file taxes.
• If child is in own household,
(i.e. Medicaid exceptions) all
of his/her income counts
toward his/her eligibility
⁻ Social security retirement
⁻ Social security survivor benefits
⁻ Social security disability income
(SSDI)
⁻ Could mean adult who is not
required to file taxes, is over
Medicaid income threshold,
and would need to file taxes to
get PTCs
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Social Security Income Examples
Example 1
Mary earns $800 per
month (82% FPL)
working part-time and
receives $600 per
month (combined
144% FPL) in social
security survivor
benefits. She does not
file taxes.
• Is Mary eligible for
AHCCCS?
• What about PTCs?
Example 2
Same scenario but
Mary has a 17-year old
daughter. Her MAGI of
$1,400 = 106% FPL for
family of 2. Jane, who
also receives $600 per
month in social
security survivor
benefits. Jane does not
earn any income and
does not file taxes.
•Does Jane’s SS count?
Example 3
Same scenario as
Example 2. But Jane
also earns $600 per
month working parttime after school.
Jane’s earned income
and SS benefits, plus
Mary’s total income =
198% FPL.
•Is Mary eligible for
AHCCCS?
•What about Jane?
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Georgetown McCourt School of Public Policy
Health Policy Institute
Center for Children and Families
Center on Health Insurance Reforms
Tricia Brooks
JoAnn Volk
Tricia.Brooks@georgetown.edu
Joann.Volk@georgetown.edu
Website:
http://ccf.georgetown.edu/
Website:
http://chir.georgetown.edu/
Say Ahhh! a child health
policy blog:
http://ccf.georgetown.edu/bl
og/
CHIR Blog:
http://chirblog.org/
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