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House Tax Bill: Penalty For No Health Coverage Stays, Medical-Cost Deduction Goes

| November 6, 2017

paul ryan medical deductions

His idea. (PBS Newshour)

The tax bill unveiled by Republicans in the House on last week would not, as had been rumored, eliminate the tax penalty for failure to have health insurance. But it would eliminate a decades-old deduction for people with very high medical costs.


The controversial bill is an effort by Republicans to revamp the nation’s tax code and provide dramatic tax cuts for business and individuals. However, its future is not yet clear because Republicans, who control both the House and Senate, appear divided on key measures.

The medical deduction, originally created in World War II, is available only to taxpayers whose expenses are above 10 percent of their adjusted gross income.

Because of that threshold, and because it is available only to people who itemize their deductions, the medical expense deduction is not used by many people — an estimated 8.8 million claimed it on their 2015 taxes, according to the IRS.

But those 8.8 million tax filers claimed an estimated $87 billion in deductions; meaning that those who do qualify for the deduction have very high out-of-pocket health costs.

“For many people, this is a big deduction,” said David Certner, legislative counsel for AARP, which opposes the change. AARP has calculated that about three-quarters of those who claim the medical expense deduction are 50 or older, and more than 70 percent have incomes $75,000 or below. Many of those expenses are for long-term care, which is typically not covered by health insurance. Long-term care can cost thousands or tens of thousands of dollars a year.

Sen. Ron Wyden (D-Ore.), ranking member of the tax-writing Senate Finance Committee, called the bill’s elimination of the medical expense deduction “anti-senior.”

But defenders of the bill say the elimination of the deduction should not be seen in isolation.

In an FAQ posted on the House Ways and Means Committee website, the bill’s sponsors denied that the change would “be a financial burden.”

“Our bill lowers the tax rates and increases the standard deduction so people can immediately keep more of their paychecks — instead of having to rely on a myriad of provisions that many will never use and others may use only once in their lifetime,” the sponsors said.

Getting rid of many current deductions “is being done to finance rate cuts and increase the standard deduction and child tax credit,” said Nicole Kaeding, an economist with the business-backed Tax Foundation. So, for many tax filers, she said, “there will likely be offsetting tax cuts.”

On the other hand, those offsetting cuts almost by definition will not make up the difference for people with very large medical expenses, who are the only ones who qualify for the medical deduction.

“That’s why tax reform is hard,” Kaeding said.

Strikingly absent from the bill — for now — is any reference to the elimination of the tax penalty for failure to have health insurance. The so-called individual mandate is one of the most unpopular provisions of the Affordable Care Act, which Republicans failed to change or repeal earlier this year.

Sen. Tom Cotton (R-Ark.) is continuing to push language to add to the bill that would eliminate the penalty. President Donald Trump has added his endorsement via Twitter: “Wouldn’t it be great to Repeal the very unfair and unpopular Individual Mandate in ObamaCare and use those savings for further Tax Cuts,” he wrote Wednesday.

But while the president is correct that there would be savings from eliminating the mandate, the Congressional Budget Office has also estimated that millions more Americans would become uninsured as a result.

–Julie Rovner, Kaiser Health News

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14 Responses for “House Tax Bill: Penalty For No Health Coverage Stays, Medical-Cost Deduction Goes”

  1. Flagler Flyer says:

    My insurance rates for 2018 have been quoted at 16.2k for a family of 4. That is with an almost 13k deductible. And to top that off it has come out that the contracted insurance rates are double the walk in rates! That means that my costs are as follows before insurance kicks in:

    16,200 for premiums

    13,000 for deductible

    6,500 for services I did not get due to BS contracted rates

    That comes to a grand total of $35,700 before insurance kicks in. I absolutely hate taking the risk of going with no insurance for me and my family, but I am done with it! The affordable care act is a sick joke. The penalty for not participating needs to go!

  2. #Bernie2020 says:

    The ACA was fine until the GOP took control of Congress and then the Senate.

    But in regards to Florida you can blame the 2017 increases on Trump saying he will not fund the Subsidies and the fact Florida refuses to expand Medicaid.

    In fact, the Florida Senate in 2015 approved a Medicaid expansion plan, but it was rejected by Gov. Rick Scott (R) and the state House. The state government almost shut down over a budget impasse linked to the issue, but state lawmakers in June 2015 reached an agreement on a final budget deal without an expansion. State lawmakers expected to debate Medicaid expansion again in 2016 but it never happened.

  3. Really says:

    Get rid of the penalty, now!!

  4. gmath55 says:

    I remember the good old days. I had BC/BS of Michigan. Didn’t cost me at all as my employer paid for it (Employer paid like $300-$350 per month). Had medical, eye coverage, dentist, hearing, prescription, etc. and I only had to pay 10% for whatever I needed. I’m retired now. But, those were the days! Now, with the government involved it is a mess.

  5. Sherry says:

    Right On Bernie2020!

    Health insurance premium rates going up? There is no one to blame NOW but trump and the GOP. Just where is the “beautiful plan” that trump promised and the Republicans worked so hard on for 7 years? You know, the one that was supposed to “lower” premiums and deductibles, and provide higher quality of health care for each and every US citizen. Where is it?

  6. Sherry says:

    So, the hard working middle class, and the working poor are actually being screwed in “two” ways. Not only is the ACA being slowly killed by trump and the GOP, and actually costing the US citizens more and more. In addition, if the GOP has its way, and you/your family become very seriously ill or injured, you won’t be able to deduct the “out of pocket medical costs” on your income taxes. Outrageous!

