Arkansas Administrative Code
Agency 016 - DEPARTMENT OF HUMAN SERVICES
Division 28 - Division of County Operations
Rule 016.28.20-002 - Medical Services Policy Manual Section E-200

E-200 Determining Financial Eligibility Under the MAGI Methodology

E-210 What is MAGI?

MS Manual

MAGI is a federal income tax term meaning Modified Adjusted Gross Income. For purposes of determining Medicaid eligibility, MAGI is a methodology for determining how income is counted and how household composition and family size are determined. It is based on federal tax rules, but it is not an amount on a specific line on an individual federal tax return. In addition to being used to determine Medicaid eligibility for certain eligibility groups, the MAGI methodology is also used to determine eligibility for and the amount of Advance Premium Tax Credits (APTC) and cost-sharing reductions available to individuals and families who are eligible to purchase health insurance through the Federally Facilitated Health Insurance Marketplace (FFM).

For tax purposes, the modified adjusted gross income reflects annual income for a specific tax year. For Medicaid purposes, however, current monthly income is used to determine eligibility. This is true even when using MAGI methodologies. Detailed information on determining whether income is "current" and converting income amounts to monthly amounts can be found in MS E-265.

E-220 Families and Individuals (MAGI) Groups

MS Manual

MAGI methodologies are used to determine financial eligibility for the following groups:

E-230 Steps in Determining MAGI Income Eligibility

MS Manual

Below are the steps for determining income eligibility:

E-240 Determining the Medicaid Household for Families and Individual Groups

MS Manual

Under the Modified Adjusted Gross Income (MAGI) methodology, the Medicaid household composition is based on federal income tax filing status. Household size is the number of individuals counted in the family size for the income standard. When determining the household size, individual Supplemental Security Income (SSI) recipients are counted. A pregnant woman is counted as one (1) person plus the number of children she is expecting. In most situations, the Medicaid household is the same as the tax filing unit of which the individual is a member. The Medicaid household composition determines whose income will be considered in determining eligibility. If the family or individual has not filed a federal tax return for the most recent tax year and does not expect to file one, then the Medicaid household is determined as described in MS E-251.

E-250 Tax Filing Status

MS Manual

To determine an individual's tax filing status or unit, two basic questions must be asked.

NOTE: Each person's eligibility for Medicaid is determined individually, even if two or more individuals are living in the same household.

E-251 Non-Tax Filing Households

MS Manual

Medicaid household composition will be determined in accordance with this section in the following situations:

E-260 Determining Countable Income for Families and Individuals Groups

MS Manual

Once the Medicaid household composition has been established for the individual, each household member's countable income must be determined. Only the income of persons in an individual's Medicaid household is considered when determining financial eligibility.

Countable income sources using the MAGI methodology are the same as a tax filing unit's taxable income sources with a few exceptions. The exceptions are:

* Social Security benefits are counted in full.

* Income received as a lump sum is counted as income only in the month received.

* Any portion of an educational scholarship, award or fellowship grant used for living expenses is countable income.

E-261 Income Included for Families and Individual Groups

MS Manual

Although not an exhaustive list, the following are examples of taxable income included in MAGI calculations to determine Medicaid eligibility:

E-262 Income Excluded for the Families and Individual Groups

MS Manual

Although not an exhaustive list, the following examples of income that are excluded as taxable income for federal income tax purposes, and therefore are excluded as countable income for Medicaid purposes:

E-263 Household Members Whose Income Will Not be Counted for Families and Individual (MAGI) Groups

MS Manual

The income of the following household members is not considered when determining Medicaid eligibility:

E-264 Determining Current Gross Monthly Income For The Families and Individuals Groups

MS Manual

Current gross monthly income minus allowable deductions will be used in determining financial eligibility for Medicaid. Current monthly income is the income the individual is expected to have in the month(s) for which eligibility is being determined.

Income that may have been received in the prior tax year or even the prior month, but that is not currently being received or expected to be received in the current or future months will not be counted. If a continuing source of income has increased or decreased since the last tax return or from other information available to the agency, the current income will be determined and used for eligibility purposes.

NOTE: Income received in a month for which retroactive eligibility is being determined will be considered for the retroactive month even if it is not considered for current or future months.

