MAGI and Insurance Exchange Strategies – Modified Adjusted Gross Income


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 is Managing Partner & CEO of No World Borders, a leading healthcare management and IT consulting firm. He serves as an expert witness in Federal and State Court and was recently ruled as an expert by a 9th Circuit Federal Judge. He serves as a patent expert witness on intellectual property disputes, both as a Technical Expert and a Damages expert. His vision for the firm is to continue acquisition of skills and technology that support the intersection of clinical data and administrative health data where the eligibility for medically necessary care is determined. He leads a team that provides litigation consulting as well as advisory regarding medical coding, medical billing, medical bill review and HIPAA Privacy and Security best practices for healthcare clients, Meaningful Use of Electronic Health Records. He advises legal teams as an expert witness in HIPAA Privacy and Security, medical coding and billing and usual and customary cost of care, the Affordable Care Act and benefits enrollment, white collar crime, False Claims Act, Anti-Kickback, Stark Law, physician compensation, Insurance bad faith, payor-provider disputes, ERISA plan-third-party administrator disputes, third-party liability, and the Medicare Secondary Payer Act (MSPA) MMSEA Section 111 reporting. He uses these skills in disputes regarding the valuation of pharmaceuticals and drug costs and in the review and audit of pain management and opioid prescribers under state Standards and the Controlled Substances Act. He consults to venture capital and private equity firms on mHealth, Cloud Computing in Healthcare, and Software as a Service. He advises ERISA self-insured employers on cost of care and regulations. Arrigo was recently retained by the U.S. Department of Justice (DOJ) regarding a significant false claims act investigation. He has provided opinions on over $1 billion in health care claims and due diligence on over $8 billion in healthcare mergers and acquisitions. Education: UC Irvine - Economics and Computer Science, University of Southern California - Business, studies at Stanford Medical School - Biomedical Informatics, studies at Harvard Medical School - Bioethics. Trained in over 10 medical specialties in medical billing and coding. Trained by U.S. Patent and Trademark Office (USPTO) and PTAB Judges on patent statutes, rules and case law (as a non-attorney to better advise clients on Technical and Damages aspects of patent construction and claims). Mr. Arrigo has been interviewed quoted in the Wall Street Journal, New York Times, and National Public Radio, Fortune, KNX 1070 Radio, Kaiser Health News, NBC Television News, The Capitol Forum and other media outlets. See and for more about the company.

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