Countable Sources of Income for Medicare Savings Program through Medi-Cal

The Medicare Savings Program can help Medicare beneficiaries by covering the Original Medicare premiums, like Part B, and the beneficiary’s cost-sharing for hospitalizations, outpatient services, labs, tests, imaging, durable medical equipment, and more. In California, the Medicare Savings Program is administered by your local county Medi-Cal office. Eligibility is based on countable sources of income and not your assets.

Many Medicare beneficiaries have a variety of income sources and assume they are not eligible. Not all income is counted, and Medi-Cal will reduce the calculated income by certain deductions like the cost of your Part B premium. For example, Pat receives Social Security retirement income of $1,440 a month. Pat does not think he will qualify because the income maximum for a Qualified Medicare Beneficiary category is $1,275 for 2024.

However, Pat’s income can be reduced by the cost of the Part B premium – health insurance premium deduction – of $174.70 a month, making the calculated income of $1,265.30. Pat qualifies for QMB status. Not all income eligibility calculations are as simple as Pat’s. There are a variety of income sources that are exempt from the calculation and other reductions to the income.

If you dig into the Medi-Cal forms and guidance, you will come across the terms of exempt and nonexempt income. Exempt income is not figured in the calculations. Nonexempt income IS added to the total income. If you are married, your spouse’s income must also be considered.

Medi-Cal breaks up the income into unearned income, earned income, in kind income, and exempt income. Finally, there are certain expenses that will reduce the final countable income for eligibility in the Medicare Savings Program.

Because the income of many people can be quite varied and complicated, the Medi-Cal eligibility worker can have a daunting task of calculating the allowed income for some people. I was not able to find a distinct and specific list of income considered or exempted from the calculations. The lists below are from elaws.us California Code of Regulations.  

I present the different sections of Title 22. Social Security, Division 3. Health Care Services, Subdivision 1. California Medical Assistance Program, Chapter 2. Determination of Medi-Cal Eligibility and Share of Cost, Article 10. Income as an illustration of how big and complicated the income calculations can be. This is not an exhaustive list. The codes are subject to change with legislation.

There are lots of questions about what should be supplied to the county Medi-Cal eligibility worker when applying for the Medicare Savings Program. The list below may shed some light on what Medi-Cal is looking for. May best guidance is when in doubt, include the income or deduction. Let the Medi-Cal eligibility worker sort through the codes and ask you questions.

The list and descriptions come from http://carules.elaws.us/code/t.22_d.3_subd.1_ch.2_art10. Some of the code may change at the legislature’s discretion.

Gross Earned Income includes, but is not limited to, the listed below (Sec 50503.)

1. Wages, bonuses, commissions
2. Net profits from self-employment. Some expenses may not be deducted from gross revenue such as entertainment cost, depreciation, capital expenditures, payments of the principal of loans for capital assets or durable goods, income tax payments.  (Sec 50505)
3. Earnings under Title 1 of the Elementary and Secondary Education Act
4. Payments under the Job Training Partnership Act
5. Payments under the Economic Opportunity Act
6. Training incentive payments and work allowances under ongoing manpower programs
7. Income received for having provided IHSS services
8. Net income from real or personal property (Sec 50508) which results from continuous and appreciable effort on the part of the applicant or beneficiary such as
   1. Room and board
   1. Rental of rooms which requires daily effort on part of beneficiary
   1. Business enterprise
   1. Sale of produce, livestock, poultry, dairy products, and other similar items.
9. Earnings from public service employment
10. Actual Earned Income Tax Credit
11. Tips actually received for the performance of work activities
12. Temporary Workers Compensation payments under certain conditions that are employer funded and characterized as temporary wage replacement until the individual returns to the employment
13. State Disability Insurance payments under certain conditions

Gross Unearned Income (Sec 50507)

1. Social Security retirement and disability payments
2. Annuities
3. Pensions
4. Retirement payments
5. Disability payments except State Disability considered to be earned income
6. Veterans payments
   1. Pensions based on need
   1. Compensation payments
   1. Educational assistance
7. Workers’ compensation, except temporary workers compensation as earned income
8. Railroad retirement payments
9. Unemployment insurance benefits
10. Proceeds from life insurance policy in excess of the lesser of either $1,500 or amount expended on the insured person’s last illness and burial expenses
11. Other insurance payments
12. Loans which do not require repayment
13. Gifts
14. Non-exempt child/spousal support
15. Inheritances which are in the form of cash, securities or other liquid assets
16. Contributions from any source
17. Prizes and awards
18. Net income from the rental of real or personal property which is not considered gross earned income
19. Dividends
20. Interest payments from any source, including trust, trust deeds, contracts of sale
21. Royalties including payments to a holder of patent or copyright for use of invention, owner of a mine, well, or similar holding for the extraction of the product or other use
22. Income of a PA or other PA recipient which is not used to determine the recipient’s eligibility
23. Incentive payments or training allowances under JTPA
24. Any other income which is available to meet current needs (Sec 50513)

