How Much Can You Earn While on Medicaid?

Medicaid is a collaborative health coverage program between federal and state governments, offering healthcare access to numerous individuals and families across the United States. It serves various populations, including children, pregnant individuals, parents, older adults, and those with disabilities. Eligibility for this program is primarily determined by financial criteria, specifically income, along with other non-financial factors. Understanding the specific income thresholds and how income is calculated is important for those seeking to access these benefits.

Core Income Eligibility Requirements

Medicaid eligibility is tied to income limits that vary significantly by state and household size. For most individuals, including children, pregnant individuals, parents, and adults under 65, financial eligibility is primarily determined by Modified Adjusted Gross Income (MAGI). This methodology, established by the Affordable Care Act (ACA), standardizes income counting rules across various health coverage programs.

Medicaid income thresholds are often expressed as a percentage of the Federal Poverty Level (FPL). The FPL is a national standard, adjusted annually by household size, providing a baseline for income comparisons. Federal law allows states to cover adults with incomes up to 133% of the FPL; however, a 5 percentage point income disregard often applies, effectively raising the limit to 138% of the FPL in states that have expanded Medicaid.

Income limits differ considerably by state, even for similar household sizes and eligibility groups. Some states set limits near federal minimums, while others extend coverage to individuals with higher incomes. These variations mean an income level qualifying an individual in one state might exceed the limit in another.

How Income and Assets Are Counted

Medicaid eligibility considers both earned and unearned income. Earned income includes wages, salaries, tips, and net earnings from self-employment. Unearned income includes Social Security benefits, pensions, unemployment benefits, and investment interest or dividends.

For most MAGI-based Medicaid categories, income calculation mirrors federal income tax rules. MAGI is defined as Adjusted Gross Income (AGI) plus certain untaxed income, such as tax-exempt interest, non-taxable Social Security benefits, and excluded foreign income. Many deductions and adjustments allowed on a federal tax return are considered in the MAGI calculation.

Certain income sources are excluded or “disregarded” from the MAGI calculation. Commonly disregarded income includes child support payments, Supplemental Security Income (SSI) benefits, and workers’ compensation payments. Excluding these income types can significantly impact eligibility.

The role of assets in Medicaid eligibility varies by program category. For MAGI-based Medicaid categories, assets are not considered when determining eligibility. The value of bank accounts, property, or other possessions does not affect qualification for these programs.

In contrast, non-MAGI Medicaid programs for individuals aged 65 or older, blind, or disabled, usually apply an asset test. These programs have specific limits on countable assets. Countable assets may include cash, certain bank accounts, and non-exempt property, while exempt assets often include a primary home, one vehicle, and personal belongings.

Understanding Different Medicaid Programs and Their Income Rules

Medicaid includes various programs, each with distinct income rules tailored to specific populations. The two broad categories are MAGI-based and non-MAGI Medicaid, with significant differences in eligibility criteria. MAGI-based programs primarily serve children, pregnant women, parents, caretaker relatives, and adults under 65 in states that have expanded Medicaid.

For MAGI-based categories, income is calculated using the Modified Adjusted Gross Income methodology, which does not consider assets. Income limits for these groups are often set as a percentage of the Federal Poverty Level (FPL), such as 138% FPL for expansion adults or higher percentages for children and pregnant individuals. In some states, pregnant women and children may be eligible with incomes up to 200% or even 206% of the FPL.

Non-MAGI Medicaid programs cater to individuals aged 65 or older, blind, or with a disability. These programs often utilize different income counting methodologies, sometimes based on Supplemental Security Income (SSI) rules, and include an asset test. Income disregards, amounts of income not counted towards the eligibility limit, can also differ substantially in non-MAGI programs compared to MAGI-based ones.

Some states operate “Medically Needy” programs, allowing individuals with incomes above standard Medicaid limits to become eligible by “spending down” excess income on medical expenses. Under a spend-down program, an individual’s income is compared to a Medically Needy Income Level (MNIL); the amount exceeding this level must be incurred in medical costs before Medicaid coverage begins. This approach provides a pathway to eligibility for those with high medical bills.

Managing Income Changes and Maintaining Eligibility

Maintaining Medicaid eligibility requires individuals to report any financial changes to the state Medicaid agency. Report income changes promptly, typically within 10 to 30 days, to avoid coverage issues. Failure to report changes can lead to retroactive benefit termination, requiring repayment of medical costs covered during ineligibility.

State Medicaid agencies periodically conduct a redetermination process to reassess eligibility. This process usually occurs annually but can also be triggered by reported changes in income or household composition. During redetermination, individuals must provide updated documentation regarding their income, household size, and residency.

If income increases above the Medicaid eligibility threshold, individuals may no longer qualify. In some instances, states might offer a grace period, allowing temporary continuation of benefits to facilitate a transition to alternative healthcare coverage. Individuals whose income exceeds Medicaid limits might then explore options such as the Affordable Care Act (ACA) marketplace, where they could be eligible for subsidies for private health insurance.

Understanding the implications of income changes is important for continuous coverage. While increased earnings are positive, they necessitate careful attention to reporting requirements and exploring other health insurance avenues. Proactive communication with the state Medicaid agency helps ensure a smooth transition if eligibility status changes.