Regular readers of Medicareful Living should be pretty familiar with Medicare. That’s one of the major goals of this site, after all. But you may be less knowledgeable about Medicare’s sister program, Medicaid. For starters, Medicaid is a health coverage program available to millions of Americans to ensure they’re able to receive health care. Sounds a lot like Medicare, doesn’t it? Well, the difference stands in who is eligible to receive each program. That said, the two programs can work together to make health care more affordable for those who need it most.
While you may be aware of the program, you may not know much about the specifics. We’ll save the basics of Medicaid coverage for another day, because at first, it’s important to discuss who is eligible for coverage. Medicaid is available to low-income adults, children, pregnant women, people with disabilities, and the elderly. That’s a very diverse group, so let’s dig in a little to the specifics.
The main way you can become eligible for Medicaid is by meeting certain financial qualifications. Your eligibility is determined by your household income, which is based on a percentage of the federal poverty level. For 2022, this would be $13,590 for a one-person household and $18,310 for a two-person household, and so on for larger families. Furthermore, while Medicaid is a federal program, it’s managed differently by each state. At the eligibility level, this is reflected by each state having its own financial qualifications. It’s important to specify this potential difference since some states vary wildly from the average.
In 2022, most states and Washington D.C. (all but 12) have their income eligibility limits set at 138 percent of the federal poverty level. Of those 12, Connecticut (160 percent for families and 138 percent for individual adults) and Washington D.C. (221 percent for families of three or more and 215 percent for individuals) are higher than 138 percent for some. The remaining states range anywhere from 100 percent of the federal poverty level to as low as 0 percent. So, this is why it’s important to check your personal state’s limits.
So, what does this mean for you? Let’s say you and your spouse make up a household of two, setting your federal poverty level at $18,310. We’ll also say you live in a state with a 138 percent Medicaid limit, since that’s the most common amount. This would mean that your income limit to be eligible for Medicaid would be about $25,267.80. As long as your adjusted household income is below that amount, you can qualify for Medicaid coverage.
Modified Adjusted Gross Income
The way your income is calculated isn’t as straightforward as just how much you bring in each year. The Affordable Care Act (ACA) established the Modified Adjusted Gross Income (MAGI), which is used across the government to simplify income determination. It’s used for Medicaid, Children’s Health Insurance Program (CHIP), tax credits, and cost-sharing reductions through the ACA marketplace. For most people, their MAGI will be a lot like their standard adjusted gross income. There are only a few major differences. Here’s what to include and what not to include in your MAGI.
Does It Count Toward MAGI?
|Income Source||Does It Count?|
|Federal Taxable Wages||Yes|
|Social Security (Taxable and Non-Taxable)||Yes|
|Social Security Disability Income (SSDI)||Yes|
|Supplemental Security Income (SSI)||No|
|Retirement or Pension Income||Yes1|
|Rental Income or Royalties||Yes|
|Untaxed Foreign Income||Yes|
|Veteran Disability Payments||No|
|Proceeds from Loans||Yes|
|COVID Economic Stimulus/Emergency Payments||No|
1 Except for qualified distributions from a designated Roth account
2 Alimony from divorces or legal separations finalized before 2019 count as income. Alimony from divorces or legal separations finalized on or after January 1, 2019, do not count.
You’ll notice that many common sources of income are included in the MAGI, and this makes sense because it’s used to accurately figure out how much money you’re bringing in each year, even the tax-deductible income. This is where it differs from a traditional adjusted gross income. In fact, Investopedia defines the MAGI as “your household’s adjusted gross income with any tax-exempt interest income and certain deductions added back in.” It may seem like a lot of numbers to calculate, so to help out, you can check out this free MAGI calculator to figure out where you stand.
Does It All Come Down to Money?
The other qualifications of Medicaid eligibility really are where the state-run aspect of Medicaid is important. In some states, your financial status isn’t the only category that determines if you qualify for Medicaid. Much like MAGI, the ACA is important in this. When the ACA was introduced, it allowed states to expand who they offered Medicaid to. Most states did expand the eligibility, but not all. These are sometimes referred to as Medicaid expansion states and non-expansion states. If you’re living in an expansion state, your income alone is enough to qualify you.
In the 11 non-expansion states (12 if you include the two that have adopted the expansion but haven’t enacted it yet), you still need a prequalifying condition to qualify for Medicaid. These vary from state to state, so it’s worth checking on your specific state’s Medicaid site. Some common qualifying statuses are parents or legal guardians, the elderly, children, or people with disabilities. So, if you’re a young, healthy, childless adult living in a non-expansion state, you’ll likely need to look into the ACA marketplace.
How Do I Apply?
There are two ways you can apply for Medicaid. First, you can enroll through the HealthCare.gov marketplace by creating an account and filling out the application. The second option is applying directly through your state’s Medicaid agency. It’s that easy!
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Medicaid is there to ensure that people on limited incomes can still attain quality health care, but since the program is managed by each state, the different requirements can be confusing. Luckily, the number of states that are expanding their eligibility of coverage is growing, creating a standardization across the country. This makes it easier to know what to expect if your considering looking into Medicaid as a health care coverage option!