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Understanding Medicaid Waiver Payments and ACA Health Insurance


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Navigating the complexities of government assistance programs and healthcare can be a daunting task, and it's not unusual to encounter situations where the rules and requirements seem contradictory. In this blog post, we'll delve into the scenario of a family where a parent takes care of another at home, receives Medicaid waiver payments, and receives Social Security income. The question at hand is whether the Medicaid waiver payments should be included when applying for Affordable Care Act (ACA) health insurance coverage.

Medicaid Waiver Payments: Not Taxable but Still Relevant

The first key point to understand is that Medicaid waiver payments are generally not taxable. This means that when your dad receives approximately $30,000 a year from the Medicaid waiver program, he doesn't have to report this income on his federal tax return. These payments are designed to support individuals who require long-term care services in a home or community-based setting, and the goal is to ensure that the recipient can receive care without depleting their financial resources.

However, this is where the waters can get a bit murky. While Medicaid waiver payments themselves are not taxable, they are still considered when assessing eligibility for certain government assistance programs, including the ACA health insurance coverage.

ACA Health Insurance: Income Considerations

When applying for ACA health insurance through healthcare.gov, income is a critical factor in determining eligibility and subsidy amounts. In the case of your parents, their combined income includes both the Social Security income from your mom and the Medicaid waiver payments received by your dad. The combined income of approximately $52,000 a year places them at about 125% of the Federal Poverty Level (FPL).

The ACA tax credits and cost-sharing reductions (CSR) are designed to provide financial assistance to individuals and families with income levels within specific ranges. At 125% of the FPL, your parents may qualify for substantial assistance in the form of premium subsidies and lower out-of-pocket costs.

Excluding Medicaid Waiver Payments: Is it Possible?

The question raised is whether it's possible to exclude the Medicaid waiver payments when applying for ACA health insurance, thereby reducing their reported income and potentially securing a better insurance plan with lower costs.

This is where you should approach the situation with caution. While Medicaid waiver payments may not be taxable, they are considered part of the household income for ACA eligibility. If your parents omit the Medicaid payments from their application, they might be inadvertently misrepresenting their income, which could have legal implications.

The Need for Professional Advice

It's essential to understand that tax and healthcare regulations are complex and can vary by state. In cases like this, it's highly advisable to consult with a tax professional or a tax advisor. They can provide personalized guidance, taking into account the specific circumstances and regulations in your parents' state.

A knowledgeable tax professional can help your parents navigate the fine line between accurately reporting their income for ACA health insurance and ensuring they receive the financial assistance they're entitled to. They can guide your parents through the nuances of Medicaid waiver payments, ACA health insurance, and the potential impact on their overall financial situation.


In conclusion, while it may seem counterintuitive to include non-taxable Medicaid waiver payments when applying for ACA health insurance, it's crucial to adhere to the rules and requirements set by the government. The intricacies of income calculations for ACA eligibility necessitate a careful and accurate approach.

To make the most informed decisions, consult with a tax professional or tax advisor who can provide expert advice tailored to your parents' unique situation. Their expertise will ensure that your parents receive the appropriate ACA health insurance coverage and any available financial assistance, all while staying compliant with the relevant regulations.