Eliminating the Medical Expense Deduction Will Harm People Who Are Chronically Ill

House and Senate Republicans have approved their plans to reform the tax code and are currently in a conference committee. The House legislation calls for ending the medical expense deduction (MED). This proposed change will cause major disruption to individuals and families trying to privately pay for the catastrophic costs of long-term services and supports (LTSS).

The MED has been in the tax code in one form or another since 1942, at  26 U.S. Code § 213  .  

Elder law attorneys are intimately familiar with it because they have a front-row seat to their elderly clients’ chronic illnesses and long-term care expenditures as well as the special medical and remedial care expenses of individuals with disabilities. In my work as an elder law attorney, I deal with this tax deduction every single day, usually to reassure my clients that they will probably be able to offset the taxable income from, say, their IRAs or 401Ks,  with their substantial deductible nursing home expenses and minimize the tax consequences of paying for long-term care (LTC) themselves.

Right now, the MED is used for a variety of expenditures and situations. Taxpayers can deduct medical expenses in excess of 10 percent of their Adjusted Gross Income for the 2017 tax year. The Senate tax bill actually lowers this threshold back to 7.5%.  The MED can be used when people are:

  • Trying to afford their health insurance premiums, co-pays, and deductibles
  • Paying for the cost of childbirth and post-natal care
  • Paying for their own LTC or the LTC of a dependent child, parent, or other relative
  • Paying for assisted living
  • Paying a Medicaid cost share to a facility
  • Using pre-tax accounts for catastrophic medical expenses when they have no insurance or insufficient insurance coverage
  • Paying for home accessibility for disabling conditions
  • Paying for dental work, which is critical to long-term health
  • Paying for toxic lead or mold remediation
  • Paying for drug abuse rehabilitation for their dependent relative
  • Paying for additional ABA for a child on the autism spectrum

Our current long-term care system is driven by Medicaid, a means-tested program, and it sometimes acts as a disincentive for the middle and working class to save. Perversely, many middle- and working-class individuals who develop a chronic illness would have been better off had they not saved at all, thereby allowing them to qualify immediately for Medicaid. Clients express this frustration to us all the time. The MED acts as a key counterweight to that disincentive by substantially expanding the length of time someone could pay privately before needing government assistance.

The House Republican Tax Reform plan takes this important tax incentive away without any appropriate justification. Elder and special needs law attorneys are leading the way in educating and persuading stakeholders and the larger public  to fight back against removing the MED.

Read more about the Medical Expense Deduction for the Chronically Ill.

This post first appeared on the mailing list of the National Association of Elder Law Attorneys (NAELA): View the original online here.

Call us for advice about long-term care planning, nursing home care and elder law . 732-382-6070

What Can Your Elder Law Attorney Do for You?

If your family is struggling with the difficult decisions regarding nursing home placement or ongoing disability, Medicaid eligibility, or a need for in-home care, the elder law attorneys at FRE-L can assist you with many of the steps in that process. You may be wondering whether to engage an elder law attorney or to work with an application processer recommended by a nursing home. First and foremost, your elder care attorney works just for you, and applies and interprets the many intertwining laws and regulations to achieve your goals, without conflicting interests. Your particular case will likely involve an array of legal issues that may not be readily apparent. Here is a sampling of how we can help:

— Review & negotiate admissions contracts for Continuing Care Retirement Communities, Nursing Homes and Assisted Living Facilities

— Review & negotiate employment contracts for home care agencies

— Prepare employment contracts for household caregivers

— Help to find an appropriate facility, especially for unusually troublesome situations

— Advocate for you with the facility business office and admissions director to assist in the admissions process

— Accompany you to the family Care Planning meetings which are required to be held by state licensing laws, to advocate for the resident’s needs

– Advise you on lawful means to preserve family assets and become eligible for government benefits such as Medicaid

— Assemble, prepare and file the Medicaid application and provide necessary legal analysis for caseworkers.

— File or defend court proceedings for guardianship (in cases of incapacity), or to create or correct a trust, or to obtain protective orders when there are family disputes about the care of elders.

— Evaluate your existing estate plan if any, and prepare an appropriate legal plan with a Will, Power of Attorney, Trust, Deed or Health Care Directive to preserve and protect your home, your independence, your family and your assets.

— identify available benefit programs such as Social Security Disability and advise you on evidence needed for the application.

— Prepare Special Needs Trusts or Supplemental Benefits Trusts for benefit of adult family members, to preserve assets and eligibility

We are here to make these stressful processes easier, so that you can take care of the other needs of yourself, your family or your job. We provide “full service” for our elder care clients, and we are committed to providing individualized solutions to complex problems, responding promptly to the needs of clients,  keeping clients informed, keeping up to date with developments in the law, and developing relationships with clients based on mutual trust, undivided loyalty, and respect

How may we help you? For an appointment call 732-382-6070