There’s been lots of talk at the national level about imposing new restrictions on Medicaid benefits. It’s enough to make anybody worry. So I’m here to give you the bottom line on the medical expense deduction, work requirements, and time limits on benefits.
The Medical Expense Deduction is Still Here
Last year I reported that one version of the Republican tax bill—the House of Representatives version—proposed eliminating the medical expense deduction. Though this wasn’t a law that would directly change Medicaid, it had the potential to affect many seniors in long-term care facilities because it would have dramatically increased their tax bills. The deduction allowed money paid out-of-pocket to facilities to be deducted, and for seniors in long-term care that deduction could easily amount to tens of thousands of dollars.
Before the tax bill passed last December, there were two versions of it: the House version and the Senate version. The House version would have eliminated the medical expense deduction entirely. The Senate version kept the deduction for unreimbursed medical expenses exceeding 7.5% of a taxpayer’s adjusted gross income (AGI) for tax years 2017 and 2018; in 2019 the threshold would jump to 10% of AGI.
Ultimately, the Senate version won—which is good news for seniors needing long-term care. It means anyone with high medical expenses paid out-of-pocket will continue to be able to reduce their tax bill and have more money available for their care. This AARP article, How You Can Deduct Your Medical Expenses, describes how the deduction works in detail.
More recently, states have begun seeking additional restrictions on Medicaid eligibility through federal waivers. These restrictions would add work requirements and time limits to certain Medicaid programs.
Normally states must comply with minimums for Medicaid eligibility set by federal law. A state may ask for an exception, however, by asking for a federal waiver. Because the Trump administration has expressed a willingness to grant more waivers, many states—including Wisconsin—have put in applications for waivers.
Wisconsin’s waiver asks for work requirements and time-limited eligibility. The work requirement would apply to childless adults receiving Medicaid, who would need to work at least 80 hours per month. If they don’t work, their benefits would be limited to 48 months. After 48 months they would be disenrolled for 6 months. After those 6 months, they could receive benefits for another 48-month period.
Those requirements sound ominous, but they come with some big exceptions. Most importantly, they wouldn’t apply to seniors or the disabled. In fact, the Kaiser Family Foundation estimated that proposed work requirements would only apply to 7% of non-elderly Medicaid recipients.
The bottom line is neither seniors nor anyone in a long-term care facility will be affected by these new limitations states are trying to impose. These waivers are a good illustration, however, of how Medicaid has become such a complicated program—the kind of program it takes a legal education to figure out.
For Seniors Who Rely on Medicaid, Nothing Has Changed
Whenever Medicaid is in the news, it’s scary. Changes to Medicaid affect millions of people who rely on it. Thankfully, seniors have nothing to worry about from the latest news. The Medical expense deduction is still here and for the next year is at a favorable level. The waivers seeking to impose work requirements and lifetime benefit limits will not apply to seniors or those in long-term care facilities.