I'm originally a Boglehead and this is my first post at MMM. Didn't get any response over there, and wondering if it were because Medicaid is not as often discussed. Thanks all.
Based on a Bogleheads thread in regards to ACA income tax planning strategies, it appears that MAGI (Modified Adjusted Gross Income) for Affordable Care Act-purposes can actually be reduced by Traditional IRA, 401(k), and HSA contributions, among others. This is more commonly used (esp. in this forum) to maximize the premium credit one receives.
My reading of this Sep. 2013 HHS document says that this is the same case for Medicaid (thinking in regards to coverage of pregnant mothers, whose limit extends up into middle class territory). Anyone had experience with this yet?
That is to say, has anyone purposefully increased their Traditional IRA (or HSA, 401(k)...) contributions to lower their MAGI... and were they able to document this to the satisfaction of their local FSSA office? I think an additional challenge would be showing this in the middle of the year, instead of simply showing last year's 1040. Thanks!
OK, I'll bite. I found myself in this situation this year, although not intentionally. I'm still waiting for the other shoe to drop. I went FI in Dec 2013, but still had residual income from my job that I got checks for in 2014. We have an infant under 1 and my wife is pregnant, due in Dec of this year. Wife is a veteran with a service-connected disability who was enrolled in VA coverage. To make it even more complicated, we moved to a new state (with expanded Medicaid coverage) to be closer to grandparents. I contributed money to a 401K, and traditional IRA for me and my spouse. This drove us into a zone of expanded Medicaid eligibility because we have an infant and my wife is pregnant.
My original intent was to get an exchange plan and pay for it, but I could never get a straight answer from the website or the phone agents about whether my wife would be ineligible for coverage because she was enrolled in the VA system. I was expecting a lot of blowback and documentation requirements because my income in 2013 was very high, and I assumed that's what they were using to verify the self-reported income.
On the first run, the website said that I should get an exchange plan, that my wife was ineligible because of her VA enrollment, and that my infant would be enrolled in Medicaid. Then they asked for proof of the reduced income, which was pretty much me writing a letter saying that I had left my job and that my income was much lower as I was starting my own business. Once I sent that in, they listed a new determination saying that both me and my son should be on Medicaid and they asked for me to estimate my new business income for 2014 (essentially zero). After getting that, they listed a new determination saying we were all going on Medicaid. I called the help line after that, and spent a half hour saying, "Are you sure that we are eligible for this?" and "Are you sure I can't just enroll in the regular plans?"
The whole process was very confusing, and I keep waiting for a phone call saying that we are going to have to pay back the money spent so far, but nothing yet. I have been pleasantly surprised being on Medicaid, as there is a stigma of bad care associated with it. Most of our doctors take it, the care is the same, and the coverage has been essentially co-pay and deductible free. I feel a little guilty using a service that is designed for poor people, but I was not really given another option. I barely use health care, but my wife's pregnancy will be quite expensive (medically necessary C-section), and if she were deemed not eligible for Medicaid, she would be ineligible for exchange plans, and...wait for it...the VA does not really provide maternity care!
So anyway, that's my story. Feel free to ask follow-up questions, and I will answer best I can. If anyone has any insight into my situation (looming danger, pitfalls, or suggestions) I would welcome it as well.