Table of Contents 2 3 • Purpose 9 • Constructing a Household 15: Non-filer Household Rules 34: Tax Filer Household Rules 42: Tax Dependent Household Rules 62: Adjusting Family Size for Pregnant Women 78 • Determining Household Income 82: Part A - Whose Income is Counted? 92: Part B - What Counts as Income? 112: Part C - Over What Period Is Income Counted? 116 • Comparing Results to Eligibility Levels

Goals: Review methodology for determining Medicaid and CHIP eligibility: −Household composition eligibility rules −Household income eligibility rules Methodology: For each section, we will: −Lay out the eligibility requirements −Explain how to apply these rules to individuals and families who are applying for coverage −Walk through scenarios to help test our knowledge and understanding Goals and Methodology 3 Note: All of the information in this training manual applies to individuals applying for coverage and those already enrolled in Medicaid or CHIP. In this training, we use the word “individuals” to cover applicants and beneficiaries. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

To be eligible for Medicaid/CHIP, individuals: Must be a state resident Must meet citizenship and immigration requirements May need to meet certain non-financial requirements, such as age, pregnancy or disability Must have household income below a certain income eligibility level General Overview of Eligibility Rules 4 This manual only covers how to determine an individual’s household size and income and compare them to the state’s eligibility levels. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Modified Adjusted Gross Income (MAGI) is determined based on federal tax rules for how income is counted and family size is determined for Medicaid and CHIP eligibility. MAGI is NOT a number on a tax return. −Aligns eligibility rules for all insurance affordability programs (Medicaid, CHIP, advanced payments of premium tax credits/cost sharing reductions) Modified Adjusted Gross Income This manual explains how to determine Medicaid and CHIP eligibility using the MAGI-based methodology. Children Adult s ages 19-64 Parents and caretaker relatives Pregnan t women 5 Use MAGI to determine eligibility for the following eligibility groups: Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Some eligibility groups are exempt from MAGI-based financial methodologies. Different rules may be used when determining eligibility for: Non-MAGI Populations Individuals who are age 65 or older or who have blindness or a disability Medically needy individuals Certain children in foster care 6 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Based on certain screening questions on the application, individuals may indicate they are part of a group for whom MAGI is not used to determine eligibility To avoid delays in securing coverage, individuals will be evaluated right away based on MAGI rules States are obligated to determine eligibility for a non-MAGI eligibility group if an individual is interested in seeking eligibility on such a basis MAGI-eligible individuals who are subsequently found eligible on a non-MAGI basis would switch eligibility groups and coverage In some instances, the coverage available on a non-MAGI basis might better fit an individual’s health care needs Screening for Eligibility on a Basis Other than MAGI 7 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Apply these three steps to determine an individual’s MAGI-based income eligibility for Medicaid or CHIP: Three-Step Process for Determining Income Eligibility Step 1 • Identify members of the individual’s family who are considered part of his/her household and determine family size Step 2 • Add the income of all the relevant members of the individual’s household Step 3 • Compare total household income to the federal poverty level for the individual’s family size 8 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Determining Income Eligibility: Step 1 9 Step 1 • Constructing a Household Step 2 • Determining Household Income Step 3 • Comparing Household Income and Size Against Income Eligibility Levels Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

What do we mean when we use the term “household”? Relationships between different family members based on individuals’ answers to questions about themselves and other family members applying for or renewing coverage ─For example: parents, spouse and children Each family member’s relationship to the tax filer – For example: tax filer, joint tax filer, and tax dependent Definition of MAGI Household MAGI Household 10 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose Family member relationships Family members’ tax relationships

Construct a household for each individual listed on the application/renewal form who is applying for/renewing coverage (this is because eligibility is determined at the individual level) ─Individual’s household may or may not include everyone listed on the application/renewal form Countable income of all the household members forms the basis for establishing an individual’s Medicaid or CHIP financial eligibility Different households may exist within a single family, depending on each of the family members’ familial and tax relationships to each other – Example: One individual’s household size may include 3 individuals but that does not necessarily mean that those 3 individuals all have the same household Household size adjustment needs to be made if individual is pregnant or individual has a pregnant woman in their household General Rules: Constructing a Household 11 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

When constructing a household for Medicaid and CHIP, first ask: ─Does the individual plan to file a federal tax return or expect to be claimed as a tax dependent for the year in which coverage is sought? OR ─Does the individual not plan to file a federal tax return (or be claimed as a tax dependent) for the year in which coverage is sought? Tax Filing Families vs. Families that Do Not Plan to File Taxes Depending on the answer, different rules apply: “non-filer” rules or “filer” rules 12 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Application/renewal form asks whether the individual plans to file a tax return for the year coverage is sought Individual’s household is constructed based on their plan to file a federal income tax return, regardless of whether or not they ultimately file a return for that year or are claimed as a dependent It is not necessary to have filed a federal income tax return in previous years What Does “ Plan to File” Mean? 13 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Many low-income people may not be required to file a federal income tax return because their gross income does not meet the tax filing threshold (which is updated annually). Many people will still file taxes even if they are below the tax filing threshold because they expect to receive-a receive-a refund. The tax filer rules are applied for individuals who plan to file taxes, even if they are not required to do so. Apply Tax Filer & Tax Dependent Rules if Individual Files Taxes, Even if Not Required to File 14 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Individuals and Families Who Do Not Plan to File Taxes (Non-Filers) First, let’s walk through how to construct a household for individuals who do not plan to file a federal income tax return or be claimed as a tax dependent for the year coverage is sought. We call these the “non-filer” rules. 15 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Use “non-filer” rules to determine eligibility for an adult or child applying for coverage who: - Does not plan to file a federal income tax return; and - Does not expect to be claimed as a tax dependent for the year coverage is sought In the following slides, we will cover scenarios for constructing a household for adult and child non-filers, including dependent exceptions Who Are Non-Filers? 16 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

