Modified Adjusted Gross Income (MAGI) Income Conversion Methodologies. Appendix 2. Primary Differences between Magi under Medicaid/Chip Eligibility Rule and the Internal Revenue Code


The concept of MAGI is adapted from the context of federal income taxes and is defined in Section 36B(d)(2) of the Internal Revenue Code of 1986.  MAGI for purposes of Medicaid and CHIP eligibility under Section 2002 of the Affordable Care Act is closely aligned with, although not exactly the same as, MAGI for tax purposes.  MAGI for tax purposes, like other federal income tax concepts, is based on annual income and adjustments.  Section 2002(a)(14)(H)(i), in contrast, specifically continues the current Medicaid/CHIP practice of determining eligibility based on “an individual’s income as of the point in time at which an application for medical assistance under the State plan or a waiver of the plan is processed,” which is closer to current monthly income.  The March 23, 2012 Final Rule on Eligibility Changes Under the Affordable Care Act explicitly incorporates other changes to the tax concept of MAGI.20

Table 2A: Differences between Medicaid/CHIP MAGI and IRC MAGI
  Medicaid and CHIP MAGI IRC MAGI
Pregnant Women Counted as a household of 1 plus the number of expected children. Always counted as a household of 1.
Relative Caregivers Claiming Dependent Children Relative caregivers’ income is not included when determining income eligibility of the children. Relative caregivers’ income is included with the children’s income when determining income level of the household.
Unmarried Parents of Common Children Both parents’ income is used to determine the income eligibility of the children. The unmarried parents are separate tax units. Their child in common is only included in the unit of the parent who claimed the child as a dependent, and the income level of this household determines the child’s eligibility.

In addition to the differences in defining households depicted in Table 3A, Medicaid MAGI differs from tax MAGI in its treatment of lump sum income and certain income received by American Indians and Alaska natives.  Medicaid and CHIP agencies will continue to count lump-sum income only in the month received, and will continue to exclude various forms of taxable income specific to American Indians and Alaska Natives, such as distributions from federal trust lands, when determining eligibility for Medicaid. 

Counting income that is not counted under current Medicaid rules will make some people who would be eligible under pre-MAGI rules ineligible under MAGI-based eligibility rules.  Not counting income that is counted now will make some people who would be ineligible under pre-MAGI rules eligible under the MAGI-based eligibility rules.  For example:

  • Child support received is currently counted for determining the Medicaid eligibility of the recipient household, after disregarding the first $50 a month (with higher disregards in some states).  However, child support received is not taxable to the recipient household, and therefore is not included in MAGI. 
  • Workers’ compensation and some kinds of veterans’ benefits are also counted for determining eligibility under pre-MAGI Medicaid/CHIP rules but are not taxable, and therefore are not included in MAGI. 

Other examples of income not counted under current Medicaid rules but counted under MAGI include:

  • Earned income for students under 21
  • Capital gains and losses
  • Depreciation on self-employment income

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