7100 Budgeting Income

A prospective (income estimate or conversion) or income average method of budgeting shall be used to determine eligibility. All income shall be counted in the calendar month received except when received on a twice a month or monthly basis. In such instances, income shall be viewed as being received by the individual on the day that the payment is ordinarily scheduled.

NOTE: For teachers or other school employees who are contractually paid 12 months out of the year, income shall normally be budgeted on a prospective basis as received unless the teacher or school employee has opted to receive their yearly contract salary over fewer than 12 months (such as only over 9 months during the school year). In such instances, the total year’s income is to be averaged over 12 months so that a monthly amount of income is considered in determining eligibility.

7110 Prospective Budgeting

A prospective budgeting methodology is used to determine eligibility. Prospective budgeting is based on an estimate reflecting the income received and/or expected to be received in the calendar month and the deductions which will be billed to the household in that month (see 7240). The basis for any estimate (including tips) must be documented. For self-employment and other intermittent income and deductions, the estimate shall be determined as outlined in 7120. A prospectively estimated budget may be recomputed if information is received that the estimate is no longer correct (e.g., income that was estimated to be received in a month is reduced or terminated). The client must request a new budget computation and the change shall be applied to the case in a month subsequent to the month in which it is requested in accordance with the provisions in 9121.1.

Earned income information must be analyzed to accurately prospect income. Past information must be evaluated to determine if it represents the future. pay stubs provided must be evaluated to determine if any are not reflective of future earnings, such as a high check due to one-time overtime or a bonus, a low check due to illness or missed work, or a first partial check. If overtime, bonuses, or commissions are on the pay stub, these must be evaluated to determine whether this income is recurring. If the person is employed where tips are paid, it must be determined if tips are actual or allocated. (Certain employers must allocate tips if the percentage of tips reported by employees falls below a required minimum percentage of gross sales. To "allocate tips" means to assign an additional amount as tips to each employee whose reported tips are below the required percentage.) Pay information provided must be evaluated to determine if there was a recent pay raise that will impact future earnings. Pay stubs should also be evaluated to determine if there are any discrepancies in the year-to-date amounts. If so, the missing information must be obtained.

If the recent past 30 days is reflective of the future, that information should be used and documented to support the determination. If the past 30 days are not reflective of future earnings due to fluctuating income, more pay stubs will need to be obtained to project future income. When using pay stubs, the most recent should be used and they should be consecutive. If one or more checks are not reflective (high due to a one-time bonus, or low due to illness, for example) they should not be used in the calculation.

Documentation must be in the case file why any pay stubs are not used in the computation. When income is from a new source, the pay rate has increased (or decreased) or when the numbers of hours to be worked has increased or decreased, the income should be projected from the best information available. Weekly and biweekly income must be converted to a monthly amount. See 1322 for earned income verification requirements.

Budgeting rules are also dependent upon the frequency and regularity of income. The case record is to be documented as the method of computation. The following rules apply:

Regular Earned or Unearned Income and Deductions - Once the full monthly amount is determined, that same amount of income shall be budgeted providing the individual anticipates continued regular income and deductions. A new budget is required prior to redetermination only if regular income becomes irregular, there is no longer any income (not applicable to a job change if earnings remain regular), or there is a change in the monthly amount of regular income.
Irregular Earned or Unearned Income and Deductions - For income and expenses received or billed more frequently than on a monthly basis (i.e., weekly, biweekly, etc.), the amount to be budgeted shall be based on converting a "representative" amount to a standard amount of anticipated monthly income or deductions. "Representative" is defined as a month in which the amount reflects a full month's benefits or wages, or deductions.
1. Income and deductions in the same weekly amount are to be multiplied by 4.3. If the income or deduction amount received is in differing weekly amounts, a representative amount shall be determined and then multiplied by 4.3.
2. Income and deductions in the same amount every 2 weeks are to be multiplied by 2.15. If the income or deduction amount received is in differing amounts every 2 weeks, a representative amount shall be determined and then multiplied by 2.15.
3. Income and deductions in the same amount twice per month are to be added together to obtain a monthly amount. If the income or deduction is in differing amounts twice per month, a representative amount shall be determined and then multiplied by 2.
  NOTE: To prospectively estimate semi-monthly income from a new job, (when paychecks are not available to average) pay periods with varying hours must be taken into account. The easiest and most accurate way to make this determination is to calculate a weekly estimate, times 2.15 times 2. Multiplying the weekly amount times 2.15 will take into account pay periods that have fluctuating hours. For example, a person working 40 hours a week will have more than 80 hours in a pay period when paid semi-monthly. Taking 40 X the hourly rate X 2.15 X 2 will get a closer anticipation of projected income than taking 40 X the hourly rate X 2 X 2.
Irregular and Intermittent Income - Irregular and intermittent income received on monthly basis in differing amounts or deductions billed monthly in differing amounts shall be averaged. See 7120.
Child Support Income/Deduction - Child Support (and alimony) income is averaged. See 7120.