Once the household members' current income has been established and verified using the ten percent (10%) reasonable compatibility standard as appropriate (See MS G-151-152), the monthly amount used to determine eligibility will be calculated. Depending on how the current income was established (e.g., tax return income via the Federal Data Services Hub, State Quarterly Wage Data, check stubs, SOLQ, etc.), the "verified" income amount may have to be reduced or increased to reflect a monthly amount. For example, if the most recent tax return reflects the income still currently available to the individual, the annual income from the tax return will be divided by 12 to arrive at a monthly amount. If the current income was established through the most recent weekly check stubs, the average weekly amount will be multiplied by 4.334 to arrive at a monthly amount. Unless the verified amount is already a monthly amount, for example Social Security benefits, then some conversion to a monthly amount is required. The calculation will be documented in the individual's case file.

The chart below shows how income amounts larger or smaller than monthly amounts can be converted to a monthly amount.

Some situations require alternative methods to arrive at a current monthly income. For example, if annual income included a lump sum payment that will not be paid again, then the lump sum payment will be excluded from the rest of the annual income before the conversion to monthly income. Self-employment income may also require an alternative method. MS E-266 contains a more detailed discussion on self-employment income.

E-265 Self-Employment Income

MS Manual

The current monthly amount of self-employment earnings is the best estimate of earned income for future months.

The individual's recent tax data can be used to determine monthly income. If the most recent tax data is not available or does not reflect current income, the individual's income will be determined by other means as determined appropriate by the eligibility worker, such as sales receipts, business records, etc.

Costs directly related to producing self-employment income are subtracted from the annual gross income before the monthly earnings are included in the budget. See Schedule C in Appendix Q for all allowable costs associated with self-employment income. After allowable deductions from annual income, the remainder is then divided by 12 to determine the monthly income.

E-266 Comparing Income to Income Standard for Appropriate Household Size

MS Manual 08/01/14

After the Medicaid household composition, size and countable current income have been established, the Medicaid household's countable income will be compared to the household size income standard for the appropriate eligibility group to determine whether an individual is income eligible. Income eligibility will first be determined according to the eligibility group the individual falls into with the lowest income standard. For example, eligibility for a parent would first be determined in the Parent/Caretaker Relative group before a group with a higher income standard.

E-267 The 5% Gross Income Disregard

MS Manual 08/01/18

Each individual will be allowed a general gross income disregard in the amount of five percent (5%) of the Federal Poverty Level for the household size.

The five percent (5%) disregard will be applied only to the Families and Individuals category with the highest income level in which an individual could be eligible. For example, if an individual is not income eligible in the lowest income level group (e.g., Parents/Caretaker Relatives), the five percent (5%) disregard will be applied to the higher income group (e.g., Adult Expansion Group). However, if the individual is eligible in the higher income group without applying the five percent (5%) disregard, the disregard will not be applied.

When applied, the five percent (5%) disregard effectively raises the income limits for the applicable eligibility group by five percentage points. For example, the income limit for the Adult Expansion Group is one hundred thirty-three (133%) See MS E-110. To apply the five percent (5%) disregard, add five percent (5%) to one hundred thirty-three percent (133%) to raise the income limit to one hundred thirty-eight percent (138%) of the Federal Poverty Level . The Full Pregnant Women and Parent Caretaker Relative categories of assistance are not eligible to receive the five percent (5%) disregard.

Application of the 5% Disregard in the ARKids First groups

The five percent (5%) disregard is applied to the ARKids A income limit only if the child who would otherwise be ineligible without the disregard is covered by a health insurance plan. Since eligibility in ARKids B is not available to a child with health insurance, ARKids A is the eligibility group with the highest income limit available to an insured child, and therefore, the five percent (5%) disregard can be allowed.

The five percent (5%) disregard is not applied to the ARKids A income limit if the child is uninsured and ineligible for ARKids A without application of the disregard. ARKids B is the eligibility group with the highest income limit for uninsured children, and therefore, the five percent (5%) disregard is applied only if needed to achieve ARKids B eligibility.

Refer to MS F-180 for exceptions to health insurance coverage for ARKids B eligibility.

E-268 Undue Hardship for Lottery/Gambling Winnings MS Manual 08/01/2020

An individual who is assessed a penalty for lottery/gambling winnings outlined in MS E-261 may request an undue hardship exception. The eligibility worker will consider factors including, but not limited to, the following: