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March 23, 2006
LEGISLATIVE CHANGES THAT AFFECT SENIORS
It’s not very often that I get to tell you about legislative changes that contain good news for seniors. This week I have good news from our federal government and our state government.
First, this weeks tax tip – Medical Deductions: We all know that certain expenses can be claimed as a medical deduction such as doctors, dentists and hospital bills. Here are some that you might not have thought of:
· Transportation – Ambulance fees are deductible. You may also deduct cab fees. If you drive to medical appointments you are allowed a mileage expense. Because the IRS changed the mileage allowance on August 31, 2005 from 15 cents per mile to 22 cents per mile, you must add up how miles you drove to medical appointments from January 1 to August 31 and then, September 1 to December 31.
· Home Care – Can you deduct the cost of physical therapy and aids for care you receive at home? Absolutely! You may even be able to deduct electricity, heat, insurance, food and any other expense of maintaining your household! Have your tax preparer check to see if you qualify as chronically ill under Internal Revenue Code Sec 7702(B).
There is a change underway in the way the chronically ill receive medical treatment. Instead of MassHealth only providing coverage for nursing homes, there is a shift to where more and more home care programs are developing. MassHealth will take the money they would have paid to the nursing home and pay it for private help that you receive at home. I think that is a good thing.
For those who do not qualify for MassHealth and are spending their assets on their medical care, there are some tax considerations. The primary concern is timing of income and deductions. If you are cashing in old savings bonds, annuities or IRA accounts, you have to realize that you are creating taxable income. In most cases we would recommend that you match the expenses of medical care with a corresponding amount of income from those investments. In most cases this will eliminate income taxes and preserve more of your assets for medical care.
Now, the latest news from MassHealth: Effective February 1, 2006 the Commonwealth has increased the “average cost of nursing home care” from $232 per day to $246 per day. This number is important because it is the factor to determine the length of a disqualification period for having made a gift. How they come up with $246 a day is beyond me. Most of the nursing homes that I have been dealing with lately are all charging over $300 per day. Anyways, here is an example:
Example: Uncle Joe pays Boston College $42,000 for his nephew’s freshman year tuition. Uncle Joe has made a gift. To determine how long Uncle Joe will be disqualified from MassHealth long term care benefits we will divide $42,000 by $246 and come up with 171 days. Using last years divisor of $232, the answer is 181 days ($42,000/$232=181). The increase in the divisor has reduced Uncle Joe’s disqualification period by 10 days.
Effective January 1, 2006:
· The minimum monthly maintenance needs allowance (MMMNA) has increased to $2,488.50. This is the amount that the healthy spouse may keep out of a couple’s total income, if her spouse needs nursing home care.
· The married couples asset allowance if one spouse needs nursing home care is now as follows. They are allowed to keep the first $19,908 as a minimum. If they have more than $19,908, they are allowed to keep one-half of their assets up to a maximum of $99,540.
The Massachusetts Committee on Health Care Financing on March 13, 2006 favorably reported on the following several bills of interest to seniors to the Massachusetts legislature:
· House Bill #2890 – A bill that would increase the personal needs allowance for a senior in a nursing home. Currently nursing home residents on MassHealth are allowed to keep $60 per month for their personal needs. This amount barely covers their cable television bill and their telephone bill. Please call your legislators and ask them to support increasing this monthly amount to $72.80!
· House Bill #2917 – This is a bill that would create a system of public information concerning MassHealth and how nursing homes get paid. My experience is that many families get their information from other families in the same situation and often times the information is eroneous. I think this is a step in the right direction.
NATIONAL NEWS: On March 13, 2006 an official for the U.S. Customs and Borde Protection agency aplolgized for the lack of advance warning to the public about a recent increase in seizures of prescription drugs purchased from Canada. Since November 17, 2005 the Customs officials have seized about 13,000 packages of prescriptions trying to make their way into the United States. The purchase of prescription drugs is illegal, but customs and FDA officials have for the most part allowed this to occur.
On Thursday March 16, the Senate voted 51-49 to approve the fiscal year 2007 budget resolution after adding more than $16 billion to discretionary spending. This budget has changed considerably from the one that President Bush presented to the congress. The Senate stripped the Medicare cuts that Bush had wanted and added additional spending items before bringing it for a vote. This budget now heads over to the House where reaching a final budget deal will be difficult, given the conservative resistance to new spending.
This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).
Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds Masters in accounting and a Masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781)233-4444. To view this or any prior article, please visit our web site at www.elderlawcenter.org