Actual income shall be used for all programs in computing any month in which the amount of income is not representative.

Once a standard monthly amount is established, it may continue to be budgeted through the redetermination period. However, a new budget is required when a change is reported in accordance with 9121.1.

7120 Income Averaging

The income averaging budgeting method is used to budget self-employment and intermittent (earned and unearned income). Income averaging is also used for all programs when irregular and intermittent income received on a monthly basis in differing amounts as indicated in 7110 (3) above. In addition, earned and unearned income received in differing amounts on a monthly basis may be averaged.

7121 Intermittent Income and Deductions

For intermittent income and deductions, the monthly amount shall be established by dividing the income/deduction by the proper number of months for the period that the income/deduction is intended (e.g., 3 months for quarterly, etc.). A fair estimate for the time period used for averaging shall be established with the client. Once the time period is established, the status of the case does not affect the time period. See example below. The case record shall clearly indicate that the income/deduction is being treated as intermittent. Intermittent unearned income received prior to the first eligibility period shall not be considered. However, if an average is established for a program and the client applies for another program, the intermittent income will be counted since a time period to count the income has already been established.

Royalty payments from tribal profits made to tribal members (e.g., casino payments, etc.) will be treated as intermittent income. However, budgeting Indian royalty payments will be averaged annually, using the IRS 1099, or the same information from a reliable source, from the prior year’s income.

Since intermittent income is counted from the date of receipt and budgeted for the period of time that it is intended, it is possible that two monthly amounts could be considered for the same month. (See 6213 and 6314.)

Examples:

Client receives intermittent semi-annual income in April. Income is divided by 6 and 1/6th of total is counted each month for the months of May thru October. Client receives next semi-annual payment in September so 1/6th of payment is budgeted for each month of October thru March. Two payments will be considered in October.
Using example 1, the case closes at the end of June. The client reapplies in August. Since an existing time period had been established for counting the income of May through October, the intermittent income will be counted when determining benefits for August through October. If the payments continue, the intermittent income will continue to be counted.
Royalty Payment Examples
1. The IRS 1099 received for the prior year’s income will be used to budget income for the benefit year. An application is received in September. A quarterly royalty payment is received in the month of September. Using the IRS 1099, or the same information from a reliable source, received in January of that year, divide the total gross income by 12 months to determine the monthly amount counted in the budget. This amount will be budgeted throughout the certification period.
2. Application for benefits received in October. Next royalty payment will be received in December. Using intermittent income rules, royalty payments will not be budgeted until the January benefit. Using the current year’s IRS 1099, or the same information from a reliable source, you will begin budgeting royalty payment income in January.
3. An individual has recently been identified as belonging to a tribe and is now eligible for a royalty payment. As this individual has no IRS 1099 for the previous year, a prospective payment determination will need to be used in the budgeting. No income will be budgeted until a royalty payment actually received. Once this payment is received, it will be averaged over the time period it is to cover and will remain in place until the next review.

7122 Self-Employment Income

See 6313 for guidelines to determine if an individual is self-employed. For self-employment income, an average shall be established based on the guidelines below.

