House Tax Plan Would Eliminate Medical Expense Deduction
DAVID GREENE, HOST:
Republicans are doing some celebrating this morning because, yesterday, the House passed a Republican bill to overhaul the U.S. tax code. This plan slashes the corporate tax rate, and it eliminates some popular deductions.
RACHEL MARTIN, HOST:
Among those deductions, the one for medical expenses. Eliminating that particular deduction is not part of the Senate's version of their tax bill, as of now anyway. So a lot of uncertainty going forward.
GREENE: Let's hear more about what this deduction actually is. We have NPR health policy correspondent Alison Kodjak here.
ALISON KODJAK, BYLINE: Hi, David.
GREENE: So help us out here. What is this deduction?
KODJAK: So this is really a deduction for people who have unusually high health care costs - not your average person. You have to spend more than 10 percent of your income on medical expenses, and then you can only deduct the costs that are more than that 10 percent. So it doesn't include insurance premiums, so it's really health care costs that aren't covered. The IRS says about 9 million people take the deduction. And their medium income is about $55,000 a year.
GREENE: So 9 million people - say more about who they are because it sounds like these are people who have a lot of medical costs. And I guess insurance doesn't cover everything they need.
KODJAK: Yeah. And I was wondering the same thing because it does seem like quite a lot of money. And I did a little unscientific poll, which means I posted a note on my Facebook page to see which people I know...
GREENE: That's pretty unscientific, right.
KODJAK: ...Actually use this, yeah. And within a couple of hours, six or seven people responded that they actually take this deduction and that some of their friends do. And the common thread among my friends is that they have disabled kids. So one woman, who actually was a friend of a friend, described how she has three boys who all needed intense speech therapy, behavior therapy and lots of other interventions because they have autism. And she had therapists in her house for more than 40 hours a week at one point. And even though she had insurance, there was a co-pay for each one of those visits.
GREENE: And that cost can pile up, I would imagine.
KODJAK: Yeah, it can pile up. And the other typical case is somebody in a nursing home. So it's an older person who needs intensive, either home health care or nursing care, actually saved up money for their retirement. So they're spending a huge amount of money, but their income is now - they're on a fixed income. And so they are deducting a lot of expenses against relatively low income. And sometimes, this deduction can eliminate their tax burden altogether.
GREENE: Wow - so a big deal for a good number of people. What happens then? Are there options for the people you're talking about who responded and also these millions of other people who have relied on this?
KODJAK: The government has two ways to help people pay for really high medical expenses. One of them is through this tax deduction. The other one is through Medicaid. And a lot of people in nursing homes are on Medicaid. And a lot of children with disabilities are also on Medicaid. And what you might see is that families would go through their own savings and income a lot quicker. Older people go through retirement savings a lot quicker without this deduction, and then the government would end up picking up their expenses through Medicaid.
GREENE: What do we expect from the Senate? I mean, the House has voted to eliminate this. The Senate's going to be taking up its own bill. They seem to be keeping this deduction for now.
KODJAK: Yeah, the Senate does not eliminate this in the bill that they have going right now. I don't really know that there's an appetite in the Senate to pick up this provision - to get rid of this deduction. But what I do know from watching the health care debates over the last several months is that parents of disabled kids are a pretty loud and fierce lobby. They really do a lot to protect their kids. So if this gets in there, there's probably going to be a lot of resistance to it.
GREENE: NPR health policy correspondent Alison Kodjak, thanks.
KODJAK: Thanks, David.
[POST-BROADCAST CORRECTION: We incorrectly reported that insurance premiums are not tax-deductible. In fact, premiums that are not paid through an employer may be deducted, if they are not paid with pretax dollars.]
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Correction Nov. 17, 2017
We incorrectly reported that insurance premiums are not tax-deductible. In fact, premiums that are not paid through an employer may be deducted, if they are not paid with pretax dollars.