Advocate's Guide to MAGI

Executive Summary

New and Updated. The Affordable Care Act (ACA) established new rules for counting income and family size to determine eligibility for insurance affordability programs, including subsidized health insurance through the Marketplaces, Medicaid and CHIP. These new income counting rules, known as Modified Adjusted Gross Income (MAGI), are applicable nationwide, are quite complex and differ significantly from prior Medicaid/CHIP rules. NHeLP’s Advocate’s Guide to MAGI is our free resource designed to help advocates understand and apply these new income counting rules. The Guide explains in detail how MAGI works, including who is and who is not subject to MAGI, the types of income counted and excluded, and how to figure out who is in an applicant’s “household” for determining eligibility. In addition, the Guide contains a number of helpful charts and hypothetical examples to demonstrate how the new rules work.
I.Introduction
 
One of the significant changes brought about by the Affordable Care Act (ACA) is the introduction of a new methodology to evaluate eligibility for Insurance Affordability Programs (IAPs):  Modified Adjusted Gross Income (MAGI).  MAGI will be used to evaluate available income for most Medicaid and Children’s Health Insurance Program (CHIP) applicants and enrollees beginning in 2014 (or earlier in a few states that have opted for early implementation). The MAGI methodology differs significantly from prior Medicaid rules. MAGI will also be used to determine eligibility for Advance Premium Tax Credits (APTCs) and Cost Sharing Reductions (CSRs) for applicants for financial assistance under the new insurance Exchanges (increasingly referred to as “Marketplaces”).  MAGI aims to introduce nationwide uniformity to a system of calculating income that previously varied considerably from state to state.
 
This Advocate’s Guide explains how MAGI works.  It sets forth, in as much detail as possible, the guidelines that CMS has developed to implement and govern this new methodology.  This Guide is similarly meant for national use, and we point out the few areas where states have leeway to shape policies that affect the MAGI calculations. 
 
The Guide will be an ongoing reference for advocates providing direct services to clients who have questions or problems pertaining to eligibility for health care affordability programs. NHeLP is publishing this Guide solely in electronic format, so we can efficiently update, expand and improve it as appropriate. While advocates may want to print out a version for desk reference, we suggest regularly checking the NHeLP website to obtain the most up-to-date version. As we are all making the transition to this new methodology and learning the “ins and outs” of it together, we welcome any suggestions for improvement or for further clarification.
 
Table of Contents
 
Glossary of Acronyms
 
I.Introduction
A.Overview of MAGI Methodology
B.How MAGI Relates to Federal Taxes
C.No Asset Test
D.Limited Applicability of MAGI
E.Legal Authorities Governing MAGI
1.Legislation
2.United States Code
3.Rulemaking
4.Code of Federal Regulations
 
II.Medicaid/CHIP Populations and Eligibility Categories Subject to or Exempted from MAGI
A.Populations and Eligibility Categories Subject to MAGI
1.Newly eligible adults
2.Pregnant women
a)Pregnancy coverage for individuals under 21
3.Parents and caretaker relatives
4.Children
a)Independent foster care adolescents
b)Children receiving state funded (non-IV-E) foster care, kinship guardianship assistance, or adoption assistance
c)CHIP
5.Limited scope Medicaid – TB
6.Family Planning
B.Populations and Eligibility Categories Not Subject to MAGI
1.Eligibility categories and populations exempt from MAGI
a)Aged, Blind, and Disabled (ABD)
i.SSI recipients
ii.Section 209(b)
b)Children receiving Title IV-E and certain non IV-E foster care, adoption assistance or kinship guardianship assistance
c)Katie Beckett option
d)Individuals for whom Medicaid is paying Medicare cost-sharing
e)Dually eligible individuals
f)Long term care
g)Medically Needy and spend down populations
h)Express Lane Findings
i)Medicare prescription drug subsidies
j)Limits on waivers
2.Categories subject to separate or no income counting rules
a)Early expansion
b)Post-eligibility disregards of income and resources
c)Former foster youth
d)Newborns of Medicaid-eligible mothers
e)Breast and Cervical Cancer Treatment Program (BCCTP)
 
III.Determination of Countable Income
A.General Principles
B.Adjusted Gross Income
1.Earned income
2.Social Security
3.Self-employment income
4.Child support
5.Alimony
6.Veteran’s benefits
C.From AGI to MAGI
D.Further Modifications to MAGI for Medicaid
1.Certain scholarship and fellowship income
2.Certain American Indian and Alaska Native income
3.Lump sum income
E.Summary of Differences Between Current Medicaid Rules and MAGI
F.Annual Income (Marketplaces) v. Point-in-time Income (Medicaid)
G.Disregards and Asset Test
1.Calculating the 5% FPL disregard
2.Applying the 5% FPL disregard
a)Health Insurance Marketplaces
b)Medicaid and CHIP
3.Elimination of Asset Test
 
IV.Household Composition - Marketplaces v. Medicaid/CHIP
A.Introduction
B.Family Size in the Marketplace
1.Married couples
2.Divorced and separated couples
3.Unmarried couples
4.Who is a dependent?
a)Qualifying child
b)Qualifying relative
5.Foster children
6.Pregnant women
7.Student
8.Individuals who are lawfully present
9.Individuals who are not lawfully present
10.Special income counting rule for APTCs for mixed status families
C.Family Size in Medicaid/CHIP
1.General principles
2.Rules for counting the Medicaid/CHIP household
a)Tax filers who are not claimed as dependents
b)Individuals expected to be claimed as a dependent by a taxpayer
i.Individuals other than a spouse or a child who expect to be claimed as a tax dependent by a tax filer
ii.A child claimed by one parent as a dependent and who is living with both parents who do not file a joint tax return
iii.A child claimed as a dependent by a parent that the child does not live with
c)Non-filers who do not file taxes and who are not claimed as a dependent by someone else
d)Married couples living together
e)Pregnant women and Medicaid
f)Same sex marriages
 
V.Household Scenarios
 
VI.MAGI Conversion for Medicaid and CHIP
A.Eligibility Categories Subject to MAGI-conversion
B.The Mechanics of MAGI Conversion
 
VII.State Options for the Transition to MAGI-based Eligibility Systems
A.Early MAGI implementation
B.Delaying and rescheduling eligibility redeterminations
C.Eligibility for Transitional Medical Assistance (TMA)
 
VIII.MAGI and the Single Streamlined Application
 
IX.Appendices
Appendix A.Medicaid Eligibility Categories and Populations Subject to MAGI
Appendix B.ACA MAGI Exceptions
Appendix C.Populations and Eligibility Categories Where MAGI Does Not Apply
Appendix D.IRS Form 1040
Appendix E.The Marketplace and Medicaid/CHIP Household
Appendix F.Household Composition Worksheet
Appendix G.Household Composition Worksheet


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