Published on 02 January 2013
Medicaid Eligibility Streamlining: Modified Adjusted Gross Income Test for Medicaid Eligibility in 2014

Medicaid eligibility and enrollment is being substantially streamlined.  State Medicaid agencies and their contractors are busy adapting eligibility systems and processes to a dramatically new set of federal standards, all required under the Affordable Care Act.  Starting in January 2014, the new framework for Medicaid eligibility and enrollment will make it far easier for low-income individuals to apply for Medicaid and remain enrolled without disruption.  As a result, Medicaid rolls are expected to increase in every state, even in states that opt against expanding Medicaid eligibility.

Medicaid eligibility is extraordinarily complex – notoriously so.  Federal law defines over 50 distinct populations potentially eligible for Medicaid based on a wide range of characteristics (e.g., age, pregnancy, disability status, specific diseases, immigration status).  Some Medicaid eligibility groups are mandatory – every state Medicaid program must cover them.  Others are optional.  Some Medicaid eligibility groups are tied to enrollment in another federal or state program, such as SSI or Foster Care.  Still other individuals are covered by Medicaid through medically needy programs or by state Medicaid coverage expansions under federal section 1115 waivers.

To qualify for Medicaid, individuals must also meet financial requirements.  These are in the form of an income test and, in some cases, an asset test.  For some types of eligibles, states have the option to apply additional disregards in order to reduce countable income and thus cover more people.  For populations covered under optional eligibility or federal waivers, these also vary somewhat by state.

New rules under the Affordable Care Act aim to fundamentally streamline (comparatively) Medicaid eligibility and enrollment.  A new, more uniform approach to determining income is part of this.

Modified Adjusted Gross Income: 

Starting in 2014, Medicaid and the Children’s Health Insurance Program (CHIP) will have a new method of determining income for most applicants.  The method – Modified Adjusted Gross Income (MAGI) – will basically apply to most Medicaid eligibility groups, including children, pregnant women, parents and other caretaker relatives, and the new optional ACA Medicaid expansion population.  The MAGI-based methodology will be used when a state determines the income of an individual or household.  While MAGI is used by the IRS, the MAGI-based methodology under federal Medicaid rules includes certain unique income counting and household composition rules.  (Perhaps we should call it Modified Modified Adjusted Gross Income, but I digress).

MAGI (pronounced like the Biblical Magi) will not apply to certain populations with their own unique income counting rules (e.g., SSI enrollees, Foster Care children, certain disabled individuals, and medically needy populations).

Implementing the Modified Adjusted Gross Income standard requires states to make massive changes to their information systems, databases, procedures, and work flows.  States must convert their entire eligibility systems and existing data files to the new methodology.  Conversion to MAGI also plays a critical role in Health Insurance Exchanges.  Every Exchange applicant must be pre-screened for Medicaid and CHIP eligibility, and MAGI will be used to determine eligibility for federal subsidized premiums and cost sharing for Qualified Health Plans in Exchanges.  So while the new income standard is not effective until January 1, 2014, everything must be tested and operational by the start of the Exchange open enrollment period on October 1, 2013.  And all this must all be done at the same time as state Medicaid agencies implement a wide range of other changes to comply with ACA.  Examples include creation of web portals for individuals to apply online for Medicaid and with electronic signatures, and changes to Medicaid primary care rates.

CMS Guidance for States: 

To implement the new MAGI methodology, the Centers for Medicaid and Medicare Services (CMS) requires state Medicaid and CHIP agencies to engage in an elaborate conversion process involving complex analysis and modeling, computer programming, rigorous testing, stakeholder input, and State Plan Amendments to reflect the new income standard.  It will also require re-training of state and county eligibility staff.

To help answer some state questions regarding the MAGI standard, CMS Center for Medicaid and CHIP Services has issued important new guidance.  The new CMS guidance explains a five-step conversion process, with tight time frames for states:

  1. MAGI Conversion Templates (due to CMS by January 15, 2013).
  2. Statements of Intent and Selection of Conversion Methodology (due February 15, 2013)
  3. Data Analysis (must be completed by April 30, 2013)
  4. Submission of MAGI Conversion Plan (due to CMS by May 31, 2013, with CMS approving or rejecting plan by June 15, 2013)
  5. State Plan Amendments and systems programming (standards set by June 2013, all testing completed by September 2013, and everything operational to support Exchange open enrollment that starts October 1, 2013).

CMS sets forth a standardized methodology states may use in converting current Medicaid eligibility populations and income counting to the MAGI standard.  CMS also outlines a process for states to propose an alternative approach for converting to MAGI.  CMS says that additional technical information for states is forthcoming.

To read the new CMS guidance for states on converting Medicaid eligibility systems to MAGI, click here (PDF).

About Author

An expert on Medicaid, Medicare, and health reform, Kip Piper, MA, FACHE, is a consultant, speaker, and author. Kip Piper advises health plans, hospitals and health systems, states, and pharma, biotech, medical device, HIT, and investment firms. With 30 years’ experience, Kip is a senior consultant with Sellers Dorsey, top specialists in Medicaid and health reform. He is also a senior advisor with Fleishman-Hillard and TogoRun. For more, visit KipPiper.com. Follow on Twitter @KipPiper, Google +, Facebook and connect on LinkedIn.

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