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-   -   Moral Quandary: Free healthcare using a loophole in state system (http://www.early-retirement.org/forums/f38/moral-quandary-free-healthcare-using-a-loophole-in-state-system-62066.html)

wantingToGetOut 07-06-2012 10:46 AM

Moral Quandary: Free healthcare using a loophole in state system
 
In my state of Mass., we have subsidized health care for low income families.

In talking with the people who run it, there appears to be a loop hole that I can use to get pretty much free health insurance for my family and keep all the doctors/hospitals I already use.


The "loophole" is that the eligibility is only based on income. It is NOT based on AGI. It is only based on income you would receive on a W2(before deductions) and from rental property, alimony, child support, pension, Social Security etc.


They do NOT consider interest/dividends/cap gains as income (I asked this question to the customer service representative working at MassHealth as it caught me off guard). They consider interest/dividend/cap gains as part of your assets and that does not factor into eligibility for me.


Since I do not work as an early retiree and have no other income outside of the interest/dividends/cap gains, I am very likely going to qualify for the max benefits (which is almost a free ride).


We are relatively well off but we are that way because we watch our expenses. Health care dominates our expenses. ~$13k of the ~$54k we spend every year is on health care.


Obviously dropping from $54k to $41k is going to make a huge difference in terms of my SWR.


My wife feels like we are going to be sponging off the state when the plan was not meant for people like us. I can't get past the numbers though.


Since others will likely be facing a similar choice come 2014 if/when the national plan kicks in, I was interested to see if other people had some moral issues with this loop hole.

REWahoo 07-06-2012 10:59 AM

Quote:

Originally Posted by wantingToGetOut (Post 1210303)
Since others will likely be facing a similar choice come 2014 if/when the national plan kicks in, I was interested to see if other people had some moral issues with this loop hole.

Although what you describe may be perfectly legal and comply fully with the letter of the law, it does not comply with the spirit of the law.

I would not sleep well at night if I got a free ride under similar circumstances. Posting the question here indicates you have some doubts. Remember, you have to look at yourself in the mirror if you decide to take advantage of the loophole.

wantingToGetOut 07-06-2012 11:04 AM

Yes I agree with your sentiment.

I also am having a hard time imagining that come 2014, there are going to be more than a handful of people in this exact same spot who are going to 100% turn it down. I have even read in other threads that it is going to change when people think they are going to retire.


I wonder if the majority who are eligible will say no to the free money.


In a related question, are we early retirees such a small niche that it was not worth covering this loophole with a simple means/assets test?

Texas Proud 07-06-2012 11:10 AM

I will be on the other side of this....

It is NOT a loophole.... if what they say is correct, it was a decision that was made when the law was passed... if they do not like the results, they can change the law.... until they do (if they do), enjoy the free ride..


I can afford to do a number of things without gvmt help, but if that help is offered without jumping through a bunch of hoops, then I am going to take it...

wantingToGetOut 07-06-2012 11:15 AM

Quote:

Originally Posted by Texas Proud (Post 1210310)
I will be on the other side of this....

It is NOT a loophole.... if what they say is correct, it was a decision that was made when the law was passed... if they do not like the results, they can change the law.... until they do (if they do), enjoy the free ride..


I can afford to do a number of things without gvmt help, but if that help is offered without jumping through a bunch of hoops, then I am going to take it...

Loophole was probably a bad term on my part. It just seems so obvious to me that this is something that could have been covered quite easily.


And from what I have read of the national plan, it appears to have the same opening in the eligibility.

Brat 07-06-2012 11:18 AM

Perhaps, so long as this option exists for you, you take the money you save and donate it to a health care charity of your cholce. If you are of a mind that charity begins at home put it in your children's college savings accounts. My thought is that the option may not remain forever, build the expense in your budget but set it aside for something you value.

wantingToGetOut 07-06-2012 11:24 AM

Quote:

Originally Posted by Brat (Post 1210314)
My thought is that the option may not remain forever, build the expense in your budget but set it aside for something you value.

I thought this as well until I read that the national plan also does not have an asset/means test.


My guess is the people who can take advantage of this are relatively so small in number that it was not worth it to try and cover

samclem 07-06-2012 11:25 AM

Quote:

Originally Posted by REWahoo (Post 1210307)
Although what you describe may be perfectly legal and comply fully with the letter of the law, it does not comply with the spirit of the law.

I would not sleep well at night if I got a free ride under similar circumstances. Posting the question here indicates you have some doubts. Remember, you have to look at yourself in the mirror if you decide to take advantage of the loophole.

I disagree. Who can know what the spirit of this law is? We can only know what the law requires. This is not a charity in which people voluntarily contributed their money in hopes of helping someone, it's just a cold government program with hard rules. The money to pay for these benefits was taken from taxpayers under rules just as capricious as the ones being used to dispense the funds.

Would anyone fail to take a tax deduction (and thereby pay more tax) just because maybe they disagree that such a deduction should exist? This is exactly the same situation. "No, I'll gladly give the state $5000 rather than deduct the mortgage interest--why should homeowners be favored over renters?" Crazy.

If you think the regulation/law is wrong, then definitely work to get it changed. But in the meantime take full advantage of it just as written. That's not hypocritical at all.