Tax Return Filed - When a tax return has been filed, the average shall be based on the most recent year's income tax return filed. Provided the return reflects a full year of self-employment earnings, a twelve-month average shall be established.
Tax Return Not Filed or Does Not Contain Full Year's Earnings - If a tax return has not been filed (e.g., employment just started or client has not filed a return) or does not reflect a full year of earnings, an initial average shall be established based on at least 3 calendar months of income which are reflective of the individual's income pattern. If the earnings reported on the tax return are representative, an average can be established based on that information dependent on the number of months reflected for the earnings reported. Otherwise, the calendar months used to establish an average must be consecutively prior to the month of application or the month in which the average is being calculated.
Income must be counted by the calendar month received. An average shall exclude only the first month of earnings when that amount is not representative. See 7110. A prospective estimate shall be used until an average can be instituted based on methodologies for using actual or anticipated income in 7110 . When at least 3 calendar months of income are known following use of the prospective estimate and these months reflect the individual's income pattern, an average is to be established. However, if additional calendar months are necessary to more accurately reflect this pattern, the average should incorporate these months.

Once an average is established, it may continue through the review period. When income is re-averaged (e.g., review or redetermination), at least 3 of the most recent calendar months shall be used. Once again, additional months should be used if necessary to accurately reflect the person's income pattern. However, once a full year of earnings is obtained based on tax return information, a new average is to be established with this information at the time of the next scheduled review and remain in effect until the following year's tax return information is available except as indicated below.

For self-employment, the average is determined by totaling all adjusted gross earnings in the months being counted and dividing by the respective number of months. The calendar months being used, and the corresponding earnings must be clearly documented in the case record.
Need for New Estimate/Average Based on Changes in Income - Income shall not be calculated on the basis of prior income (i.e., income tax returns) when the individual has experienced a substantial increase or decrease in earnings. If the averaged amount does not accurately reflect the individual's actual circumstances because he or she has experienced a substantial increase or decrease in business, the self-employment income shall be calculated on anticipated earnings until a new average can be established. Self-employment earnings may also be re-averaged prior to the review period or the availability of tax return information if the current average is no longer reflective of the person's income. This can be done by either establishing a new average which incorporates the change in income pattern or an estimate until at least three calendar months of income which are reflective are known. See 9121.1 for the effective date when a change is reported.
New or Ending Self-Employment - Changes to begin or terminate self-employment or to go from self-employment to regular employment shall be made based on what is anticipated in the forthcoming month or until a representative amount can be established. If a representative amount of standard employment (converted amount) or self-employment (averaged amount) is already established and that representative amount is expected for the forthcoming month, then that amount will be applied. If a representative amount is no longer anticipated for the upcoming month, then the actual amount anticipated shall be applied in the determination.
Unearned Income - If unearned income is treated as self-employment and received on a basis other than monthly it is budgeted as intermittent income per 6213 so that income received prior to the first eligibility base shall not be considered. (See 6313 (1)).

7122.1

Reserved

7122.2

Reserved

7122.3 What is Counted for Medical Assistance

Self-employment income for all medical programs will be based on the countable net income as reported on the federal income tax form. The individual will be required to provide a copy of the most recent tax return. If the individual does not file taxes or has not yet filed because this is a new self-employment enterprise, or the current return is not representative, completion of the Self-Employment Worksheet by the individual is required.

The net countable income reported on either the federal tax return or the amount determined from the Self-Employment Worksheet applying the IRS income and expense counting rules shall be used.

7123 Other Budgeting Provisions

The following additional budgeting provisions apply to the medical assistance programs.

Income Averaging - For independent living applications involving a 6-month base period, if an average cannot initially be established, an estimate shall be used to compute countable income or determine the amount of spenddown. Once the average has been determined, the budget for the eligibility base period shall be recomputed using actual amounts received for the months prior to the month the average is implemented. The average shall then be budgeted for the remainder of the base. For independent living and long term care applications where a 1-month base period is used, an estimate shall also be used until an average has been determined, but the re-budgeting process is not applicable. process is not applicable.
Income may be estimated when there is a change in circumstance. For re-computing eligibility based on a change in income, use the average in place prior to the month of change. In addition, project anticipated income beginning with the month of change.