Net Income from Property (Sec 50508) may not be calculated like the IRS

Net income from property shall be considered in determine share of cost and shall be computed as follows:

1. If the income is from the rental of real property, subtract the following expenses, as limited by (b), from the gross income:
   1. Taxes and assessments
   1. Interest on encumbrance payments, principal portion not deducted
   1. Insurance
   1. Utilities
   1. Upkeep and repairs. The amount of this item shall be the greater of the following:
      1. Actual amount expended for upkeep and repairs during the month
      1. Fifteen percent of the gross monthly rental plus $4.17 per month
2. Utilization requirements must be met in accordance with Section 50416 (a)(1) only the amount specified in in (a)(1) (E) shall be deducted rather than a amount specific
3. If income is from the rental of rooms, or the provision of a board and room or board and care, which does not require a business license, the net income shall be ten percent of the grow amount received
4. If the income is from the provision of board and room or board and care which requires a business license, or from self-employment, the net income is the net profit from self-employment as determined in accordance with Section 50505
5. If the income is from a deed of trust or a mortgage, the net income is the amount specified in Section 50441 (c)
6. If the income is from property in which the person holds a life estate, the net income is the amount actually received
7. If the income is from personal property, the net income is the amount actually received
8. If the income is from the rental of unit(s) of a multiple unit dwelling or other dwellings on property that is exempt as the principal residence and the applicant or beneficiary is living in a portion of the property, the expenses specified in (a) which are common to the property as a whole shall be prorated as follows:
   1. Determine the number of rooms in the building. If there is more than one building, determine the number of rooms in all of the buildings together. For the purpose of this section, rooms include any room other than the following:
      1. Bathroom, hallway, closet, unfinished basement, loft, attic
      1. Determine number of rooms which are producing the rental income
      1. Based upon the number of rooms, determine the percentage of property which is producing the rental income
      1. Apply the percentage determined in accordance with (3) to the expenses specified in (a) which are common to the property as a whole. This is the amount which shall be subtracted from the gross income

In Kind Income (Sec 50509)

1. Income in kind is any support or maintenance received in kind from a person other than a responsible relative for:
   1. Housing
   1. Utilities
   1. Food
   1. Clothing
2. Income in kind shall be considered as income only if the entire item of need is provided
3. The value of free board and lodging received during a temporary absence from the home shall be considered as follows:
   1. If the absence is for one month or less, the income in kind value shall not be considered income
   1. If the absence is for more than one month, the income in kind value shall be considered income to the extent that it exceeds the actual costs of maintaining the home to which the beneficiary will return
4. Income in kind which is received as earned income shall be subject to earned income exemptions and deductions
5. Income in kind which is received as unearned income shall be subject to unearned income exemptions and deductions
6. Income in kind from a parent shall not be considered in determining the eligibility of a child when any of the following conditions exists: child’s application processed for minor consent services, unmarried minor parent, child is unborn

Value of Income in Kind

1. The value of the income in kind for the items specified in Section 50509 (a) shall be the lesser of the following:
   1. The actual cost or net market value of the item, or
   1. The income in kind amounts effective July 1, 1981 for housing, utilities (including telephone), food and clothing specified in (d) as adjusted for any increases or decreases in the cost of living specified in (b)

Ownership of Income (Section 50512)

Except as specified, income is considered to belong to the person who is named on the negotiable instrument, given in cash, or received in kind. In the case of a married couple, it is presumed that each spouse has a one-half community property ownership in the total monthly gross earned and unearned income of both spouses providing that:

1. One spouse is in Long Term Care and the other spouse in noninstitutionalized
2. There is no break in marital ties
3. The LTC spouse receives an income greater than the income received by the noninstitutionalized spouse.

Some exceptions apply if the income is clearly and verifiably owned by one spouse.

