Applying for Medicaid services involves an evaluation of your income and assets. These limits are determined by each state, but federal policy establishes what types of income and assets are counted or exempt for retirees.
Common Types of Social Security Benefits
The Social Security Administration (SSA) manages various benefits programs that pay cash allotments to beneficiaries and, in some cases, their dependents. Although these programs are all managed by the SSA, it’s important to understand how they differ and under which circumstances they might overlap. This can help you determine which type of Social Security income might be counted under Medicaid’s rules.
- Retirement benefits. Work credits, earned through paying Social Security taxes, qualify retirees for benefits. The amount this benefit pays out is relative to your earnings through your working years and at what age you choose to start receiving benefits.
- Disability benefits. Two programs provide disability benefits through the SSA. Social Security Disability Insurance (SSDI) is paid to disabled adults who have earned enough work credits through Social Security taxes to qualify, while Supplemental Security Insurance is available to low-income households for disabled children and adults who do not have enough work credits to qualify for SSDI.
- Survivor and dependent benefits. In the case of a beneficiary’s death or disability, their spouse and children may be eligible to receive a survivor or dependent benefit for a certain amount of time.
In some circumstances, a beneficiary may receive more than one type of Social Security income. For example, if a retiree is disabled, they may receive their retirement income in addition to SSDI or SSI payments.
Defining Modified Adjusted Gross Income (MAGI)
Gross income is the total amount of all earned and unearned income an individual or their household receives before any deductions or disregards are applied. Adjusted gross income (AGI) is the total taxable amount of earned and unearned income for a tax-filing individual or group, minus qualifying deductions.
Modified adjusted gross income, or MAGI, is the total taxable and non-taxable amount earned and unearned income for that same tax-filing individual or group. While AGI is a tool used by the IRS, MAGI is not. MAGI was originally designed to help determine eligibility for premiums and their discounts in the Affordable Care Act (ACA) Marketplace.
Income counted in MAGI:
- Wages, tips and self-employment income.
- Unemployment compensation.
- Social Security retirement, disability insurance (SSDI) or survivor’s benefits income.
- Retirement and pension income.
- Alimony income finalized before January 1, 2019.
- Capital gains and investment income.
- Rental and royalty income.
- Nontaxable foreign income.
Income not counted in MAGI:
- Supplemental Security Income.
- Veterans’ disability benefits.
- Worker’s compensation.
- Funds from loans (such as student, home equity or private bank loans).
- Alimony income finalized on or after January 1, 2019.
- Child support.
Medicaid Income Eligibility Standards
Medicaid uses many of the same standards as the ACA Marketplace when it comes to establishing what types of income are included in a household’s MAGI. However, in households that receive Social Security income, whether it’s related to retirement, disability or survivor and dependent benefits, there may be special rules that impact how Medicaid determines income eligibility.
In all cases, SSI benefits are not included in a household’s income when evaluating eligibility for Medicaid services. Otherwise, taxable and non-taxable Social Security income received by the primary beneficiary may be counted as part of the household’s income for Medicaid eligibility.
Exemptions exist for children and tax dependents who receive survivor or dependent benefits through Social Security. If the child or tax dependent does not meet tax-filing thresholds for their earned and unearned income amounts, their Social Security income may not be included in the household’s MAGI for Medicaid eligibility.
Applicants should be aware that the policies that regulate MAGI inclusions and exemptions, as well as how Medicaid determines eligibility, can change throughout the year or differ between states. Call the agency that manages Medicaid in your state for the most current information about income limits and eligibility requirements.