A new computation is required whenever income terminates and there continues to be a spenddown or patient liability in place. When re-computing income for an independent living base period, the average in place prior to the income termination shall be used. If there will be only one month of irregular earnings within the eligibility base period, the actual amount for that month will be considered if it is known in time to adjust the budget within the eligibility base period. For persons in long term care, the average in place prior to the income termination shall be used.
Reasonable Compatibility - This provision is only applicable to the Medically Needy (MDN), MediKan and Medicare Savings Programs (MSP – QMB, LMB and ELMB). It does not apply to long term care (LTC) or Working Healthy (WKH).
1. General Provisions – Reasonable compatibility is the earned income and zero earned income verification standard used to determine if the information reported by the consumer is consistent with data received through the tiered verification provisions contained in 1322.4. The amount of reported income which is considered reasonably compatible shall be budgeted for eligibility purposes.
  Sufficient information must be provided to complete the reasonable compatibility test. In situations where the consumer has reported an hourly wage but failed to report the number of hours worked per week, the self-attestation can be determined using an assumed 40 hours per week. When an hourly wage is provided along with a range of hours, the average of the range of hours is used.
  
  Applicable data sources are The Work Number and the wage records on KDOL (BASI). When The Work Number is used, the income from the most recent 30 days will be compared to the reported income. When KDOL (BASI) is used, the income from the most recent quarter of the two prior quarters is used to determine an average monthly amount and then compared to the reported income to determine if it can be accepted as verification. If the source information is reasonably compatible with the consumer statement, the reported information is considered verified. Additional information may not be requested from the consumer.
2. Individual Test – The reasonable compatibility test is performed separately for each individual in the household with reported earnings and individuals who report they do not have earned income or fail to answer questions about earned income on their application. All earnings from all sources (including multiple jobs) for each individual are combined into one income amount when performing the test.
  To make the comparison, the income amounts from both the consumer and the source are converted to a monthly amount. There is reasonable compatibility when one of the following occurs:
  1. No earnings were reported and both data sources do return any earned income,
  2. The amount reported by the consumer is greater than the amount received from at least one data source for the applicable time frame, or
  3. The difference between the amount reported by the consumer and one data source is no greater than 20% of the self-attested amount.
3. Fails Test – When reported zero earned income is not determined to be reasonably compatible, Tier 3 income sources (see 1322.4(1)(c)) are used in the order presented:
  1. The Work Number (TALX) – When The Work Number/TALX returns wage information, staff will evaluate the check dates returned on the Reasonable Compatibility Detail page.
    1. If the latest check date is older than 30 days from the date the Reasonable Compatibility Test was completed, this is indicative that there has been a change in income. The lack of reported earnings is accepted and considered verified.
    2. If the latest TALX check date is within the last 30 days from the date the Reasonable Compatibility Test was completed, staff will obtain the TALX Monthly Income Amount from the Reasonable Compatibility Test Detail in KEES and use this for the determination.
    3. If the consumer later contests the use of this income, proof of the end of the income would be required and the eligibility will be redetermined if appropriate. If the consumer contests after the time frame identified in 1414.2, send to KDHE Policy Team for direction.
  2. Case Record – When KDOL (BASI) wages are returned for the quarter prior to the current quarter, staff shall research the case file for income verification or information that may indicate the recent loss of employment. A manual search of the non-medical case file shall be completed if information is not found in the medical case file.
    If an explanation is found that substantiates the report of no earned income, then further research into the KDOL (BASI) wages are not required. The lack of reported earnings is accepted and considered verified. If not substantiated, proceed to Tier 4 (see 1322.4 (1)(d)) and contact the consumer.
    1. If no earned income was reported, and no earnings are found in both TALX and KDOL (BASI), or earned income is found in KDOL (BASI) in the quarter prior to current, the reported zero income is considered verified. See also 1322 and subsections for information about interfaces checked to confirm the existence of SSA or Unemployment payments.
    2. If earnings are reported and have been verified as reasonably compatible, the reported amount shall be budgeted.
    3. When reported earnings are determined not to be reasonably compatible, Tier 3 sources are used in the order presented:
      1. The Work Number (TALX) – When Work Number/TALX data is not successful in establishing reasonable compatibility in Tier 2, the income details may be used to verify income reported. Staff will obtain the TALX Monthly Income Amount from the Reasonable Compatibility Test Detail in KEES and use this for the eligibility determination. If TALX data is not available, proceed to researching the case record.
      2. NOTE: TALX will usually provide a prospective amount for this purpose, but in some instances, it will use an actual amount (i.e., a sum vs. an average) depending on the information provided by the employer.
      3. Case Record – The medical and non-medical case file shall be searched for hard copy verification of the reported earned income. For earned income, this could be in the form of paystubs or a statement from an employer. When processing an application, the date of wage verification must be within the three months prior to the month of application. When processing a review or change, the wage verification must be from the three months prior to when the initial reasonable compatibility test was run through the final processing date.
      4. Collateral Contact – Collateral contact shall be made to verify the reported information, when deemed appropriate. If verification cannot be made via collateral contact, proceed to Tier 4 verification.
      5. Request Information – If the earnings cannot be verified using the above methods, Tier 4 verification is used as outlined in 1322 and subsections. A request for information is sent to the individual and “the last 30 days of income” is requested as proof.
4. Reviews – As part of the review process (see 9310), KEES will run a Reasonable Compatibility (RC) batch which will be used to determine the medical review type (passive or pre-populated) for all individual recipients due for review.
  Due to this, when a pre-populated review is being processed, an RC test might not be required. If the consumer has not reported any changes in income, and the income passed the Reasonable Compatibility Test that was executed by the batch, it is not necessary to re-run the RC test. The passing RC test executed by the batch is used for the review determination. If the RC test executed by the batch did not pass, it should still be re-run by the worker at the time of processing, even if no income has been reported as there may be new data present in KDOL (BASI) or The Work Number (TALX) for the comparison.
  
