Bulletin NUMBER #17-21-06 DATE April 17, 2017 OF INTEREST TO County Directors Social Services Supervisors and Staff Case Managers MinnesotaCare Operations MNsure Managers, Supervisors and Staff Navigators, In-Person Assisters, and Certified Application Counselors Tribal Governments (Tribes) ACTION/DUE DATE Effective immediately. Please read and implement upon receipt EXPIRATION DATE April 17, 2019 DHS Clarifies the Medical Assistance MAGI-based Income Calculation TOPIC Medical Assistance (MA) modified adjusted gross income (MAGI) based income calculation PURPOSE Provide policy and instructions regarding the MA MAGI-based income calculation CONTACT Health Care Eligibility Operations (HCEO), counties and tribal agencies should submit policy questions to HealthQuest. All others should direct questions to the following: Health Care Eligibility and Access (HCEA) Division P.O. Box 64989 540 Cedar Street St. Paul, MN 55164-0989 SIGNED NATHAN MOROCCO Assistant Commissioner Health Care Administration TERMINOLOGY NOTICE The terminology used to describe people we serve has changed over time. The Minnesota Department of Human Services (DHS) supports the use of "People First" language.
Bulletin I. Background The Patient Protection and Affordable Care Act of 2010 required states to adopt the modified adjusted gross income (MAGI) based methodology when determining Medicaid financial eligibility for parents, caretaker relatives, pregnant women, children and adults without children ages 21 through 64 years old. Minnesota implemented the new MAGI-based methodology for Medical Assistance (MA) for these populations on January 1, 2014. II. The MA MAGI-based Income Calculation A person s or household s MAGI-based income for MA is based on adjusted gross income (AGI), which is the person s or household s total federal taxable income minus certain federal income tax adjustments. Federal taxable income includes: - Wages, salary and tips Wages or salary do not include pre-tax benefits that people receive through their employers, such as pre-tax benefits for child care, health insurance, retirement plans or transportation assistance. These are also called flex benefits or payroll deductions, and they are not subject to federal income tax. - Business income (i.e., self-employment), farm income, unemployment compensation and other forms of income - The types of losses that would be reported on the federal 1040 U.S. Individual Income Tax Return: Business loss (including self-employment) on line 12 Capital loss on line 13 Other loss on line 14 Rental real estate, partnership, S corporation, trust loss, etc. on line 17 Farm loss on line 18 Net operation loss included on line 21 (including carryforward loss) AGI is arrived at by subtracting certain income tax adjustments from total federal taxable income. These include income tax adjustments such as spousal support, educator expenses, health savings accounts, moving expenses, the deductible portion of self-employment tax and other federally allowed adjustments to income. These items are taken into account for MAGI-based income for MA, whether or not a person expects to file a tax return.
Page 3 For MA, the following types of income must be added to a person s or household s AGI to get the modified adjusted gross income (MAGI): Nontaxable Social Security or Railroad Retirement benefits Tax-exempt interest Foreign earned income and foreign housing costs Lastly, the following types of income are excluded in determining MAGI-based income for MA eligibility, even if they would be reported on the federal 1040 form: Lump sum income after the month of receipt (However, lump sum income is counted in the month of receipt) Scholarships, awards or fellowship grants used for education purposes Certain American Indian and Alaska Native income See sections 2.2.3.4 and 2.2.3.5 of the Minnesota Health Care Programs Eligibility Policy Manual (EPM) for more information about the MAGI-based income calculation for MA eligibility. Example 1: Gina is a single adult without children whose current income includes wages from a job and selfemployment. Gina earns $500 biweekly at her job. Her self-employment income varies month to month, and she reports an overall loss of $2,000 yearly. Gina s wages total $13,000 yearly ($500 biweekly times 26 pay periods equals $13,000). Her selfemployment loss ($2,000) is subtracted, resulting in an AGI of $11,000 yearly. Gina has no income tax adjustments and no income additions or income exclusions for MA. Both Gina s AGI and MAGI-based income is $11,000 yearly, or $916.67 monthly. Gina is income eligible for MA but must meet all other eligibility factors to be MA eligible. Example 2: Karla and Abdul are a married couple without children who expect to file a joint federal income tax return. Karla receives wages from a job. Abdul is the sole proprietor of several rental properties. On their February 2017 application, they report that Karla currently earns $800 semi-monthly (paid the first and fifteenth of each month) from her job. They also report that Abdul s current rental real estate income is $1,000 monthly. They have no federal income tax adjustments. Their MA MAGI-based income at application is $31,200 yearly, or $2,600 monthly ($800 semi-monthly times 24 pay periods equals $19,200 [Karla s yearly income] + $12,000 [$1,000 times 12 months, Abdul s yearly rental income] equals $31,200). Karla and Abdul s current income is above the 133 percent MA income standard for adults without children. Karla and Abdul are determined ineligible for MA because their income is above the limit. In April 2017, Karla reports that Abdul s rental real estate income has changed. The tenants moved out of one of his properties, and he has been unable to find someone new to replace them. As a result, his
Page 4 rental real estate is now operating at a net loss of $500 each month. To help out, Karla has been able to pick up extra hours at work, and her current income has increased to $900 semi-monthly. Karla s new wages total $21,600 yearly ($900 semi-monthly times 24 pay periods equals $21,600). Abdul s rental real estate loss ($500 monthly times 12 months equals $6,000 yearly) is subtracted, resulting in an AGI of $15,600. With no income tax adjustments, or MA income additions or income exclusions, Karla and Abdul have MAGI-based income for MA of $15,600 yearly, or $1,300 monthly. Karla and Abdul s current income is within the 133 percent MA income standard for adults without children. Based on this income change, Karla and Abdul are now income eligible for MA. They must meet all other eligibility factors to be MA eligible. Example 3: Harlan and Victoria are a married couple with two children under 19 years old. They expect to file a joint tax return and claim their children as tax dependents. They report on their application that Harlan has a job and earns $72,500 yearly in wages. They also report a farm income loss of $12,000 yearly. They report an income adjustment for educator expenses of $250 yearly. Harlan and Victoria s MAGI-based income is calculated by subtracting the farm income loss ($12,000) and the income adjustment ($250) from Harlan s wages ($72,500). Harlan and Victoria have MAGI-based income for MA of $60,250 yearly, or $5,020.83 monthly. Based on this income, Harlan and Victoria are determined ineligible for MA because they have income above the MA limit for parents. However, their income is below the MA income limit for children, so their children are income eligible for MA. The children must meet all other eligibility factors to be MA eligible. III. Action Required: County and Tribal Workers, Health Care Eligibility Operations and MNsure The MA MAGI-based income calculation described in this bulletin is generally supported by the Minnesota Eligibility Technology System (METS), except that it does not account for business losses (including selfemployment); capital losses; other losses; rental real estate, partnership, S corporation or trust losses; farm losses or net operating losses (including carryforwards). METS does not currently allow entry of any income losses on the online application or in the case worker portal under income details evidence. Follow the Business Loss Procedure in ONEsource to enter information about income losses until the system is updated to permit entry of income losses.
Page 5 Americans with Disabilities Act (ADA) Advisory For accessible formats of this publication or assistance with additional equal access to human services, write to DHS.info@state.mn.us, call 800-657-3739, or use your preferred relay service. (ADA1 [9-15])