Medicaid and the Affordable Care Act:  
Conversion to Modified Adjusted Gross Income (MAGI) 
February 2013 
 
Q1:  What methods can be used for conversion to modified adjusted gross income (MAGI)? 
 
A1:  Effective January 1, 2014, MAGI eligibility rules will be used to determine eligibility for 
nonelderly, nondisabled eligibility groups. The transition to MAGI also involves converting 
current net income eligibility standards to MAGI standards. MAGI rules apply regardless of 
whether a state adopts the new adult eligibility group. The December 28, 2012 Modified 
Adjusted Gross Income (MAGI) conversion guidance sets out options for a state to use a 
standardized MAGI conversion methodology (using Survey of Income and Program Participation 
(SIPP) data or with state data) or to propose an alternative methodology for converting to 
MAGI.  
   
There are two potential ways of using the standardized MAGI conversion methodology: 
  States may choose to have CMS calculate the converted income levels for eligibility 
groups requiring conversion using state-adjusted data from the Census Bureaus 
SIPP; or  
  States may choose to use their own data as the source for applying the standardized 
conversion methodology.  
 
For each eligibility group income level that needs to be converted, under the standardized 
MAGI conversion methodology, individuals whose net income is within 25 percentage points of 
the FPL below the current income standards will be selected (for example, if the current 
standard is 80 percent of the FPL, the analysis will include people with incomes between 55 and 
80 percent FPL). The next step is to calculate disregards as a percent of FPL for each selected 
individual. The resulting average disregard amount as a percent of FPL is added to the current 
net income standard to get the converted standard.  
 
For example, if the average disregard is 8 percent FPL, the converted standard would be 88 
percent FPL. This basic process is the same regardless of whether SIPP data or state data is 
used. 
 
Alternatively, states have the option to propose their own method, subject to approval by CMS.  
States are asked to provide a statement of intent by February 15, 2013 and must submit their 
MAGI conversion plans by April 30.  The December 28, 2012 guidance is available at 
http://www.medicaid.gov/Federal-Policy-Guidance/downloads/SHO12003.pdf 
 
 
 
 
 
   
Q2:  What issues should states consider in choosing which income conversion method and 
data source to use? 
 
A2:  Factors that states might want to consider in choosing an income conversion method and 
data source include whether the state currently maintains or can easily access the data that are 
needed to do the conversions, as well as the quality and completeness of the states data. In 
addition, states will want to consider whether they have the analytical resources needed to do 
the conversions with their own data, how long it would take them to run the conversions and 
how much it would cost to pay a contractor to do the analysis. Finally, states should also 
consider preferences about using state-adjusted SIPP or state data.  
 
Q3:  If a state wants to use the Standardized MAGI Conversion Methodology with its own 
data, what data elements will it need to use? 
 
A3:  Detailed information on how to use state data to apply the standardized conversion 
methodology is forthcoming, but in general states will need 1) information on net income of 
each person and the size of the Medicaid eligibility unit to establish which enrollees fall within 
the 25 percentage point band below the current net income standard; and 2) data on the total 
amount of disregards for each individual within the 25 percentage point band  if this is not 
stored as a data element in the states system, this can be calculated by adding up individual 
disregards, or as the difference between gross income and net income. 
 
Q4:  What type of technical assistance is available to states, and how can states access it? 
 
A4:  Technical assistance for states thinking through their MAGI conversion options is available 
through the State Health Access Data Assistance Center (SHADAC) at the University of 
Minnesota. SHADAC is available to help states understand the income conversion methods, the 
data sources that can be used (SIPP or state data), and factors for states to consider in choosing 
a methodology.  CMS will do conversions for all states using the standardized conversion 
methodology with SIPP data.  States that choose to use state data or that propose a different 
methodology will need to do the conversions themselves, and SHADAC is available to provide 
consultation with states as they work through the process. This help is available at no cost to 
states. States can contact SHADAC for help with income conversion at (612) 486-2439 or by 
emailing their questions to fmaphelp@shadac.org. 
 
Q5:  Can you explain more about how the survey data from SIPP will be reweighted to be 
reflective of state demographics? 
 
A5:  To produce reliable state-level results, income conversions using SIPP data will be based on 
the entire national sample that has been re-weighted to account for state demographic 
characteristics. The purpose of the reweighting is to ensure that the analysis is done using a 
population whose characteristics are similar to each states actual population. The variables  
used in reweighting include age, parent status, gender, race/ethnicity, total household income  as a percent of FPL, types of unearned income (whether the household has any unearned 
income and whether it includes child support), and whether or not an individual has child care 
expenses. The re-weighting will be done separately for each state and will ensure that the 
distribution of these characteristics (and combinations of these characteristics) matches state 
totals from the Census Bureaus Current Population Survey. In some states, a few of these 
categories will need to be combined due to small sample size.  CMS will be releasing a brief on 
SIPP and the re-weighting adjustments.