Overlapping Eligibility and Enrollment: Human Services and Health Programs Under the Affordable Care Act. Determination of MAGI


Determining eligibility for both Medicaid and HIM subsidies requires knowing the modified adjusted gross income (MAGI) of a person’s family.

For purposes of HIM subsidies, the family is always defined as a taxpayer, his/her spouse, and his/her dependents. The income that is counted is the income of the taxpayer/spouse, plus the income of any dependent who is required to file a tax return. TRIM3’s Federal Tax simulation determines dependency relationships and filing requirements. For HIM purposes, MAGI is computed on an annual basis, and compared to the annual poverty guideline for a particular family size.

For purposes of Medicaid eligibility under ACA, the final regulations 39 describe alternate family definitions covering individuals in certain circumstances, such as children living with unmarried parents or claimed as a dependent by a noncustodial parent, and individuals (any age) who do not expect to file a tax return and do not expect to be claimed as a dependent, or who are claimed as a dependent by someone other than a spouse or parent. The simulation models these alternate family definitions as described in the final regulations. However, due to data limitations, dependency relationships involving persons living outside the household are not captured in the analysis.

The final regulations also clarify that Medicaid eligibility is based on current or projected income rather than the prior year’s income. To capture this fact, the simulation computes MAGI as a percentage of the poverty guideline on a month-by-month basis, using the monthly income amounts developed for use in all TRIM simulations of benefit programs.40

On either an annual or monthly basis, MAGI includes all the types of income that are counted in AGI for tax purposes—earnings, pensions, asset income, interest, dividends, rents and royalties, Social Security benefits, Unemployment Insurance, alimony, and capital gains. MAGI includes tax exempt interest not included in AGI and also the non-taxable portion of Social Security. To capture capital gain/loss amounts, TRIM uses amounts that have been statistically matched to the TRIM3 file for purposes of TRIM3’s standard federal tax simulation, using the IRS Statistics of Income Public Use File (PUF), which contains de-identified data from a representative sample of taxpayers’ 1040 forms. For purposes of allocating this amount to specific months, the annual amount is divided evenly over all months. (In reality, many capital gains/losses would be lump-sum amounts, which could be treated differently for purposes of monthly eligibility.) MAGI includes AGI adjustments to income—three of which are captured in this analysis (the deductions for half of the self-employment tax, and deductible IRA contributions and payments to Keogh plans obtained through the statistical match with the PUF).

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