• • • For adults, the household must include: Adult Non-Filer Household Rules The adult applying for/renewing coverage; AND The adult’s married spouse if living with the individual; AND The adult’s natural, adopted, and step-children under age 19 (or including, at state option, age 19 or 20 if a full-time student) if living with the adult 17 State Polic y Option Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Adult Non-Filer Household Scenarios Scenario 1: John lives alone and does not plan to file taxes Scenario 2: John lives with his wife, Jane, and they have no children 18 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Adult Non-Filer Household Scenarios Scenario 3: John is married to Jane and they have 3 children ages 3, 5 and 17. They all live together. He does not plan to file taxes. 19 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Adult Non-Filer Household Scenarios Scenario 4: John lives with his girlfriend, Susan. He does not plan to file taxes. 20 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Scenario 5: John lives with his girlfriend, Susan, and Susan’s daughter, age 3, who is not John’s biological, step- or adopted daughter. He does not plan to file taxes. Adult Non-Filer Household Scenarios 21 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Scenario 6: John is married to Jane and they have 3 children ages 3, 5 and 26. They all live together and he does not plan to file taxes. Adult Non-Filer Household Scenarios 22 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Scenario 7: John is married to Jane. They live with Jane’s mother, age 58, and they have no children. He does not plan to file taxes. Adult Non-Filer Household Scenarios 23 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

• • • • • Child(ren) Non-Filer Household Rules 24 Household for children under age 19 (and at state option, age 19 or 20 if full-time students) must include: The child applying for/renewing coverage; AND The child’s parents (including biological, adoptive and step- parents) if living with the child; AND The child’s siblings (including biological, adopted and step-siblings) who are under age 19 (or including, at state option, age 19 or 20 and a full- time student) if living with the child; AND The child’s spouse (married to and living with the child); AND The child’s own children (biological, adopted and step-children), if living with the child Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose State Policy Option

Child(ren) Non-Filer Scenarios Scenario 1: Sally, age 5, lives with her biological mother and father. She does not plan to file taxes or be claimed as a tax dependent. 25 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Child(ren) Non-Filer Scenarios Scenario 2: Sally, age 5, lives with her biological mother and her mother’s boyfriend. She does not plan to file taxes or be claimed as a tax dependent. 26 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Child(ren) Non-Filer Scenarios Scenario 3: Sally, age 5, lives with her adoptive mother, Joanne. She does not plan to file taxes or be claimed as a tax dependent. 27 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Child(ren) Non-Filer Scenarios Scenario 4: Sally, age 5, lives with her adoptive mother, Joanne, and her adoptive mother’s 2 biological children. She does not plan to file taxes or be claimed as a tax dependent. 28 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Child(ren) Non-Filer Scenarios Scenario 5: Sally, age 5, lives with her biological mother and her mother’s new husband, Sally’s step-father. She does not plan to file taxes or be claimed as a tax dependent. 29 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Child(ren) Non-Filer Scenarios Scenario 6: Sally, age 5, lives with her biological mother and her mother’s new husband (Sally’s step-father), and her step-father’s 2 children (age 8 and 10). She does not plan to file taxes or be claimed as a tax dependent. 30 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Child(ren) Non-Filer Scenarios Scenario 7: Sally, age 5, lives with her grandmother. She does not plan to file taxes or be claimed as a tax dependent. 31 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Child(ren) Non-Filer Household Scenarios Scenario 8: Sally, age 5, lives with her grandmother and her younger brother, age 2. She does not plan to file taxes or be claimed as a tax dependent. 32 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Child(ren) Non-Filer Household Scenarios Scenario 9: Sally, age 18, lives with her mother, her grandmother, and Sally’s 6-month-old baby. She does not plan to file taxes or be claimed as a tax dependent. 33 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Tax Filer Household Rules Now, we are going to discuss the household composition rules for individuals who expect to file taxes or expect to be claimed as a tax dependent for the year coverage is sought. We will cover tax filer rules first. 34 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

General Filer Rules: Tax Filer vs. Tax Dependent Apply different Medicaid/CHIP household rules based on whether the person is the “tax filer” or the “tax dependent” “Tax Filer” Individual plans to file a federal income tax return and does not expect to be claimed as a tax dependent on someone else’s federal income tax return for the year coverage is sought. “Ta x Dependent” Individual expects to be claimed as a “tax dependent” for the year coverage is sought. Example: A father, who plans to claim his child as a tax dependent, is called the “tax filer.” The child, claimed by his father, is a “tax dependent.” A taxpayer’s dependents count for constructing a household when determining MAGI eligibility. 35 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

