Seniors and the sick would be slammed if Congress scraps medical tax deductions

Congress Taxes
Pat Toomey: “We must catch up and surpass the rest of the world as the premier place for investment. That’s why tax reform is such an opportunity and necessity.”

Are you or your parents among the many living in a retirement community or Alzheimer’s care unit? Are health-care bills stacking up?

Good thing you can deduct those on your taxes.

Oh, wait, not if Congress has its way. Your medical deductions could soon disappear — unless you contact your senator or representative to help sway the decision.

The Philadelphia region is home to a whopping 5 percent of the nation’s retirees living in continuing-care retirement communities, or CCRCs, so we matter.

Philly boasts 30,000 of the nation’s 600,000 CCRC residents — the most heavily concentrated number of senior living communities in the country. Other types of senior housing — independent living, assisted living, skilled nursing, and memory care — have monthly fees that are also tax-deductible as medical expenses.

Under the House version of the tax-reform bill, medical or health-care tax deductions — those you can write off for monthly fees, long-term-care premiums, and drug costs — would vanish, thus eliminating tax relief to millions of older Americans with high out-of-pocket and/or long-range costs but modest incomes.

The Senate version actually expanded medical deductions.

Under current tax law, those of us who spend more than 10 percent of our income on medical expenses can deduct the remainder of out-of-pocket expenses — health-care premiums, deductibles and co-pays, medical transportation costs, and memory care. Breast cancer or prostate cancer patient? You can deduct your treatment costs above the limit. In-vitro fertilization? Deductible. Diabetes or Parkinson’s treatments? Deductible above the limit.

The Senate proposal also would lower the bar to 7.5 percent of income for the 2017 and 2018 tax years. Now, that would be helpful.

In 2015, about 8.8 million Americans used the medical-expense deduction. Of those, nearly 70 percent had annual incomes below $75,000, and more than half had a household member over age 65, according to AARP’s Public Policy Institute.

The average medical-expense tax deduction in 2014 was $9,958.

Seniors aren’t the only ones who would be affected by its elimination. If you itemize and deduct any doctor’s office co-pays, big fat deductibles, premiums for long-term-care insurance (for yourself or your parents), care of a disabled child or parent, we repeat: Those could well be gone — unless you contact your congressional representatives, as well as AARP, which is lobbying against repeal of the medical-expense deduction.

We spoke with retirement communities in the Philadelphia area, and they’ve warned their residents, staffs, and their local reps to contact Congress and get this dumb idea repealed out of the tax bill, currently in reconciliation.

Why is it a dumb idea? Because as we age, we spend more on health care. Without the deduction, older individuals spend down their assets more quickly, and depending on Medicare and Medicaid even faster.

Whom to contact? Republicans on the conference committee include Pennsylvania Sen. Pat Toomey. Democratic conferees include Sens. Tom Carper of Delaware and Bob Menendez of New Jersey.

Remind them of the stats: Chronic conditions and serious illnesses, such as diabetes or Alzheimer’s disease, affect many of the 8.8 million people who take the medical deduction.

“From our perspective, the bill is a travesty,” said Katie Smith Sloan, CEO of LeadingAge, the trade group for senior living in Washington. “We’re telling seniors to call and write their senators and Congress. The Senate version of the bill allows for 7.5 percent deductions, which gives us some hope. We don’t want repeal to sneak into the final bill.”

LeadingAge has a website where you can write to Congress: http://www.leadingage.org/grassroots/make-your-voice-heard.

Jeff Petty, CEO of Wesley Enhanced Living, which operates six communities in the region, said, “We are up in arms about the bill.” He and his staff have contacted local congressional reps to vote against scrapping the medical deduction.

“Seniors living in retirement communities overwhelmingly pay their own way. So the impact of this goes directly to them,” added Jeff Kaighn, chief administrative officer of Acts Retirement-Life Communities, based in West Point, Montgomery County.

“We alone have eight communities and 3,000 residents” in Montgomery, Bucks and Delaware counties, Kaighn said. “The biggest group of health-care consumers are seniors, and then those with chronic conditions or disabilities. They can’t deduct their medical expenses either. Whether you’re a senior or infirm, you’re now vulnerable.”

In Pennsylvania, Kaighn has contacted Republican U.S. Reps. Patrick Meehan and Brian Fitzpatrick, as well as Toomey and Democratic Sen. Bob Casey. He’s also planning on speaking with Democratic Reps. Dwight Evans and Brendan Boyle.

Adult children would lose the medical deduction, too, “and that could mean caregiver children stop contributing to their parents’ care,” Kaighn said.

“So much of the tax code is about incentivizing people — to retire, to save, to buy a house. The medical deduction recognizes when you have high health-care costs, the deduction makes health care more affordable, no matter your income,” said Cristina Martin Firvida, director of financial security at AARP in Washington.

“We’re hopeful,” she said, “and we want the Senate version to remain.”