Healthcare is a major socioeconomic issue for the Unites States and a hot topic within the political arena. This is for good reason. In 2019 U.S. healthcare costs increased 4.6% to $3.8 trillion or $11,582 per person – amounting to 17.7% of Gross Domestic Product (GDP). In the 60’s the cost of healthcare was closer to 6% of GDP. This increase seems largely the result of an aging population but I’m far from being an expert on this topic and realize there are many factors at play. Many people are concerned about and challenged by healthcare. I live in a relatively low-income area so I began taking an interest in government subsidized health insurance to learn if there’s any way I can help those struggling. What I discovered is worth sharing.

I live in rural Minnesota (for now), which is just one of two states providing a basic health program permitted by the affordable care act – New York also provides this. In 2019 just under 20% of Minnesotans were covered by Medicaid and only 1.35% of Minnesotans were covered by the basic health program. Nationwide, about 22% of people are covered by Medicaid.

The Affordable Care Act changed Medicaid qualification to be based on Modified Adjusted Gross Income (MAGI). “MAGI is the basis for determining Medicaid income eligibility for most children, pregnant women, parents, and adults. The MAGI-based methodology considers taxable income and tax filing relationships to determine financial eligibility for Medicaid. MAGI replaced the former process for calculating Medicaid eligibility, which was based on the methodologies of the Aid to Families with Dependent Children program that ended in 1996. The MAGI-based methodology does not allow for income disregards that vary by state or by eligibility group and does not allow for an asset or resource test.” – https://www.medicaid.gov/medicaid/eligibility/index.html

MAGI is the sum of your adjusted income. There are specific income sources and income adjustments used in calculating this. For most people, income will consist of wages, interest, dividends, IRA distributions and social security. The Affordable Care Act, however, allows for numerous income adjustments such as contributions to health saving accounts or deductible retirement accounts. (See full list here)

I briefly checked the MAGI limits in Minnesota and in New York for comparison. There were slight differences so be sure to confirm these numbers with your state. Here are the 2021 MAGI limits for Minnesota.

Size of Household	MAGI for Adults	MAGI for Children
1	$16,970	$35,090
2	$22,929	$47,410
3	$28,887	$59,730
4	$34,846	$72,050
5	$40,804	$84,370
6	$46,762	$96,690
7	$52,721	$109,010
8	$58,679	$121,330

Most people can’t cover bills with such little income allowed by Medicaid but there are circumstances that make this possible for a temporary period of time – especially if you live in a low-cost area and have little debt. I’m a family of 5 and I recently started tracking my expenses. It’s too early to say with complete certainty but it appears I could live off $30 – $40,000 without debt payments.

Imagine a married couple under age 50 who each have access to a 401(k) through work. They’d each be able to contribute $19,500 to a 401(k) and $6,000 to an IRA (depending on their income). If they have access to group health insurance through their employer, Medicaid would likely have them enroll in the plan and reimburse premiums. In this arrangement it’s possible to have access to an HSA, which could provide up to $7,200 in potential deductions. All in all, this married couple could have access to $58,200 in deductions between retirement and health saving accounts. In the right situation insurance premiums can be exchanged for contributions to retirement and health savings accounts. Although it’s likely not sustainable to remain on Medicaid for an extended period of time, it could provide a temporary boost to retirement and health savings accounts when the stars align.

Being young is challenging. There’s a lot of things pulling at the purse strings in your 20’s. Student loans, vehicles, houses and children make it difficult to contribute to retirement accounts. Yet, time value of money shows us the importance of establishing investment accounts early on. Think of the long-term impact of living a simple, inexpensive life early in your career and exchanging insurance premiums for 401(k) contributions. Aggressive contributions to retirement accounts early in life can reduce how much you need to save in future years.

I spoke with someone about this concept who expressed concern that Medicaid allows states to place estate liens for medical expenses. This being a major consideration led me to explore this concern. In my research I discovered this only applies in certain situations.

“State Medicaid programs must recover certain Medicaid benefits paid on behalf of a Medicaid enrollee. For individuals age 55 or older, states are required to seek recovery of payments from the individual’s estate for nursing facility services, home and community-based services, and related hospital and prescription drug services. States have the option to recover payments for all other Medicaid services provided to these individuals, except Medicare cost-sharing paid on behalf of Medicare Savings Program beneficiaries.

Under certain conditions, money remaining in a trust after a Medicaid enrollee has passed away may be used to reimburse Medicaid. States may not recover from the estate of a deceased Medicaid enrollee who is survived by a spouse, child under age 21, or blind or disabled child of any age. States are also required to establish procedures for waiving estate recovery when recovery would cause an undue hardship.

States may impose liens for Medicaid benefits incorrectly paid pursuant to a court judgment. States may also impose liens on real property during the lifetime of a Medicaid enrollee who is permanently institutionalized, except when one of the following individuals resides in the home: the spouse, child under age 21, blind or disabled child of any age, or sibling who has an equity interest in the home. The states must remove the lien when the Medicaid enrollee is discharged from the facility and returns home.” – https://www.medicaid.gov/medicaid/eligibility/estate-recovery/index.html

I’m not an attorney and I encourage you to research with your state, but the State of Minnesota provides a clearer statement on their website. Note that Medical Assistance (MA) is the term for Medicaid in Minnesota.

“Estate recovery applies to MA members who: 

• at 55 years old or older receive MA long-term services and supports (LTSS)
• at any age permanently reside in a medical institution and receive MA services 

If either of these situations occur, a local agency must claim against an estate after the MA member dies to recover what MA paid for LTSS. In addition, if the MA member was permanently institutionalized, the claim must attempt to recover the costs of all MA services (not just LTSS) that the MA member received during the period of institutionalization.” – https://mn.gov/dhs/people-we-serve/adults/health-care/health-care-programs/programs-and-services/estate-recovery.jsp

My interpretation is that Minnesota’s estate recovery only applies in the case of permanent residency in a medical institution and for people over age 55 who receive long term services. I spoke with a social services employee in my county that agreed with my understanding of this. That being said, she is a case worker, and not an attorney. The Affordable Care Act has the potential to provide a temporary boost to your retirement accounts, but make sure to research the estate recovery program with your state before jumping on the train.

I hesitated to share this information because I don’t want to come across as encouraging people to leech off the government, but I didn’t write the rules and am just the messenger.