Your assets, MAGI and Medicaid eligibility

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Qualifying for Medicaid is not as easy as you might think, at least for now. While your income plays an obvious role (Medicaid is a poor and needy medical program after all), your eligibility may also depend on your participation in other government programs.

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How you qualify for Medicaid determines how the government views your finances. Understanding the difference can go a long way in protecting your assets in the long term.

Two Categories of Medicaid Eligibility

Before the Affordable Care Act, Medicaid eligibility depended on how much money you made and how much you had, such as your income, assets, and net worth. However, after the passage of the law, the right to participate was divided into two separate groups.

Some people continued to be eligible for old-fashioned Medicaid, while others were eligible based on their Modified Adjusted Gross Income (MAGI).

THE THREE WISE MEN

People who meet these criteria :

  • 19 and 20 years living with their parents
  • Childless adults ages 19-64 living in Medicaid-extended states
  • People Eligible for the Family Planning Benefits Program
  • Babies and children under 19 years of age
  • Parents / Guardians and Family Members Living in the Same House
  • Pregnant women

No MAGI

People who meet these criteria:

  • Foster children, including former foster children under age 26 who were on Medicaid when they turned 18
  • People who live in institutionalized adult homes managed by the local Department of Human Services (LDSS) or the Directorate of Minority Health (OMH).
  • Medicare beneficiaries earning less than 100% of the Federal Poverty Level (FPL)

Depending on whether you are MAGI or not MAGI, the government uses several factors to decide if you are eligible for Medicaid.

How to calculate MAGI

MAGI is the primary tool used by the government to determine your eligibility for Medicaid or subsidized health insurance through the Health Insurance Marketplace . Understanding MAGI is as easy as your tax return, which means it can be confusing. This is what you need to know.

Tax

Your gross income is your total earned income. This is actively flowing money and does not include fixed assets like real estate or vehicles. People who live or work abroad can benefit from the Foreign Income Exclusion on their US tax returns.

Gross income minus legal deductions

Your adjusted gross income (AGI) is your gross income after any applicable tax deductions.

For example, you can deduct college expenses, health savings deductions , IRA contributions, medical expenses, relocation costs, self-employed health insurance deductions, employment taxes for self-employment, student loan interest from your tax returns and training, etc.

Modified Adjusted Gross Income

Your modified adjusted gross income (MAGI) is your adjusted gross income excluding foreign income, the tax-free portion of your Social Security income, and tax-free interest.

Essentially, this adds certain AGI deductions. For most people, AGI and MAGI will be the same.

However, when it comes to Medicaid eligibility, MAGI has two components. The first is your household income and the second is your family size.

If you are single, in a family of two, or in a family of five, you will have different MAGI scores to be eligible for these programs. Each state will also have different levels of MAGI , depending on whether or not the Medicaid extension is entered .

Asset testing and Medicaid

When it comes to Medicaid Medicaid non-MAGI eligibility, both your income and assets come into play. Most government programs that qualify you for Medicaid use an assets test. SSI sets standards.

If your income and assets exceed a certain level, you are not eligible for the program. In 2021, the income limit is set at $ 2,382 per month and the asset limit is $ 2,000 per person .

MAGI Medicaid does not cover everything. Your assets come into play when it comes to Long Term Services and Supports (LTSS), the part of Medicaid that pays for long-term care in a nursing home .

Not everything you own will count towards your assets. If you have too many assets, you will need to spend less before you are eligible for Medicaid. However, how you spend less money matters because you could be penalized for valuable gifts or transfers made in the last 60 months (including irrevocable trusts ) – in other words, Medicaid rollback period.

Means

These are the most common assets to consider, although this list is far from exhaustive.

Bank accounts and cash

Your first $ 2,000 belongs to you and only you. Medicaid will only count dollars in excess of this amount. For example, if you have $ 2,500 in your bank account, only $ 500 will count toward your Medicaid-eligible assets.

Funeral and burial funds

When it comes to dying and dying, the government allows a certain dignity. Funds used to pre-arrange a funeral or memorial service are excluded from your Medicaid assets. This includes pre-purchased burial plots not only for you, but for your immediate family members as well.

If no pre-preparation is done, a bank account of up to $ 1,500 can be set aside for funeral expenses and will not count toward your Medicaid-eligible assets.

Insurance policies

Not all insurance policies are the same. Immediate life benefit policies pay benefits when you die, but do not accumulate cash value while you are alive. Other types of policies (permanent, universal, variable or comprehensive life insurance) generate monetary value over time. Medicaid pays attention to them.

Medicaid will include the cash value of a life insurance policy of more than $ 1,500 in its asset test, although this amount varies in some states. For example, if the cash value is $ 2,000, only $ 500 will count toward your membership limit.

Property

Your home is probably your most valuable asset, but it may not count toward Medicaid asset verification. As long as you live in a state where you apply for Medicaid and plan to return home, you are protected up to $ 603,000, although some states have adopted an upper limit of $ 906,000 .

Additional properties can be excluded from asset verification. It depends on whether these additional properties are necessary to support you, that is, they generate income that is at least 6% of the property's value each year. Consider farms, rental properties, and other real estate investments in this category.

Vehicles

If you have a car, you can be sure Medicaid won't blame you for it, no matter how much it costs. It could even be a Lamborghini! You can also evict a second car that is over seven years old if it is not a luxury car or a classic or vintage car over 25 years old.

If you are married, your spouse will share a certain percentage of your assets. Each state has its own distribution rules. Be sure to check with your local Medicaid office.

Take advantage of the benefits of MAGI

The Affordable Care Act has made it easier for millions of Americans to get Medicare. Using MAGI to determine eligibility has simplified the application process. The administrative burden of confirming assets has been taken to the back burner. Unfortunately, it also gave wealthy people a chance to tap into taxpayers' money.

This loophole stems from the fact that most Americans are now eligible for Medicaid through MAGI, which, if you are not seeking long-term care in a nursing home, no longer uses an assets test. People with rich assets, especially those with investments or real estate, can still technically meet the MAGI criteria.

Someone could own an $ 850,000 home, a Lamborghini, a second car, hundreds of acres of farmland, and still be technically eligible for Medicaid.

These Americans will be considered wealthy by any standard, but by protecting their assets under applicable tax laws, they will be legally eligible for Medicaid or subsidized plans through the health insurance marketplace . This happens even when they can easily dig into your assets to pay for health insurance.

If the intention is to provide medical care to the most financially needy, MAGI Medicaid may need to think about how to close this gap. The Republican Party is currently seeking to end Obamacare, which will effectively end MAGI Medicaid.

However, it will also reintroduce complexities into the system that the Affordable Care Act seeks to reduce. Be on the lookout for possible Medicaid reforms in the future.

Get the word of drug information

Eligibility for Medicaid can be a complex issue. Whether you meet the MAGI criteria or the non-MAGI criteria, your assets will be screened if you need long-term nursing home care. Find out how your assets will be accounted for and you can find ways to protect them in the future.

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