• • • Tax Filer Rules Construct a tax filer’s household:  A tax filer’s household must include: The taxpayer; AND His/her spouse if they live together, regardless of whether they intend to file a federal income tax return jointly*; AND Individuals the taxpayer expects to claim as tax dependents on his/her federal income tax return 36 *Special rules for spouses living separately:  If they are filing separately, apply tax filer rules and do not include the spouse in the individual’s household  If they are filing jointly, follow state specific rules. States have the flexibility to:  Include spouses in each other’s households regardless of whether they live together  Not include spouses in the household if the spouses live separately Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose Stat e Specif ic Rules

Tax Filer Household Scenarios Scenario 1: Paul and Pam are married and live together. Paul plans to file taxes jointly with Pam. 37 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Tax Filer Household Scenarios Scenario 2: Paul and Pam are married and live together. They plan to file taxes jointly and claim their son, Peter, as their tax dependent. 38 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Tax Filer Household Scenarios Paul Scenario 3a: Paul and Pam are married and live together. They plan to file taxes separately. Paul expects to claim their son, Peter, as his tax dependent. 39 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Tax Filer Household Scenarios Pam Scenario 3b: Paul and Pam are married and live together. They plan to file taxes separately. Paul expects to claim their son, Peter, as his tax dependent. 40 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Tax Filer Household Scenarios Scenario 4: Paul and Pam are married and plan to file jointly. They plan to claim their son and Pam’s mother as tax dependents. 41 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Tax Dependent Household Rules Now let’s learn the household composition rules for individuals who expect to be claimed as a tax dependent for the year coverage is sought. 42 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Identify Who Is a Tax Dependent Based on information provided about the family members listed on the application/renewal form, identify who expects to be claimed as a tax dependent for the year coverage is sought and who plans to claim them. 43 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Determine Whether Tax Dependent Meets an Exception For each tax dependent, ask: Is the individual a tax dependent of someone other than a biological, adopted, or step-parent? OR Is the individual a child under age 19 (or at state option, age 19 or 20 and a full-time student) living with two parents but the parents do not expect to file taxes jointly? OR Is the individual a child under age 19 (or at state option, age 19 or 20 and a full-time student) who lives with one parent and is expected to be claimed as a tax dependent by another parent? 44 If answer is “yes” to any of these questions, tax dependent meets an exception to the normal rules for tax filer households. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose 1 2 3

Examples of Exception #1 45 Is the individual a tax dependent of someone other than a biological, adopted, or step-parent?  Grandchild expects to be claimed as a tax dependent by his grandmother  Child expects to be claimed as a tax dependent by an older adult sibling 1 Examples: Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Example of Exception #2 46 Is the individual a child under age 19 (or at state option, age 19 or 20 if a full-time student) and living with two parents but the parents do not plan to file a federal tax return jointly?  Child lives with his mother and father who plan to file taxes separately because they are not married. 2 Example: Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Example of Exception #3 47 Is the individual a child under age 19 (or at state option, age 19 or 20 if a full-time student) who is living with one parent and expects to be claimed as a tax dependent by the other parent?  A 10-year-old child lives with his mother, and his father does not live in the same home. The child expects to be claimed as a tax dependent by his father. 3 Example: Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

If Tax Dependent Meets an Exception, Apply Non-Filer Rules  Use relationship-based rules to construct a household for tax dependents who meet at least one of the exceptions to the tax dependent rules  Under the relationship-based non-filer rules, the household is based on the family members who live with the individual  Reminder that the non- filer rules vary slightly for children versus adults 48 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

• • • • Child(ren) Non-Filer Household Rules Construct a child’s non-filer household:  For children under age 19 (or at state option, age 19 or 20 if a full-time student), relationship-based rules require the household to include: Child applying/renewing coverage; AND Any of the child’s parents (biological, adoptive and step- parents), if living with child; AND Any of the child’s siblings (biological, adoptive and step- parents), who are under age 19 (or at state option, age 19 or 20 if a full-time student) if living with child 49 If the child is married, the spouse, if the spouse is living with the child; and if the child has their own child, the children and step-children if living with the child Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

• • • Adult Non-Filer Household Rules Construct an adult’s non-filer household:  For adults, relationship-based rules require the household to include: Adult applying for/renewing coverage; AND Adult’s spouse if living with the adult; AND Any of the adult’s natural, adopted, and step-children under age 19 (or at state option, age 19 or 20 if a full-time student) if living with the individual 50 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

• • • • If Tax Dependent Does Not Meet an Exception, Apply Tax Dependent Household Rules Construct a tax dependent’s household: A tax dependent’s household must include: The taxpayer who is claiming the individual as a tax dependent (this could be two people if filing jointly); AND Any other tax dependents the taxpayer(s) claim(s); AND The tax dependent’s spouse if they live together 51 The tax dependent; AND Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

To determine a tax dependent’s household, utilize the following three-part process: Three-Part Process for Assessing Tax Dependent Households Part A Part B Part C Based on application information, identify who is a tax dependent. See if the tax dependent meets an exception to the tax dependent rules. If the tax dependent meets an exception, apply the non-filer rules. If the person does not meet an exception, apply the tax dependent rules. 52 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Tax Dependent and Exception Scenarios Now let’s walk through household scenarios for tax dependents. Then we will walk through household scenarios for tax dependents who meet an exception to the tax dependent rules. 53 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Tax Dependent and Exception Rules: Review 54 As a reminder, there are 3 tax dependent exception rules. We must check whether each tax dependent meets any of these exceptions: Individual is a tax dependent of someone other than a biological, adopted, or step-parent Individual is a child under age 19 (or at state option, aged 19 or 20 and a full-time student) living with two parents but the parents do not plan to file taxes jointly Individual is a child under age 19 (or at state option, aged 19 or 20 and a full-time student) who lives with one parent and expects to be claimed as a tax dependent by another parent Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose 1 2 3

Tax Dependent Household Scenarios Tim Scenario 1: Tim expects to be claimed as a tax dependent by his parents, Tom and Terry, who are married, live together and plan to file taxes jointly. 55 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Tax Dependent Household Scenarios Tim Scenario 2: Tim and his sister, Tina, are expected to be claimed as tax dependents by their father, Tom. 56 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Tax Dependent Household Scenarios Tim Scenario 3: Tim is expected to be claimed as a tax dependent by his father, Tom. Tom does not expect to claim Tim’s older sister, Tara, who lives with them. 57 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Tax Dependent Household Scenarios Tim Scenario 4: Tim, age 22, moves away but expects to be claimed as a tax dependent by his father, Tom. Tom also plans to claim his girlfriend and Tim’s grandmother as tax dependents. 58 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Dependent Exception Scenario: Applying Non-Filer Rules Marty Scenario 1: Marty lives with his grandmother who expects to claim him as a tax dependent. 59 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Dependent Exception Scenario: Applying Non-Filer Rules Marty Scenario 2: Marty lives with both of his biological parents, Mary and Mark, who are married. Marty expects to be claimed as a tax dependent by Mary, and Mark plans to file taxes separately from Mary. 60 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Dependent Exception Scenario: Applying Non-Filer Rules Marty Scenario 3: Marty lives with his mother, Mary. Marty expects to be claimed as a tax dependent by his father, Mark, who lives separately. 61 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Adjusting Family Size for Pregnant Women Once the household is determined, if the individual is a pregnant woman, the family size must be adjusted based on the number of children she expects to deliver. Example Analysis Pregnant woman expecting a single child Family size increased by 1 Pregnant woman expecting twins Family size increased by 2 62 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose + + +

If an individual has a pregnant woman in their household, their family size may be adjusted depending on the option elected by the state. State Option Example Analysis Option 1: Pregnant household members count as one plus the number of children expected Pregnant woman expecting twins. Family size increased by 2 Option 2: Pregnant household members count as two (even if she expects to deliver multiple babies) Pregnant woman expecting triplets. Family size increased by 1 (even though she is expecting triplets) Option 3: Pregnant household members count as only one Pregnant woman expecting one child. Family size does not increase. 63 Adjusting Family Size for Pregnant Women (cont’d.) Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose + + + State- Specific Rules

Adjusting Family Size for Pregnant Women: Scenario Scenario: Erica is married to Elijah Erica is pregnant and expecting twins Erica and Elijah have a 4-year-old, Enid Erica and Elijah plan to file taxes jointly and claim Enid as a tax dependent Erica and Elijah live in a state where when an individual has a pregnant woman in their household, the pregnant woman counts only as 1 for other household members 64 Using this information, let’s figure out the Medicaid household information for Erica and Elijah Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose State- Specific Rules

Pregnant Women Scenario (cont’d.) Erica’s Scenario: Erica is married to Elijah and is pregnant and expecting twins. She plans to file taxes jointly with Elijah and claim their daughter, Enid, as a tax dependent. 65 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Pregnant Women Scenario (cont’d) Elijah’s Scenario: Elijah is married to Erica, who is pregnant and expecting twins. Elijah plans to file taxes jointly with Erica and claim their daughter, Enid, as their tax dependent. They live in a state where a pregnant woman counts as only 1 when determining eligibility of an individual who has a pregnant woman in their household. 66 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

State- Specific Rules

Putting It All Together: Test Your Knowledge Time to test your knowledge of the household rules by walking through some scenarios 67 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Putting It All Together: Test Your Knowledge Scenario A:  Bob and Brenda are married and intend to file taxes separately.  They have two children together, Bo (age 10) and Betsy (age 4). - Brenda plans to claim Bo and Betsy as tax dependents.  Bob also has a 20-year-old daughter, Alice, from a previous relationship, whom he plans to claim as a tax dependent. Alice lives with Bob and Brenda while working and attending school full time.  They all live in a state that does NOT count full-time students age 19 and 20 as children.  No one in the household is pregnant. 68 Using the information from Scenario A, let’s figure out the Medicaid household information for each member of the family. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose State- Specific Rules