  7. RickG says:

    This all can be solved with the inclusion of a Public Option. Insurance companies are the vultures of health care.

  8. Percy's mother says:

    Dear Bernie2020
    What you’ve written doesn’t make any sense. Premium increases and Medicaid have nothing to do with one another.

    Trump saying he was going to cut subsidies has nothing to do with increased premiums. Obamacare has been in a death spiral for several years due to unsupportable premium increases and the fact that most people have what’s considered “catastrophic insurance” (see Flagler Flyer’s post about high premiums and catastrophic coverage).

    Again, you people can’t accept the fact that Obamacare was a flawed product 100% backed and voted for by Democrats. Republicans didn’t back it, didn’t vote for it and knew it wasn’t going to work because it was a flawed product. Those of you who were rabid about having it are now getting the rude awakening some of us knew was inevitable. But some of you can’t accept the fact that Obamacare was going to screw everything up, which it did, and so now the scapegoat is Trump, Trump and again Trump. Wake up people. Turn off CNN and get your news from unbiased sources.

  9. #Bernie2020 says:

    Percy’s mother, yes it does.

    Most people that can’t afford to purchase insurance outside the ACA marketplace went to the marketplace and due to their income they received subsidies to buy insurance at a lower cost. That is what you call a middle class tax break. Since Trump said the government would not pay for them, the insurance companies by law still have to offer them at the discount so since they aren’t going to get paid for them, they increased the policies to get their money back or left the market. That is what you call sabotage on your own people. But I think Treason might be coming soon anyway..

    Now if Florida had the Medicaid option (which was turned down and our money went to other states) people that couldn’t afford these policies would have another option to choose.

    Obamacare is not in a death spiral, it had a 1000% increase in sign ups since enrollment started and the most successful states are the ones that expanded Medicaid option. So stop using your GOP playbook buzzwords. The GOP has the Congress, The Senate, most of the Governors and the White House and you can’t figure out a way to replace it to even VOTE on it to get it to Trump’s desk. So you tell me, if it is so bad why can’t it be repealed? Could it be 20 million people that depend on it might vote Republican?

    But you keep blaming Obama and the Democrats, you’ve have had almost 6 years to bring something to the table to make the ACA better and all that happened was lawsuits and fighting to see who gets the most money for re-election.

  10. #Bernie2020 says:

    gmath55

    Now, with the government involved it is a mess.

    No, it’s because the same people that tanked the housing market started to invest in healthcare after the dot.com crash and wrote their own laws with the men and woman we voted to represent us.

    Also once insurance became a for profit game in 1973 it was all over for working class. The increases kept coming, the labor unions started to fail, jobs went overseas and now today you have the market you have today where the pay is what it was 20 years ago with inflation.

    In 1973, Nixon did a personal favor for his friend and campaign financier, Edgar Kaiser, then president and chairman of Kaiser-Permanente. Nixon signed into law, the Health Maintenance Organization Act of 1973, in which medical insurance agencies, hospitals, clinics and even doctors, could begin functioning as for-profit business entities instead of the service organizations they were intended to be. And which insurance company got the first taste of federal subsidies to implement HMOA73 … *gasp* … why, it was Kaiser-Permanente!

  11. BC says:

    No matter what happens with health care costs spiraling out of control, lack of any substantive plan by the GOP to repeal and replace Obamacare, or anything else the GOP will just sit back and ignore until it is too late…. everything will be Obama’s fault!
    That is just their logic and way of thinking. Deficit through the roof because of the war on terror and bank bailouts (that all happened and were signed during the Presidency and Administration of George W Bush)…Obama’s fault. Middle class being screwed because GOP governors refuse to expand Medicaid…Obama’s fault. Health insurance industry regulations gutted in favor of ridiculous profits for insurance companies (bills passed by GOP Congress and made law by revote after President Obama vetoes them)…yup, you guessed it! Obama’s fault again! No matter what happened as a result of GOP manipulation or Congressional slighting by the GOP, their only response is to blame Obama.
    It’s almost like their go-to rhetoric for Bengazi of blaming everything on Hillary Clinton…when in fact the GOP Congress themselves eliminated millions of dollars for foreign Embassy security, including Bengazi. You cannot blame everyone else for your own screwups simply because you finally realized you were wrong and have to save face. Sadly, most of the American people can see right through the BS and lies… especially when spewed from the mouth of Trumpty Dumpty himself.

  12. Sherry says:

    Excellent post BC. . . you are absolutely correct!

  13. Sherry says:

    Bernie2020. . . hopefully there are those who will be educated by the facts you’ve outlined.

    WE, “The People” need to take our power back!

    We need to all wake up and understand that the Russians, who are “hell bent” on dividing us, should be our “common enemy”!!! The division in our country is exactly what ” they” want to accomplish. The RUSSIANS are destroying our Democracy!

    We need to STOP believing all the FAKE garbage on social media and to learn from “credentialed” journalists and make sure everything we believe is actually “fact” checked. Education and factual information is extremely powerful! We need to DEMAND HONESTY from all our leaders. . . in government and in the private sector.

    UNITED WE STAND. . . DIVIDED WE FALL!

  14. anon says:

    Here is the republican’s bill that the House just passed. Weep, Americans.

    https://www.congress.gov/bill/115th-congress/house-bill/1/text

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