  The RC test completed as part of the review batch is valid until the end of the third month following the month the test was executed. A new RC test is required for any review with an older RC test.
Budgeting Method - This provision is only applicable to the Medically Needy (MN), MediKan and Medicare Savings Programs (MSP – QMB, LMB and ELMB). If reported income is verified through either the Tier 3 or Tier 4 process described in 1322.4, the amount of income budgeted on the medical assistance program will depend on the level of verification received.
1. Full Month - If a full month (at least 30 days) of income verification is received, a prospective amount based on the verification received shall be determined and budgeted in place of the reported amount. For new applications, a full month of income verification exists when the agency has verification of 30 days of consecutive earnings received by the wage earner within the period beginning 30 days prior to the application date and ending on the date the application is processed. When processing a review or case change, the income verification provided must be from the three months prior to the month the Reasonable Compatibility test is initially run through the final processing date.
2. Partial Month - If less than a full month (less than 30 days) of income verification is received, or it cannot be determined if the verification represents a full month, a prospective amount shall be determined based on the partial verification received. The greater of either the reported amount or the prospective amount based on the partial verification received shall be budgeted.
  When determining the prospective amount for new applications, the acceptable time frame for income verification must be dated within three months prior to the application month. When processing a review or case change, the income verification provided must be from the three months prior to the month the Reasonable Compatibility test is initially run through the final processing date.
  
  NOTE: Verification received from either a KDOL – BARI/BASI or DCF income record (cash or food assistance program) under the Tier 3 process shall always be considered a partial month for purposes of this provision.
Additional Budgeting Provisions - The following budgeting provisions apply where multiple programs are involved for the same individuals).
1. Application - Where eligibility for multiple program types is being determined for the same individual at the time of application, if the use of reasonable compatibility is not required for all the programs, eligibility shall be determined for all programs without the reasonable compatibility.
  An example would be where a nursing home resident applies for long term care (LTC) and MSP coverage. The MSP application requires the use of reasonable compatibility. The LTC application does not. Eligibility for both LTC and MSP shall be determined by verifying actual income.
2. Program Added - Where a program using reasonable compatibility is being added to a program not using reasonable compatibility or vice versa, eligibility shall be determined for all programs without using reasonable compatibility beginning with the first month of eligibility for the added program.
Transition to New Program - Where eligibility transitions from a program using reasonable compatibility to a program not using reasonable compatibility, eligibility shall be determined for the new program without using reasonable compatibility. Where eligibility transitions from a program not using reasonable compatibility to one that does, the current budgeting in place shall continue to be applied to the new program through the end of the existing review period.