If you still feel bad about complying with the law as written, take the difference you would have spent and donate it to a medical charity for the indigent. I'll bet each buck does a lot more good that way than if you left it with the State of Massachusetts. You can already see that their criteria is a mess.

wantingToGetOut 07-06-2012 11:30 AM

Quote:

Originally Posted by samclem (Post 1210317)
I'll bet each buck does a lot more good that way than if you left it with the State of Massachusetts. You can already see that their criteria is a mess.

As I mentioned previously, the Mass criteria is not of much different from the National criteria for the PPACA in terms of an assets/ means test. At least from what little we know of the PPACA at this time.

REWahoo 07-06-2012 11:32 AM

I love threads like this - they clearly demonstrate we can all find justification why whatever decision we make is the right one... :)

M Paquette 07-06-2012 11:46 AM

Quote:

Originally Posted by wantingToGetOut

I thought this as well until I read that the national plan also does not have an asset/means test.

My guess is the people who can take advantage of this are relatively so small in number that it was not worth it to try and cover

The PPACA subsidy as written will consider both taxable and tax exempt dividend and capital gain income.

wantingToGetOut 07-06-2012 12:03 PM

Quote:

Originally Posted by M Paquette (Post 1210324)
The PPACA subsidy as written will consider both taxable and tax exempt dividend and capital gain income.

I did not realize this. This makes more sense to me.


I had read that the PPACA was going to be based on AGI but from your information that does not appear to be true.


Thank you.

easysurfer 07-06-2012 12:16 PM

To answer the moral quandry question...

Sometimes, taking the tax advantages of having a HSA (triple tax benefit) feels like I'm getting a free ride as it feels like I'm just shuffling money around.

I contribute, then use the tax deferred contributions to pay myself back for qualified medical expenses, all the while get a tax deduction for the contributions come tax time. Additionally, some folks don't even use a HSA for medical expenses yet, but instead think of it as a super IRA.

I love my HSA. But is that a free ride, or just wise planning?

p.s. No political statement intended.

MichaelB 07-06-2012 12:21 PM

If the program is MassHealth, investment income is considered. It looks very much like SSI or other need based programs.
http://www.massresources.org/masshea...igibility.html
Quote:

What income is counted?

The following income is counted:

Wages, salary, tips, commissions (before deductions)
Self-employment income (minus expenses)
Social Security benefits
Railroad Retirement benefits
Pensions and annuities
Federal veterans' benefits (minus allowed exclusions)
Interest and dividends
Rental income (minus expenses)


wantingToGetOut 07-06-2012 12:23 PM

It looks like the PPACA is going to be based on MAGI(not AGI as I mistakenly thought) according to this document (great info in here).

Go to page 6
http://www.ncsl.org/documents/health...MedicdProv.pdf



Seems to be a bit of a trade off between the PPACA and the Mass plan in terms of eligibility.


The PPACA appears to include certain deductions and includes interest/dividends
The Mass plan does not include either deductions or tax exempt interest/dividends

wantingToGetOut 07-06-2012 12:27 PM

Quote:

Originally Posted by MichaelB (Post 1210334)
If the program is MassHealth, investment income is considered. It looks very much like SSI or other need based programs.
http://www.massresources.org/masshea...igibility.html

It is Mass Health.


I called them earlier as I saw that exact line at that web site you linked.


I talked to the representative to confirm and dividends/interest does not apply to people under the age of 65. They categorize dividends and interest as an asset and they apply to people over 65.

Does not make a ton of sense though. I should probably call back.

ERD50 07-06-2012 12:32 PM

Quote:

Originally Posted by wantingToGetOut (Post 1210313)
Loophole was probably a bad term on my part. It just seems so obvious to me that this is something that could have been covered quite easily. ....

Quote:

Originally Posted by samclem (Post 1210317)
... Who can know what the spirit of this law is? We can only know what the law requires. ....

If you think the regulation/law is wrong, then definitely work to get it changed. But in the meantime take full advantage of it just as written. That's not hypocritical at all.

Exactly. It is the lawmaker's job to write the law as they intend. If they intended to include div/int, then they should have written it that way. We are not the Supreme Court, we are in no position to question the intent, we can only follow the rules as written (and that is often difficult, as in 'substantially identical' with regards to a wash sale - but don't get me started).

Quote:

Originally Posted by REWahoo (Post 1210320)
I love threads like this - they clearly demonstrate we can all find justification why whatever decision we make is the right one... :)

It's not justification, it is reading and complying with a law as it is written. It's not we are trying to 'justify' going 65 in a 45.

-ERD50

plex 07-06-2012 12:39 PM

Just keep in mind that even if Mass. Health works the way you think it might, it won't work that way anymore in 2014. Federal law establishes the bare minimum, states can expand on it, but they can't have looser restrictions.

wantingToGetOut 07-06-2012 12:43 PM

I called Mass Health again. This customer service representative now says that taxable interest/dividends are included but that tax exempt interest/dividends are not. They sound very confused as he had to check a couple times with supervisor.

I guess I just need to wait for the eligibility check to be complete to see.


It is still an interesting question no matter what though from a high level about the moral quandary.




Thank you to everyone for your help.

Buckeye 07-06-2012 12:51 PM

I sure hope you don't take the mortgage interest deduction (assuming you have a mortgage) or claim your kids on your tax return given that you don't need the extra funds! :)


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