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Today’s tax proposal, unveiled by the House Republicans, ends the Medical Expense Deduction causing serious harm to individuals and families trying to pay for the catastrophic costs of long-term service and supports (LTSS). Read the Bill here. 

The following information is provided by NAELA, the National Academy of Elder Law Attorneys.

Read NAELA’s “Overview of the Medical Expense Deduction for the Chronically Ill” and NAELA’s “The Medical Expense Deduction for the Chronically Ill, Key Points.

What is LTSS?

LTSS provides assistance with Activities of Daily Living — eating, transferring, bathing, dressing, and continence. In many instances, individuals who need LTSS must be placed in a nursing facility to receive 24-hour care. Conditions that may require LTSS include Alzheimer’s disease, Multiple Sclerosis, or spinal cord injury.

The tax code allows individuals to deduct qualified long-term care expenses if they are chronically ill, meaning those unable to perform two or more Activities of Daily Living 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. For instance, paying for nursing home care can quickly impoverish middle- and working-class Americans, costing a median of $97,000 a year for a private room.

According to NAELA President Hy Darling, CELA, CAP, “The problem is as much a practical issue as it is a policy one. Fundamentally, many individuals paying for these costs will not be able to pay for their care and federal income tax at the same time. Raising the standard deduction and lowering tax rates will not address the issue.”

Why wouldn’t increasing the standard deduction and lowering tax rates help? “Because many chronically ill Americans must pay all of their income towards care, and without the Medical Expense Deduction they could still have a tax liability that they cannot afford to pay,” explains Darling.

How does eliminating the Medical Expense Deduction impact chronically ill Americans?

Put simply, eliminating the Medical Expense Deduction puts chronically ill Americans between a rock and a hard place. If these individuals cannot pay for the cost of LTSS, this could lead to eviction from their care facility. Yet paying for their care and not the increased tax creates an uncollectible tax liability. And, it likely would lead to an increased reliance on government programs. Many middle- and working-class individuals must “spend down” their resources to qualify for Medicaid. Without a tax subsidy, there is an increased incentive for people in need of care to participate in an already stressed federal/state program rather than assuming personal responsibility for their care or the care of their loved ones.

Here’s how you can help:

Call your representative – Look up the direct office number in the House of Representatives Directory.

 

Terry Garrett is a member of the National Academy of Elder Law Attorneys and is active in the Texas and Austin Bar Associations. She graduated with honors from Cornell University. She was on the Dean’s List at Wharton Business School. She earned her J.D. at Columbia Law School, receiving the Parker Award and a Mellon Fellowship.

She assists families of people with special needs, people planning for the retirement years and people administering estates.

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