Effective Date: November 1, 2021

No Previous Policy

A. General Budgeting Concepts

Budgeting is the process of determining a best estimate of income an individual or household will receive during the certification period. Medicaid rules require the agency to use the individual's current circumstances to determine eligibility.

1. Use prospective budgeting for CHIP. "Prospective" budgeting means that we use information about the individual's current circumstances, as well as historical information, or known future changes to project what income the individual or household will receive during the certification period.

2. Use the methods of anticipating, averaging or annualizing income to determine an appropriate prospective estimate.

o The method used to determine the best estimate depends on the type of income, the frequency of receipt, the individual’s earnings history and any known anticipated changes in circumstances.

o Determine the best method to use based upon the individual's history and current circumstances.

3. Consider the following factors to determine the best estimate of income.

o What income is the individual currently receiving or expecting to receive in the future months?

o Does the individual expect any predictable changes during the certification period? For example, will the individual's rate of pay change at a specific future date?

o What are the individual's historical patterns such as recurring income, a quarterly or annual bonus, or regular seasonal income that will continue in the future? For example, a individual working as a school aide for 9 months a year who also does yard maintenance work in the summer.

B. The Budgeting Process

1. Determine a best estimate of income the individual expects to receive during the whole certification period to arrive at a monthly amount.

o Deductions are limited to those allowed under tax rules. Remember to look for infrequent income, such as taxable interest income.

o Once the best estimate is determined for the certification period, it remains fixed unless the agency receives information about a change in income. See section 804-5 for reported income changes.

2. These rules apply to any family members whose income must be counted based on the MAGI methodology.

3. When budgeting self-employment income, determine the expected net annual income.

o Use prior year tax forms or current income and expense ledgers to determine the income and business expenses only if they are reflective of the individual's current business income and expenses.

o Tax forms show past income, so ask the individual if current income and expenses are different.

o Current ledgers, accounting statements or upcoming work contracts a individual has secured may be a more accurate way to verify current circumstances, especially during the first few years someone is self-employed.

o Subtract from gross income the actual or anticipated business expenses allowed under IRS rules. The individual must identify and verify income and expenses. Individuals may expect to have some expenses even if they have not incurred them yet. In this case, the client's statement may be the only way to verify.

o Prorate the annualized income over 12 months to determine a monthly amount.

o Some other types of income such as contract or commission income may also need to be annualized. See 419-2 and 419-3 for more information on self-employment.