Putting It All Together: Test Your Knowledge Bob Scenario: Bob is a tax filer and plans to claim Alice as a tax dependent. 69 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Putting It All Together: Test Your Knowledge Brenda Scenario: Brenda is a tax filer and plans to claim Bo and Betsy as tax dependents. 70 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Putting It All Together: Test Your Knowledge Alice Scenario: Alice is Bob’s daughter from a previous relationship. She lives with Bob and Brenda while working and attending school full time. Alice expects to be claimed as a tax dependent by Bob. Alice does not meet any of the tax dependent exception rules. 71 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Putting It All Together: Test Your Knowledge Bo Scenario: Bo expects to be claimed as a tax dependent by Brenda. Bo meets one of the tax dependent exception rules: Bo is a child living with two parents, but the parents do not plan to file jointly. Since Bo meets one of the tax dependent exception rules, non-filer rules apply. 72 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Putting It All Together: Test Your Knowledge Betsy Scenario: Betsy expects to be claimed as a tax dependent by Brenda. Betsy meets one of the tax dependent exception rules: Betsy is a child living with two parents, but the parents do not plan to file jointly. Since Betsy meets one of the tax dependent exception rules, non-filer rules apply. 73 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Putting It All Together: Test Your Knowledge Scenario B:  Zelda is 45 years old and lives with her adopted daughter, Zoe (17 years old) and Zoe’s son, Zach (2 years old)  Zoe is pregnant with twins  Zelda plans to claim both Zoe and Zach as tax dependents  They live in a state that counts a pregnant woman as 2 in determining the family size of other household members 74 Using the information from Scenario B, let’s figure out the Medicaid household information for each member of the family Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose State-S pecific-R u les

Putting It All Together: Test Your Knowledge Zelda Scenario: Zelda plans to file taxes and expects to claim Zoe and Zach as tax dependents. Zoe is pregnant so the family size needs to be adjusted for pregnancy 75 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Putting It All Together: Test Your Knowledge Zoe Scenario: Zoe expects to be claimed as a tax dependent by Zelda. Zoe does not meet any of the tax dependent exception rules. Zoe is pregnant so the family size needs to be adjusted for pregnancy. 76 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Putting It All Together: Test Your Knowledge Zach Scenario: Zach expects to be claimed as a tax dependent by Zelda. Zach meets one of the tax dependent exception rules: Zach is claimed by a non-parent. Since Zach meets one of the tax dependent exception rules, non-filer rules apply. Zoe is pregnant so the family size needs to be adjusted for pregnancy. 77 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Determining Income Eligibility: Step 2 78 Step 1 • Constructing a Household Step 2 • Determining Household Income Step 3 • Comparing Household Income and Size Against Income Eligibility Levels Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Household Income Overview 79  Now that the individual’s total household is constructed, let’s determine the total household income to learn what income is counted for all of the people in that household  We will use total household income to determine whether the individual is eligible for Medicaid or CHIP Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose $

MAGI Overview 80  MAGI is an income methodology used to determine Medicaid and CHIP eligibility ─ IRS determines type of income included in MAGI, with some modifications ─ “MAGI-based rules” are used to determine Medicaid and CHIP eligibility ─ Regardless of whether or not an individual files taxes, MAGI counts taxable income for individuals’ eligibility determination  MAGI income largely aligns Medicaid and CHIP income tests with eligibility for advanced payments of premium tax credits Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Three-Part Process for Determining Household Income 81 Part A Part B Whose income is counted? What counts as household income? Part C Over what period is income counted? Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Part A: Whose Income Is Counted? 82 Part A Whose income is counted?  In the “Constructing a Household” section, we reviewed how to determine an individual’s household  Generally, the MAGI of all individuals in an individual’s household must be counted toward household income  Let’s review an example together Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Whose Income Is Counted? Example 83 Sam Scenario: Sam and Susan are married, plan to file taxes jointly, and plan to claim their daughter, Sarah, age 6, as a tax dependent. Sam’s monthly income is $1,000, Susan’s monthly income is $500, and Sarah has no income. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Whose Income Is Counted? Exceptions 84 Usually the MAGI of all individuals in an individual’s household must be counted toward household income, but there are two exceptions: Income of most children not expected to be required to file a federal income tax return; and Income of most tax dependents not expected to be required to file a federal income tax return Note: These rules are based on whether or not an individual is “expected” to be required to file taxes for the year coverage is received; it does not matter whether an individual eventually does or does not file taxes. 2019 Filing Requirements for Individuals Under 65  Unearned income > $1,100  Earned income > $12,200  Gross income > than the larger of  $1,100  Earned income (up to $ 11,850) plus $350 The IRS updates the filing thresholds annually. For eligibility determinations and renewals, Medicaid/CHIP uses the most recent filing thresholds, even if they are from the previous tax year. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose 1 2

