1. MIke says

    For example, take a family with $120,000 AGI and a $30,000 medical bill. They have one FSA that, thanks to the reduced limit, covers only $2,500 of the cost. The next $12,000, thanks to the raised floor, is not deductible, so they have to pay $12,000 out of pocket with no tax relief. That leaves $15,500. They withdraw $15,500 from their IRA, pay no penalty and almost no tax.

    The entire point of the PPACA is that these people will have health insurance, and won’t have to pay $30,000 medical bills.

    Also, $120,000 AGI is not anyone’s definition of middle class, except maybe you and Mitt Romney

  2. Ryan says

    One way to avoid these pitfalls, at least in part, is to use an HSA. HSA contributions are deductible, and if you contribute through payroll deductions they reduce your income subject to FICA tax. Medical expenses paid for with HSA distributions can’t be deducted on Schedule A, since the contributions were already deducted. You essentially get a deduction on the first dollar of medical expenses, rather than even a 7.5% threshhold to meet.

    I believe the high-deductible plans that are required in order to contribute to an HSA are becoming increasingly common. My Fortune Global 100 employer offers three different versions but no “traditional” PPO. Even when a traditional PPO was offered, the premiums were so high that I think few people chose it. I would imagine that anyone with an individual health insurance policy has a high-deductible plan. Anyone with a high deductible plan should contribute as much as they can to an HSA and avoid spending the money saved there for anything but catastrophic health care costs.

  3. f carruba says

    I have read both of your articles relating to how much the new health care taxes will affect the high earners, and then the middle class. It is ironic that in today’s environment where fairness in taxation is of such concern that the health care law affects the different income classes in such different ways.

    When previous entitlement programs were established (social security and medicare) a tax structure was established that was the same for all potential beneficiaries. And that tax was established so that it would cover the expected future benefit to the potential beneficiaries. Even though the benefits available under these programs were modified by means testing, the taxes to generate the revenues remained flat and the same for all.

    The new health care law made no attempt to tax the potential beneficiaries fairly. In fact I believe great effort was taken to make the new law a redistribution of income project. It would have been simple to increase payroll taxes to cover the potential benefits ultimately available to all citizens. But that approach was not taken Instead over 20 different revenue sources were tapped to cover some of the projected costs of the law. The determination of the taxes to be generated from these revenue sources did not appear to be based on what appeared to be fair, but instead on what might be politically acceptable to the masses.

    But what the heck. If the new health care taxes had been fair to everyone, you would have been able to cover it in only one article.

  4. f carruba says

    All Americans have been screwed by the Affordable Care Act (ACA), regardless of income class. Numerous articles have been written about the death panels, excessive government intrusions, the number of newly insured overwhelming the medical profession, etc. But I believe the most significant negative issue relating to the program has not been discussed. That is its funding.

    President Obama indicated the new program must be funded, and criticized Bush for not funding Medicare part D. Yet almost a third of the ACA is funded with smoke and mirror money. That is the $716 billion supposedly shifted over from Medicare.

    This $716 billion is suppose to be available because of savings created by the ACA that benefit Medicare. Certainly, approximately $150 billion of the total amount might be available because of cuts to Medicare (the Medicare part D subsidies were eliminated by the ACA.) But most of the remaining savings is due to projected reimbursement rates to doctors providing Medicare services. How could anyone realistically and honestly use reimbursement rates for Medicare that are less than the reimbursement rates for Medicaid to project long term savings? Doesn’t congress pass the “doc fix” every year? But I guess it is a handy tool, to fool us citizens, and to keep CBO projections within desired parameters.

    But in the very near future the actual costs will be substantially more than those shown in the dishonest projections. The impact will be even greater deficits and the need for even greater taxation. And maybe everyone’s taxes will have to go up. Yes we are all screwed.

  5. Matthew says

    This article is silly. None of this applies since most people will have health insurance so there is only the deductible + coinsurance.

    The FSA could be a minor increase for uncovered things such as LASIK or braces, or in a large family (of whom get plenty of other deductions). But still…

    Oh yea, and the whole world is going to end too… ahhh, why even bother with your health then?

  6. Brad says

    I agree with Matthew! Glad to see someone with common sense here. Most policies max out at $10k or maybe $15k at most, out of pocket for a family, even the high deductible (HSA qualified) ones. Very little chance of spending more, unless you go completely off-plan.

    Guessing the exceptions will be a quite minuscule number of middle income taxpayers. Like 1/10 of 1 percent or even less that might get screwed by the ACA in this way.

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