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Millions of Americans who take a medical deduction could be affected by the tax overhaul. Here’s how

Consumer groups are worried that the tax deduction for medical expenses could be killed by the Republican tax overhaul. How does the deduction work, and who would be affected if it gets scrapped? Lisa Desjardins talks to Cristina Martin Firvida of AARP, an organization that is lobbying lawmakers to keep the deduction.

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  • Judy Woodruff:

    Republican leaders in the U.S. House and Senate are meeting this week to try to iron out their differences over a massive tax overhaul plan in time to send the bill to the president by Christmas.

    We're continuing to look at important provisions that are the subject of concern.

    One starting to get more attention is the elimination of a tax deduction for medical expenses.

    Lisa Desjardins zeros in on that.

  • Lisa Desjardins:

    The House version of the tax bill eliminates the medical deduction. Right now, individuals qualify if their medical costs exceed more than 10 percent of their income.

    The Senate version, it goes the other way- It would make it easier for Americans to qualify for at least two years.

    But consumer groups are worried that the deduction may be killed as part of the final bill.

    Cristina Martin Firvida is with AARP, which has taken a position here. They are lobbying lawmakers to keep the deduction. She's here tonight to help us walk through how this works and who could be impacted.

    Thank you for joining us.

  • Cristina Martin Firvida:

    Thank you.

  • Lisa Desjardins:

    Let's just start with a little bit of history and also bring it to current times.

    How did this deduction start, and what is the House trying to do?

  • Cristina Martin Firvida:

    Well, since the 1940s, individuals who had very high health care costs have been permitted to deduct those from their income when preparing their federal income taxes.

    So this is a deduction that's been in the tax code for decades. And, unfortunately, now we see, with the House bill, an attempt to repeal this medical expense deduction. And that is something that of course will affect many, many tax filers; 8.8 million tax filers take the deduction annually.

  • Lisa Desjardins:

    You know, last week we sent out a call online to everyone reading our Web site. We wanted their questions on this tax bill.

    And, Cristina, we got a lot of questions on this particular issue. We're going to talk about other questions later this week.

    But I want to highlight two of these e-mails that we received, first from Elizabeth Gross in Bellingham, Washington.

    She wrote- "My husband and I are both in our 70's and living on a fixed income. He has Alzheimer's disease and now needs skilled nursing care. If this deduction goes away," she wrote, "I will need to sell my house to pay for his medical expenses."

    We also got this from Laurence Bardoff in San Francisco.

    He wrote simply- "How will the loss of medical deduction affect seniors on limited budgets with medical conditions?"

    And I think that's the question here. Do we know how this will affect people? Obviously, there are some people worried about losing everything because of this change.

  • Cristina Martin Firvida:


    So, this is a concern we're also hearing from many of our members. Something to bear in mind about the medical expense deduction is that it is available for anyone at any age, but, overwhelmingly, older Americans claim this deduction, because, unfortunately, as we age, our health care costs do go up.

    We have heard from many of our own members who have shared similar stories about what it will mean to lose this deduction. For most people we have heard from, they have said it will raise the cost of their health care because they will lose the tax benefit associated with the deduction, and it will make them go through their life savings much more quickly as they meet those high health care costs in older age.

  • Lisa Desjardins:

    Do you have a sense of what the average kind of deduction is for this right now?

  • Cristina Martin Firvida:

    It depends. It depends on the expenses that an individual has. And it depends on your income. So it's very hard to pin down an average.

    Of course, you're only permitted to take it if your expenses exceed currently 10 percent of your income. So it varies both by the amount that you make each year and the amount you spend.

  • Lisa Desjardins:

    You mentioned that many seniors and others are worried about running through what savings they have if they lose this deduction.

    Is there any indication that perhaps more people will have to turn to Medicaid because of this? Are there any kind of statistics on that?

  • Cristina Martin Firvida:

    We have heard that as well.

    Now, we have not had an analysis from any of the official score keepers, for example, from the Congressional Budget Office, to explain what the effect will be on Medicaid. But we have heard that from our own members, who have explained to us that currently they use their life savings and other assets that they may have to pay for expenses such as nursing home care.

    And, if they lose the deduction, they will run through their savings much more quickly, and they will end up having depleted their assets and having to turn to Medicaid to meet more of their health care expenses.

  • Lisa Desjardins:

    We do know that the majority of people who take this deduction right now are earning under $75,000.

    And also, speaking to the House Ways and Means Committee, I know the chairman has said that he wants to bring this up, bring this, put this on the table during negotiations, see if there's a way to find a middle ground here.

    But Republicans overall, Cristina, say that this is in the name of spreading out sort of tax benefits, so that take away these deductions and more people get a tax cut. Do they have a point there?

  • Cristina Martin Firvida:

    Well, we have been telling policy-makers what you just noted.

    This is a middle-income deduction. Close to 70 percent of the individuals who claim it have income under $75,000. By comparison, only 35 percent of individuals who claim the mortgage interest deduction or the charitable deduction have incomes of under $75,000.

    So I think an important thing to bear in mind is, as we look for ways to simplify the tax code, we also want to be fair in the way that we do that. And it's unfair to tell people who are sick, through no choice of their own, that their taxes may go up.

  • Lisa Desjardins:


    Cristina Martin Firvida of AARP, thank you for joining us.

  • Cristina Martin Firvida:

    Thank you.

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