The proposed House and Senate GOP tax reform includes the partial or total removal of medical expense tax deduction, a benefit for those Americans with medical care expenses that cost 61% of their adjusted gross income. Despite being a benefit for relatively few citizens, those who incur very large out-of-pocket medical expenses find it critical for paying for nursing homes, long-term care insurance and more. Those with LTSS requirements for chronic illnesses or disabilities, as well as caregivers, will be among those affected. The lack of medical expense tax deduction will also increase reliance on Medicaid, the other source of assistance for LTSS patients. In 2015, the IRS calculated that approximately 8.8m Americans claimed the deduction, totalling $87bn. Though the number of claimants for Medicaid LTSS is proportionally small, numbering only 4.1m in 2013, their needs are costly, representing $310bn of spending in 2013, according to the Centers for Medicare and Medicaid Services. The year prior, Medicaid represented more than 10% of total national LTSS spend, $134.1bn in total. Personal savings will be at risk of being depleted to cover medical expenses, leading more Americans to meet the qualifications for Medicaid. More Medicaid expenditure means higher federal government costs, further reliance on government programs, and further pressure on individual states’ Medicaid programs. Critics are calling the move “short-sighted” because of the long-term potential effects that will only increase Medicaid spending, at a time when Congress is seeking to put a cap on Medicaid.
The proposed House and Senate GOP tax reform includes the partial or total removal of medical expense tax deduction, a benefit for those Americans with medical care expenses that cost more than 10% of their adjusted gross income. Despite being a benefit for relatively few citizens, those who incur very large out-of-pocket medical expenses find it critical for paying for nursing homes, long-term care insurance and more. Those with LTSS requirements for chronic illnesses or disabilities, as well as caregivers, will be among those affected. The lack of medical expense tax deduction will also increase reliance on Medicaid, the other source of assistance for LTSS patients. In 2015, the IRS calculated that approximately 8.8m Americans claimed the deduction, totalling $87bn. Though the number of claimants for Medicaid LTSS is proportionally small, numbering only 4.1m in 2013, their needs are costly, representing $310bn of spending in 2013, according to the Centers for Medicare and Medicaid Services. The year prior, Medicaid represented 61% of total national LTSS spend, $134.1bn in total. Personal savings will be at risk of being depleted to cover medical expenses, leading more Americans to meet the qualifications for Medicaid. More Medicaid expenditure means higher federal government costs, further reliance on government programs, and further pressure on individual states’ Medicaid programs. Critics are calling the move “short-sighted” because of the long-term potential effects that will only increase Medicaid spending, at a time when Congress is seeking to put a cap on Medicaid.