Exceptions to Whose Income Is Counted: Children 85 1 Exception for the income of children:  Child’s income does not count toward household income if child is included in the household with his or her parent, unless the child is required to file taxes  Child’s income does not count for evaluating: ─ Child’s eligibility; OR ─ Eligibility of other household members  Applies to adult children who are tax dependents of their parent  If a child does not live with his or her parent and is not claimed as a tax dependent by his or her parent, then child’s household will not include the parent  In this case, the child’s income will count for their own eligibility and the eligibility of the child’s other household members, such as siblings, regardless of whether the child’s income is high enough to require a tax return to be filed Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Child Income Exception Scenarios 86 Marty Scenario: Marty claims his adult son, Mark, as a tax dependent. Marty makes $2,500 a month. Mark is a 22-year-old college student and makes $800 a month working as a waiter and is not expected to be required to file a tax return. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Child Income Exception Scenarios 87 Sadie Scenario: Sadie, age 55, plans to claim her daughter, Stephanie, age 17, and her granddaughter, Sarah, age 2, as tax dependents. Sadie earns $3,000 a month in wages. Stephanie earns $500 a month in wages. Sadie and Stephanie both plan to file taxes, but Stephanie does not make enough money to be expected to be required to file taxes. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Child Income Exception Scenarios 88 Stephanie Scenario: Stephanie, age 17, and daughter, Sarah, age 2, expect to be claimed by her mother, Sadie, age 55, as tax dependents. Sadie earns $3,000 a month in wages. Stephanie earns $500 a month in wages. Sadie and Stephanie both plan to file taxes, but Stephanie does not make enough money to be expected to be required to file taxes. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Child Income Exception Scenarios 89 Sarah Scenario: Sadie, age 55, plans to claim her daughter, Stephanie, age 17, and her granddaughter, Sarah, age 2, as tax dependents. Sadie earns $3,000 a month in wages. Stephanie earns $500 a month in wages. Sadie and Stephanie both plan to file taxes, but Stephanie does not make enough money to be expected to be required to file taxes. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Exception for the Income of Most Other Tax Dependents 90  Include income of a tax dependent in household income of person who is claiming them, only if the tax dependent is expected to be required to file a tax return  This exception does not apply to a tax dependent’s income when determining the household income of any household where the tax dependent’s parent and the tax dependent’s claiming tax filer are not part of that household ─ In such cases, the tax dependent’s income counts toward household income regardless of whether or not he/she is expected to be required to file a tax return 2 Exception for the income of other tax dependents: Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Exception for Income of Other Dependents Scenario 91 Mary and Matthew Scenario: Mary, age 45, plans to claim her nephew, Matthew, age 18, as a tax dependent. Mary earns $2,500 a month in wages. Matthew earns $100 a month in wages as a waiter. Matthew is not expected to be required to file taxes. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Part B: What Counts as Income? 92  MAGI consists of four types of income that are counted in determining eligibility: 1) Adjusted gross income (taxable income and adjustments) 2) Social Security benefits not included in adjusted gross income 3) Tax-exempt interest 4) Foreign earned income  To determine Medicaid and CHIP eligibility, a few additional modifications are made to MAGI Note: Most Medicaid/CHIP individuals will only have adjusted gross income and some will have Social Security benefits. Almost no Medicaid/CHIP individuals will have tax-exempt interest or foreign earned income. Part B What counts as household income? Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

MAGI 93 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose Let’s look at the four types of income that are counted as part of MAGI, plus the adjustments

• • • MAGI: Taxable Income 94 Taxable Income For most people, wages and salaries will constitute the majority of their taxable income Taxable income also includes income from a broad array of other sources, such as unemployment benefits, alimony received (see next slide on exceptions), interest, net business income and capital gains There are tax adjustments people can make to decrease their taxable income: ─Adjustments include alimony payments (see next slide on exceptions), interest on student loans, and other items ─Adjustments do not include charitable contributions, mortgage interest, and other itemized deductions More information to help an individual construct taxable income to follow 1 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

• • • MAGI: Alimony 95 Prior to enactment of the Tax Cuts and Jobs Act (TCJA)*, alimony was generally considered taxable income to the recipient, and similarly the payer of alimony generally could claim an adjustment to deduct alimony paid from taxable income Upon enactment of the TCJA, alimony payments under separation or divorce agreements finalized after December 31, 2018, are not considered taxable income to the recipient or an adjustment to the payer’s taxable income Alimony agreements finalized on or before December 31, 2018, follow the pre-existing tax rules, described in the first bullet above, unless the agreement is modified after that date specifically to incorporate the new tax treatment of alimony payments Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose *Tax Cuts and Jobs Act (Pub. L. No. 115-97)

• • MAGI: Social Security Benefits 96 Social Security Benefits All Social Security benefits are counted as part of an individual’s MAGI-based income However, in determining whether a child’s or tax dependent’s income is expected to meet the filing threshold, only the taxable portion of Social Security benefits is counted 2  Except in rare cases, a child or tax dependent’s Social Security benefits will not be taxable unless the child/tax dependent has other income which itself (i.e., not counting Social Security benefits) exceeds the tax filing threshold  See IRS Publication 915 to:  Determine whether any portion of Social Security benefits may be taxable, and  If a portion of benefits may be taxable, how to determine the actual taxable amount Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