Availability of Income (Section 50513)

Only income which is actually available to meet the needs of the person of family shall be considered in determining the person’s or family’s share of cost. Income shall be considered in the month it is received unless to be apportioned over time in accordance with Section 50517 or unavailable in accordance with Section 50515

Unavailable Income (Section 50515)

Income that is not available to the person will not be considered in determining the person’s share of cost. Unavailable income may include workers’ compensation or settlements designated for medical and legal expenses or not controlled by the person. There are other situations where income may not be considered such as amounts to a medically needy person residing in a licensed board and care facility or reimbursements from an employer to cover expenses necessary for job performance.

Apportionment of Income over Time (Section 50517)

Income is considered available in the month it is received, unless it is apportioned over time.

1. Income earned and received in more than eight but less than twelve months under an annual contract of employment shall be apportioned equally over the period of the contract beginning with the first month of the contract
2. Income received more frequently than monthly or semi-monthly shall be converted to monthly income in accordance with (3) if both of the following conditions are met:
   1. Beneficiary wishes to receive Medi-Cal for more than two months
   1. Beneficiary is to receive the income for a full month

There are specific rules for apportioning or converting income into monthly amounts. For example, interest income from a deed of trust contract of sale is determined on an annual basis and apportioned monthly. There is another rule for interest income received less frequently.

Fluctuating Income (Section 50518)

Fluctuating Income is determined by estimating the amount received to be received in the month unless certain conditions are met. The following must be considered.

1. Income pattern over the last year
2. Actual income received in the last month
3. Beneficiary’s statement of anticipated income

These rules do not apply to self-employment income.

Income Exemptions and Deductions – General (Section 50519)

There are specific types of income that are exempt from determining a beneficiary’s eligibility. Income which remains after the application of the exemptions specified in Sections 50523 through 50544 shall be nonexempt income.

Payments Exempt from Consideration as Income (Section 50521)

Property Tax Refunds (Section 50523) including some California Franchise Tax Board payments (Section 50454.5)

Public Assistance and General Relief Grants (Section 50525) including cash value of food stamps and immediate need payments through AFDC.

Social Services (Section 50527) such as In-Home Supportive Services, child care, training and rehabilitation services.

Assistance Based on Need (Section 50528) such as regional centers for the developmentally disabled and probation departments.

Federal Housing Assistance (Section 50529) in the form of rent subsidies, loans, or partial house payments.

Training Expenses (Section 50530) paid by the Department of Rehabilitation

Foster Care Payments (Section 50531) to foster parent(s) some exceptions apply such as if the child is absent from the home for a month or more.

Exempt Loans, Grants, Scholarships and Fellowships (Section 50533) encompasses a broad range of different types of educational assistance. In general, the dollar amount is attributed to the specified educational expense and not current living costs.

Payments to Victims of Crimes (Section 50534) are generally exempt as income.

Relocation Assistance Benefits (Section 50535) when paid by a public agency is not considered income. These funds for the relocation because of redevelopment, urban renewal, freeway construction or other public development involving demolition or condemnation of existing housing.

Disaster and Emergency Assistance Payment (Section 50535.5) when received from a federal, state, or local government agency.

Payments to Victims of the National Socialist Persecution (Section 50536) received from the Federal Republic of Germany (German Reparations Payments) is not exempt income, including interest earn.

Federal Payments to Indians and Alaskan Natives (Section 50537) is considered personal property and not income. There can be exceptions such as stock investments are not exempt.

Vista Payment (Section 50538) made under the Domestic Volunteer Act of 1973 to VISTA volunteers is exempt.

Irregular or Infrequent Income (Section 50542), the first $60 of which is exempt, if income is not received more than twice every three months and is not reasonably expected to recur.

Student Exemption (Section 5043) of earned income if the individual meets certain conditions such as being a full-time student and working part-time.

Deductions from Income (Section 50545)

Educational Expenses (Section 50547) may be deducted when documented expenses related to college and training courses. Educational expenses include tuition, books, fees, equipment, special clothing, child care services, and certain transportation costs.

Support Payment from an Absent Parent (Section 50549.1) specifies one-third of any payment from an absent to support a disabled or blind child will be deducted from the total payment.

Guardian and Conservator Fees (Section 50549.3) provides for the deduction of reasonable court approved guardian/conservator fees to unearned income of an aged, blind, or disabled medically needy individual. There are several conditions that must be met for the fees to be deducted.

Student Deduction (Section 50551) allows a maximum of $1,620 per year be deducted from the nonexempt earned income of a blind or disabled person. The person is under 22 years of age, not married, not a parent, and currently enrolled in school for at least eight hours a week.

There are a variety of deductions to income for blind and disabled individuals.

Health Insurance Premiums (Section 50555.2) allows for the deduction of health insurance premiums paid and purchased for any person in the family.

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