The House Republicans tax proposal introduced today ends the Medical Expense Deduction. This change will cause major harm to individuals and families trying to pay for the catastrophic costs of long-term services and supports (LTSS).

About half (52%) of Americans turning 65 today will develop a condition that requires LTSS. Individuals needing LTSS are those who require assistance with activities of daily living, such as feeding, getting dressed, or bathing. In many instances, these individuals must be placed in an assisted living facility or nursing home to receive 24-hour care. Conditions that may require LTSS include Alzheimer’s disease, Multiple Sclerosis, or spinal cord injury. Paying for care in a facility can quickly impoverish middle-and working-class individuals. Nursing home care in New Jersey costs about $110,000 a year for a private room, while the cost of care in an assisted living facility can cost $70,000 a year.

Presently, the tax code allows an individual to deduct “qualified long-term care expenses” for people who are “chronically ill,” those unable to perform two or more “Activities of Daily Living” (eating, transferring, bathing, dressing and continence) without assistance, or who need constant supervision because of a “severe cognitive impairment” such as Alzheimer’s disease. These expenses are usually catastrophic, requiring many Americans to spend all of their income and to liquidate resources to pay for care.

Eliminating the Medical Expense Deduction will have a number of negative consequences:

• Possible Eviction From a Care Facility. Without the deduction, individuals paying privately for LTSS may not have the funds to pay their tax liability and cost of care. This could lead to eviction from a care facility.
• Hurts Family Caregivers. Children can also use this deduction if they pay for more than half of his or her parent’s care. Eliminating this deduction will have a negative effect on the financial well-being of a child trying to care for a chronically ill parent.
• Increased Reliance of Government Programs. Many middle-and working-class individuals must “spend-down” their resources to qualify for Medicaid. This will happen much faster without a tax subsidy and will place a larger burden on an already stressed federal/state system.

Simply stated, eliminating the Medical Expense Deduction would seriously harm people who are chronically ill.

The tax proposal introduced today can be accessed here – https://waysandmeansforms.house.gov/uploadedfiles/bill_text.pdf

UPDATED ON DECEMBER 12, 2017: Today, the National Academy of Elder Law Attorneys (NAELA) asked the conferees working on the Tax Cuts and Jobs Act to retain the medical expense deduction due to the high costs of long-term services and supports. NAELA’s letter to the conferees can be found below:

Download (PDF, 1.13MB)

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For additional information concerning Medicaid and public benefits planning, visit: https://vanarellilaw.com/medicaid-public-benefits-planning/

(This blog post is adopted from information provided on the National Academy of Elder Law Attorneys (NAELA) website. Mr. Vanarelli is a long-time member of NAELA. )