Will my disability income affect my eligibility for Medicaid?

Q. I am 49 years old and had to stop working for medical reasons in August 2021. I have private disability insurance. After the six-month waiting period, the carrier granted me total disability and I started receiving benefits. This policy was purchased with after-tax money, so my benefit amount is tax-free. I also filed for social security disability. When I first stopped working, I was told I could apply for Medicaid because I had no income. Now that I have income, what will Medicaid consider?

– Concerned

A. We are sorry to hear that you cannot work.

But we are happy to hear that you are receiving disability benefits from your private policy.

You’re correct that because you paid for coverage with after-tax dollars, your benefits aren’t taxable, said Matthew DeFelice, a certified financial planner with US Financial Services in Fairfield.

“Any benefits received will not show up in calculating your Modified Adjusted Gross Income (MAGI) for items such as tax filings and eligibility for reduced health insurance premiums under Obamacare,” a said DeFelice. “That’s not necessarily the case when determining Medicaid eligibility.”

To qualify for disability-based Medicaid, you must have a “book income” of $1,133 per month or less, or $1,526 or less for couples, he said.

The way your income is counted for disability-based Medicaid is very similar to the SSI accounting income calculation: less than half of all earned income is counted, and most of your unearned income is counted.

DeFelice said unearned income includes funds received from sources for which no paid work activity is performed.

Disability benefits such as SSDI, SSI, short-term disability insurance, private long-term disability insurance, VA benefits, workers’ compensation; Income from a trust or investment, spousal support, dividends, profits or funds received from any source other than work are all generally considered unearned income, he said. .

DeFelice said when you reapply for Medicaid, they can count the disability benefits you receive, which unfortunately can disqualify you.

“If indeed you lose your Medicaid coverage, you should be able to purchase private health coverage without your disability affecting your consideration, thanks to the Affordable Care Act,” he said. “And, if you can’t afford individual coverage, the government can help pay for it through tax credits.”

Additionally, with changes made through the US bailout, no American will ever pay more than 8.5% of their household income for health coverage, DeFelice said. If your premium is more than 8.5% of your household income, you’ll qualify for a premium tax credit to help cover the rest, he said.

“Here’s your benefit: Under the plan, the ‘household income’ figure isn’t just what your household earns in a year — it’s based on your modified adjusted gross income,” he said. . “And in your case, your MAGI should not include your private disability benefits when determining your eligibility for tax credits for your health premiums, if Medicaid denies your next application.”

DeFelice said if you ultimately qualify for SSDI, you’ll automatically be eligible for benefits from Medicare, which provides broader coverage than Medicaid. You should also check with the state to see if your children would be covered by the Children’s Health Insurance Program (CHIP).

Due to the complexity of these programs, consider working with a qualified attorney with experience in these areas.

Send your questions to [email protected].

Karin Price Mueller writes the Bamboos column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. To find NJMoneyHelp on Facebook. Register for NJMoneyHelp.comit is weekly e-newsletter.

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