Sunday, July 09, 2017

Health Care Reform - Tax-Based Changes

Part of the GOP is currently making a last ditch effort to get a repeal and replace healthcare bill passed, while some factions are insisting on a full repeal and others insist on keeping a great deal of Medicaid expansion in place.

While my family and I benefit from some provisions of the ACA, I cannot fully disagree with stepping away from Obamacare. Using the US tax code to help taxpayers cover their health care expenses seems to be a good place to make concessions that could make Trump-care more palatable.

Health Insurance Adjustment for ALL Taxpayers

In Donald Trump's campaign promises regarding health care, he mentioned making health insurance "fully deductible". Currently, the tax code allows for health insurance provided by employers and health insurance for the self employed as adjustments to gross income. However, anyone who is employed and buys health insurance on their own gets the 10% of adjusted gross income limit shaved off of their deduction. This is one example of a glaringly inequitable result in the tax system - especially under Obamacare. If health insurance is an adjustment from income for those who have employer provided coverage and for those that are self-employed - it should be an adjustment for all taxpayers.

Remove the 10% Limit For Certain Medical Expenses

When my boys were diagnosed with Autism, the most effective medical treatment for the disease was not covered by a vast majority of health insurance plans. The cost is high enough that it was impossible for families with incomes under 50,000 dollars to afford. These factor's led my wife and I to pursue her graduate education. We needed to raise our income in order to pay for these major expenses out of pocket.

Unfortunately, when you raise your income your raise your tax debt as well. While we have more money to pay for medical therapies, the IRS eats up a substantial portion without realistic allowances for additional financial costs associated with special needs children.

There are many situations where families that care for special needs or ill family members end up with a major tax bill that they cannot pay because medical expenses devour all available savings and investments. These people either get in deeper debt to pay the IRS, or they pay tax professionals (more debt) to help them request installment arrangements or request offers in compromise (offer's to settle tax debt for less than the amount owed).

If the 10% limitation was removed for catastrophic medical expenses (medical expenses from a single event that exceed 5,000 dollars or more) and medical expenses of the uninsurable chronically ill and/or disabled individuals, these families would be paying taxes on amounts that are more reflective of their actually financial position.

If we are going to get rid of Obamacare, let's provide some real incentives for people to be able to take care of their own medical issues. Taxing people on income with a health insurance adjustment would make health insurance a less painful expenditure. Allowing full medical deductions for those who have to pay medical expenses out of pocket, would make being self-sufficient a much easier pill to swallow for families with disabilities, pre-existing conditions, and other chronic medical problems.

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