QMC

What is MAGI and how does it Affect Medicaid Eligibility?

In the United States income tax system, adjusted gross income (AGI) is an individual’s total gross income minus specific deductions and is a major factor in determining federal income tax liability. It is used to calculate taxable income, which is AGI minus allowances for personal exemptions and itemized deductions. For most individual tax purposes, AGI is more relevant than gross income.

Gross income for Americans is sales price of goods or property, minus cost of the property sold, plus other income. It includes wages, interest, dividends, business income, rental income, and all other types of income. Adjusted gross income is gross income less deductions from a business or rental activity and 21 other specific items.

Several deductions (e.g. medical expenses and miscellaneous itemized deductions) are limited based on a percentage of AGI on a taxpayer’s tax return. Certain phase outs, including those of lower tax rates and itemized deductions, are based on levels of AGI. Many states base state income tax on AGI with certain deductions.

Adjusted gross income is calculated by subtracting above-the-line deduction from gross income.

Certain tax calculations are based on modified adjusted gross income of AGI (MAGI) The MAGI methodology of “modified AGI” varies according to the purpose for which the related calculation is being used for the tax payer or the Medicaid applicant. These modified versions of AGI may add certain items to AGI that were excluded in computing both gross income and adjusted gross income. Common additions include tax exempt interest, the excluded portion of Social Security benefits and tax-free foreign earned income.

MAGI is used to determine eligibility for certain Medicaid programs, including those applying in Missouri. Modified Adjusted Gross Income (MAGI) is a method used to determine eligibility for Medicaid based on income and IRS tax filing. MAGI rules apply to certain categories of Medicaid eligibility, including: 

  • Children under 19 

  • Pregnant women 

  • Parents and caretakers of children under 21 

  • Adults ages 19-64 with incomes at or below 133 percent of the Federal Income Poverty Guidelines (FPIG) 

All states must use MAGI rules, but states may use their own rules for determining income and households for the elderly, disabled, and children in foster care. 

Income for MAGI purposes includes all taxable income and household income, such as cash wages, money, property, or services.

MAGI can also play a role in financial eligibility for the Affordable Care Act (ACA), determining health coverage and health plans. These health care programs apply MAGI against the applicable federal poverty level, to determine the type of enrollment options and eligibility determination.

This monthly income is also a factor when determining whether an applicant qualifies for Supplemental Security Income, or SSI.

For purposes of long term care vendor assistance in a nursing home, these FPLs do NOT play a role in eligibility. Nor do they play a role in qualification for Medicare health insurance coverage, as Medicare is an entitlement program and is not based on income guidelines, income limits, household income or even gross income.

For long term care vendor Medicaid in a nursing home setting, these annual income levels are irrelevant, as income eligibility is not a factor in determine assistance. Eligibility is not MAGI based. When a nursing home resident qualifies for Medicaid and their countable assets are under the applicable limit, all of their monthly income is due to the nursing home each month, with Medicaid providing the payment for the remainder of the care costs. So income plays a role in benefit levels, but it does not come into play with respect to eligibility.

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