• • • MAGI: Tax-Exempt Interest 97 Tax-Exempt Interest Most interest people receive from bank accounts, money market accounts, certificates of deposit, and deposited insurance dividends is considered taxable income and is already included as part of adjusted gross income. However, interest on some bonds issued by and used to finance state and local government operations is not taxable at the federal level. This tax-exempt interest is considered as part of MAGI. The application will not ask about this income separately—it is expected that individuals include it with their other interest when requested. 3 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

• • • MAGI: Foreign Earned Income 98 Foreign Earned Income Include foreign earned income in MAGI even though it is not generally subject to taxation This is income received from sources within a foreign country or countries, which constitutes earned income attributable to services performed by individual when they were a: 1) U.S. citizen and bona fide resident of a foreign country for an uninterrupted period of time, including an entire taxable year OR 2) U.S. citizen or resident and who, during any period of 12 consecutive months, is present in a foreign country for at least 330 full days during that period 4 The application will not ask about this income separately—it is expected that individuals will include it with their other job-based income Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

MAGI: Adjustments 99  Tax adjustments must be subtracted from an individual’s income  Common adjustments among individuals eligible for Medicaid and CHIP are likely to include certain self-employment expenses, most contributions to IRAs, alimony paid, and student loan interest  The term “deductions” is often used on applications to refer to tax adjustments For additional information on tax adjustments see IRS Publication 17 at http://www.irs.gov/pub/irs-pdf/p17.pdf Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Income Modifications to MAGI 100 We must make some additional modifications to MAGI to determine Medicaid/CHIP eligibility:  Lump sum payments. Taxable lump sum payments (e.g., prizes, back pay, insurance settlements, etc.) are generally only counted in the month received with the following exception: – Exception: lottery and gambling winnings received on or after January 1, 2018, that exceed $80,000 are counted over a longer period of time, up to 120 months*  Educational scholarships, awards or fellowships used for educational purposes are subtracted. Note: Most scholarships are not taxable, so they will not typically be included in taxable income and therefore will not need to be subtracted; however, if taxable, they are not counted in MAGI-based income  American Indian/Alaska Native specified income is subtracted.  Cash Support. For individuals who expect to be claimed as a tax dependent by a relative, or another taxpayer who is not a parent, household income may include cash support (exceeding nominal amounts) provided by the person claiming the individual as a tax dependent Non-taxable lump sum payments (e.g., disaster relief payments or tax refunds, etc.) are not counted in MAGI calculations Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose *See SHO #19-003 for details on the formula for determining this period State Policy Option

Income Modifications to MAGI: Example 1 101 1 Count lump sum payments only in the month received. Example:  Susan won $1,000 from a Lotto scratch-off ticket on September 5th.  If Susan applied for Medicaid in September, include $1,000 lump sum payment in her total household income.  If Susan applied for Medicaid in November, do not count her $1,000 lump sum payment in her total household income. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose Susan applies for Medicaid in September Susan applies for Medicaid in November Count as income?

Income Modifications to MAGI: Example 2 102 2 Subtract educational scholarships, awards or fellowships used for educational purposes from household income. Note: Most scholarships are not taxable, so it is unlikely they will need to be subtracted. Example  Jocelyn receives $2,500 in scholarships to help pay for her college tuition.  When Jocelyn applies for health insurance and reports her income, do not count the $2,500 she receives in scholarship money as part of total household income. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose Scholarship Count as income?

Income Modifications to MAGI: Example 3 103 3 Subtract certain types of income for American Indian/Alaska Native individuals. Example  Monica receives $1,000 a month in tribal land payments.  Do not count this $1,000 a month in her total household income. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose Tribal land payments Count as income?

Income Modifications to MAGI: Example 4 104 4 For individuals who expect to be claimed as a tax dependent by a grandparent, another relative, or another taxpayer who is not a parent or step-parent, household income may include cash support (exceeding nominal amounts) provided by the person claiming the individual as a tax dependent Example:  Jamie lives with his aunt Sasha, who claims Jamie as a tax dependent  Sasha gives Jamie $40 each week to help cover his bus fare and lunches  When Jamie applies for health coverage, the $40 per week will be counted in Jamie’s income only if the state chooses to include this type of cash support as income, and considers this amount to be more than nominal State Policy Option: Cash Support State Policy Option Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Putting It All Together: Countable vs. Non-Countable Income 105 We’ve reviewed the basics of MAGI-based income. Let’s identify countable and non- countable income types and then walk through some scenarios. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Countable Income 106 Examples of Countable Income Taxable wages/salary (before taxes are taken out) Self-employment (profit once business expenses are paid) Social Security benefits Unemployment benefits Alimony received (for settlements finalized on or before December 31, 2018) Most retirement benefits Interest (including tax-exempt interest) Net capital gains (profit after subtracting capital losses) Most investment income, such as interest and dividends Rental or royalty income (profit after subtracting costs) Other taxable income, such as canceled debts, court awards, jury duty pay not given to an employer, cash support, and gambling, prizes, or awards Foreign earned income State agencies should be alert for pre-tax income. For example, contributions to dependent care accounts, health insurance premiums, flexible spending accounts, retirement accounts and commuter expenses that are deducted from an employee’s pay before federal income tax is withheld are NOT included as income. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose $

