MAGI and Insurance Exchange Strategies – Modified Adjusted Gross Income

by MICHAEL ARRIGO

During the holidays we think of the Magi, the Three Wise Men, Three Kings, or Kings from the East, who were, according to Christianity, a group of distinguished foreigners who visited Jesus after his birth, bearing gifts of goldfrankincense and myrrh.

They are regular figures in traditional accounts of the nativity celebrations of Christmas and are an important part of the Christian tradition.

In healthcare, the federal Patient Protection and Affordable Care Act (PPACA) introduces a new meaning for Magi, which is income definition—Modified Adjusted Gross Income (MAGI) for determining Medicaid income eligibility across the country.  MAGI, pronounced the same way as the Biblical term, will be a regular figure in future accounts of who has access to the best prices for health care coverage and will be relevant for Health Insurance Exchanges (HIX).

Here is why:

The adoption of MAGI, which is based on adjusted gross income as defined in the Internal Revenue Code §36B(d)(2), will standardize the calculation of income across the nation.  Calculations include determination of MAGI with respect to Federal Poverty Level (“FPL”) and other considerations such as pregnancy, children, children’s age, and whether the applicant is a caretaker for other dependents.

Rules for determining income for Medicaid vary from state to state.  Some states allow  deductions that are not allowed in others.   Additionally, since income will be based on an income tax definition, family size and household income will be based on tax filing unit, which is a change from the current methodology used by Medicaid.

MAGI introduces a new type of eligibility system.  State Medicaid organizations across the U.S. have been working to determine whether they can extend their existing Medicaid Management Information System (“MMIS”) to leverage their existing know how and and possibly IT infrastructure to implement MAGI.  In some cases, States have opted to switch from a monolithic MMIS strategy to best of breed or Common Off the Shelf (COTS) solutions they can hopefully bolt on to the MMIS.  We have seen some unreasonably complex RFPs in the past year that show State CIOs and their staff are struggling to put their arms around how much is needed to deal with MAGI.

Other types of eligibility systems in production include:

  • TANF – Temporary Assistance to Needy Families (formerly AFDC)
  • SNAP – Supplemental Nutrition Assistance Program (formerly food stamps)
  • Medicaid – free and low-cost health care to low income families
  • CHIP – Children’s Health Insurance Program (Medicaid for kids)
  • Energy Assistance – low income home energy assistance
  • Women, Infants & Children (WIC) – nutritional supplement for pregnant women, infants and children (until school age)

Other State human services systems include:

  • SACWIS – child abuse and neglect, foster care, adoption
  • Child Support Enforcement – collection from non custodial parents
  • SDU – state disbursement unit for child support payments
  • EBT – electronic benefits transmission for cash assistance

These eligibility and reporting systems will be integral to various human services capabilities for each state.  State HIX systems will rely on some of these factors when pricing health plans to the public.

Michael F. Arrigo

Michael Arrigo brings four decades of experience in the software, financial services, and healthcare industries. In 2000, Mr. Arrigo founded No World Borders, a healthcare data, regulations, and economics firm with clients in the pharmaceutical, medical device, hospital, surgical center, physician group, diagnostic imaging, genetic testing, health IT, and health insurance markets. His expertise spans the federal health programs Medicare and Medicaid and private insurance. He advises Medicare Advantage Organizations who provide health insurance under Part C of the Medicare Act. Mr. Arrigo serves as an expert witness regarding medical coding and medical billing, fraud damages, as well as electronic health record software for the U.S. Department of Justice. He has valued well over $1 billion in medical billings in personal injury liens, medical malpractice, insurance fraud cases. The U.S. Court of Appeals considered Mr. Arrigo's opinion regarding loss amounts, vacating, and remanding sentencing in a fraud case. Mr. Arrigo provides expertise in the Medicare Secondary Payer Act, Medicare LCDs, anti-trust litigation, medical intellectual property and trade secrets, HIPAA privacy, health care electronic claim data Standards, physician compensation, Anti-Kickback Statute, Stark law, the Affordable Care Act, False Claims Act, and the ARRA HITECH Act. Arrigo advises investors on merger and acquisition (M&A) diligence in the healthcare industry on transactions cumulatively valued at over $1 billion. Mr. Arrigo spent over ten years in Silicon Valley software firms in roles from Product Manager to CEO. He was product manager for a leading-edge database technology joint venture that became commercialized as Microsoft SQL Server, Vice President of Marketing for a software company when it grew from under $2 million in revenue to a $50 million acquisition by a company now merged into Cincom Systems, hired by private equity investors to serve as Vice President of Marketing for a secure email software company until its acquisition and multi $million investor exit by a company now merged into Axway Software SA (Euronext: AXW.PA), and CEO of one of the first cloud-based billing software companies, licensing its technology to Citrix Systems (NASDAQ: CTXS). Later, before entering the healthcare industry, he joined Fortune 500 company Fidelity National Financial (NYSE: FNF) as a Vice President, overseeing eCommerce solutions for the mortgage banking industry. While serving as a Vice President at Fortune 500 company First American Financial (NYSE: FAF), he oversaw eCommerce and regulatory compliance technology initiatives for top ten mortgage banks and led the Sarbanes Oxley Act Section 302 internal controls IT audit for the company, supporting Section 404 of the Sarbanes Oxley Act. Mr. Arrigo earned his Bachelor of Science in Business Administration from the University of Southern California. Before that, he studied computer science, statistics, and economics at the University of California, Irvine. His post-graduate studies include biomedical ethics at Harvard Medical School, biomedical informatics at Stanford Medical School, blockchain and crypto economics at the Massachusetts Institute of Technology, and training as a Certified Professional Medical Auditor (CPMA). Mr. Arrigo is qualified to serve as a director due to his experience in healthcare data, regulations, and economics, his leadership roles in software and financial services public companies, and his healthcare M&A diligence and public company regulatory experience. Mr. Arrigo is quoted in The Wall Street Journal, Fortune Magazine, Kaiser Health News, Consumer Affairs, National Public Radio (NPR), NBC News Houston, USA Today / Milwaukee Journal Sentinel, Medical Economics, Capitol ForumThe Daily Beast, the Lund Report, Inside Higher Ed, New England Psychologist, and other press and media outlets. He authored a peer-reviewed article regarding clinical documentation quality to support accurate medical coding, billing, and good patient care, published by Healthcare Financial Management Association (HFMA) and is published in Healthcare IT News.

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