Non-Countable Income 107 Examples of Non- Countable Income Temporary Assistance to Needy Families (TANF) and other government cash assistance Supplemental Security Income (SSI) Child support received Veterans benefits Workers’ compensation payments Proceeds from life insurance, accident insurance, or health insurance Federal tax credits and federal income tax refunds Gifts and loans Inheritances Alimony received (settlements finalized, and certain agreements modified, after December 31, 2018) Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose $

Countable vs. Non-Countable Income Scenarios 108 Michael Scenario: Michael lives alone, plans to file taxes, and earns $400 a month in wages and receives $200 in veterans benefits. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Countable vs. Non-Countable Income Scenarios Tracy and Tara Scenario: Tracy does not plan to file taxes and lives with her daughter, Tara, age 8. Tracy earns $500 a month from her job and receives $300 a month in child support payments from her ex-husband. 109 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Countable vs. Non-Countable Income Scenarios Bob, Barbara, Betty and Billy Scenario: Bob and Barbara are married and plan to file taxes jointly. They have twins, Betty and Billy, age 16, whom they claim as dependents. Bob earns $600 a month from his job; Barbara receives $600 a month in workers’ compensation benefits. Betty works as a camp counselor and earns $500 a month for three months, but is not expected to be required to file taxes. 110 Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Countable vs. Non-Countable Income Scenarios 111 Rose and Randy Scenario: Rose, age 60, claims her granddaughter, Randy, age 18, as a tax dependent. Rose earns $800 a month in wages and receives $200 a month in Social Security benefits. Randy receives $2,000 a month in scholarships for college. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Part C: Over What Period Is Income Counted? 112 Individuals Applying for Coverage  Use household’s current monthly income to evaluate eligibility for Medicaid and CHIP  States may use reasonably predictable changes to determine monthly income Beneficiaries Renewing Coverage  States have two options: 1. Use current monthly income - States may use reasonably predictable changes to determine monthly income 2. Use projected annual income Part C Over what period is income counted? Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

STATE OPTION: Reasonably Predictable Changes 113 At application or renewal, states have the option to take into account whether an individual’s future income can be reasonably predicted to change – States have flexibility to develop reasonable methodologies for including a prorated portion of reasonably predictable future income – Commonly, the methodology utilizes an individual’s projected household income over the next 12 months, divided by 12 to derive monthly income If the state adopts this option, then application questions will need to account for reasonably predictable income changes Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose Application State Policy Option

State Option: Reasonably Predictable Changes: Example 114 John is a migrant farm worker. March 1 August 31 February 28 John is employed from March-August John is usually not employed from September-February John reports that he will have income for 6 months of the year and be unemployed for the remaining 6 months of the year. If John applies for coverage in March, these reasonably predictable income changes must be considered in determining his eligibility, which means that John’s income for six months should be prorated across 12 months. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose State Policy Option

State Option: Demonstrating Reasonably Predictable Income Changes 115 States may accept self-attestation that the individual’s future income is reasonably predicted to change. A state could request proof of reasonably predictable changes in income if applicant’s statement about his/her income is inconsistent with results of data verification check. See your state’s verification rules for more information. Proof, if needed, could include, but is not limited to: Signed contract for employment History of predictable income fluctuations Notice of employment termination or other indication of future income change Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose $ State- Specific Rules

Determining Income Eligibility: Step 3 116 Step 1 • Constructing a Household Step 2 • Determining Household Income Step 3 • Comparing Household Income and Size Against Income Eligibility Levels Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Compare Household Income and Size Against Income Eligibility Levels 117 Final step to determine Medicaid/CHIP eligibility: Compare household’s current monthly income to Federal Poverty Level (FPL) guidelines for appropriate household size for each individual. Use most recently published FPL level in effect in month during which someone applies for coverage (your agency will continue to provide the year’s FPL level by family size as they have in the past). Apply 5% of FPL-equivalent income disregard if it will impact an individual’s eligibility for a program. Generally, automated rules engines will be used to determine eligibility. The system will do this work as long as it has the right inputs. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Household Size and Income Eligibility: Example 118 Emma Scenario: Emma, age 25, is a single woman who is pregnant with twins. Emma earns $3,000 a month in wages. Emma resides in a state where the Medicaid eligibility for pregnant women is 213% of the FPL. Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose

Next Steps 119 Now that you understand the rules, the next steps are: Practice constructing a household; Practice determining household income; Practice comparing results to eligibility levels; and Learn more! The following resources provide additional information on the MAGI rules: MAGI 2.0 Part 1: Household Composition - Scenarios for complex households and special populations MAGI 2.0 Part 2: Income Counting - Details on more complex income types and adjustments - Discussions on operationalizing the income counting rules Comparing Results to Eligibility Levels Determining Household Income Constructing a Household Purpose