Healthcare question

[AllDone]

This article from a neutral website, WebMD, explains the Medicaid work around:

How Poor Might Qualify For Obamacare Subsidies In States That Don't Expand Medicaid - WebMD

I used to work for a very large primary care practice in a high income county. We contracted with MediCal (CA Medicaid) to take a certain number of patients per year. They weren't treated any differently from the Medicare, Medicare Advantage, or commercial patients. If your income is low enough to qualify for Medicaid, then sign up!

 

[gozer]

This article from a neutral website, WebMD, explains the Medicaid work around:

How Poor Might Qualify For Obamacare Subsidies In States That Don't Expand Medicaid - WebMD

I used to work for a very large primary care practice in a high income county. We contracted with MediCal (CA Medicaid) to take a certain number of patients per year. They weren't treated any differently from the Medicare, Medicare Advantage, or commercial patients. If your income is low enough to qualify for Medicaid, then sign up!

Don't some states do means based testing for medicaid? Or is that a myth-conception.

 

[ziggy29]

Don't some states do means based testing for medicaid? Or is that a myth-conception.

They do, but I believe the states that expanded Medicaid will no longer be able to do that. States that did not expand Medicaid still might.

Also, states are required to seek reimbursement from estates of individuals who received Medicaid benefits at age 55 and older. (It's not required for individuals receiving benefits under age 55.) ACA didn't change this aspect of the law. So even if you have almost no income and can go on Medicaid, if you have a million dollars in the bank and receive Medicaid benefits at age 55 and older, the state will claim a chunk of that when you kick the bucket to recoup its costs.

 

[AllDone]

Don't some states do means based testing for medicaid? Or is that a myth-conception.

. All states still do means testing, but the ones that accepted expansion, now provide Medicaid to people who make up to 138% of FPL and they no longer can require other special conditions. Prior to Medicaid expansion, many states required Medicaid enrollees to also meet special requirements such as pregnancy, parents of minor children, chronic disability, etc. as well as meet varying levels of income and asset limits.

Note, also, that subsidies begin at 100% of FPL, so if you fall in the 100-138% FPL range, you have your choice in expansion states, but Medicaid will be the cheapest option for you.

 

[MichaelB]

No expert here but I think in the Medicaid expansion states the elimination of asset tests only applies to healthcare insurance. Nursing home, other LTC and assistance programs are still subject to asset limits.

 

[sengsational]

Until you turn 65 and get on Medicare, then none of this matters anymore. I just retired last week. I'm 48, so I have about 17 years of this nonsense. 7 years trying to keep my income high enough to get subsidies, but low enough to minimize/eliminate federal taxes. Then 10 years of trying to minimize income enough to still get subsidies, while converting as much IRA to roth as I can while staying in the 15% income tax bracket so that my capital gains rate is 0.

I guess it helps if you sort of enjoy the game.

Can you tell me more about holding off Roth conversions for 7 years?

 

[donheff]

When you think about it this dilemma is not a bad one to have. It used to be early ERs worst fear was being locked out of health insurance. Now they are worried about the stigma of accepting free HI instead of just getting a subsidy.

 

[ERhoosier]

Confusingly, "means testing" seems to be used 2 ways in the press- testing income & testing assets. IIRC, Medicaid is (& almost always has been) income tested but only some states still have asset limits. It has been argued that since so few have large assets but minimal income, asset-testing/auditing Medicaid recipients is not cost-effective (EXCEPT for LTC issues).
Special conditions have historically been imposed by some states as part of Medicaid eligibility, but chronic disability per se is generally a Medicare issue. With certain combinations of age, disability, and low income, some folks qualify for both Medicare & Medicaid (as primary & secondary HI).

 

[gozer]

Can you tell me more about holding off Roth conversions for 7 years?

In the almost 7 years before our pensions kick in, we can easily pay nothing in federal income taxes. This is while enjoying a fairly comfortable life style living off cash, bonds and using up the carry forward loss from the great recession when we sell stocks from our taxable portfolio. We could do IRA to Roth IRA conversions while trying to stay in or near that tax free mode. Prior to ACA, this seemed the obvious choice to me.

However, healthcare subsidies under ACA have become a third variable that must be considered. We get 14K in tax-free muni bond fund interest per year and some capital gains distributions from funds that we can't easily control. So we have some things that already qualify as MAGI. This means our IRA to Roth IRA conversions will be further minimized if we want to maximize healthcare subsidies under ACA. Convert too much and healthcare premiums go up and/or I lose cost sharing subsidies. 10K in premium subsidy and up to another 0-12K in cost sharing subsidies depending on actual medical usage in the given year.

So the game, or linear algebra problem for the math inclined, becomes at what point do we convert just enough IRA to Roth IRA to maximize tax free money later, while not losing healthcare subsidies or paying too much taxes now. Since future tax rates and value of cost sharing subsidies are unknown, there is some guess work in all this.

 

[sengsational]

I wish I remembered enough about my undergrad to model the decision using linear programming. Might be a fun side-project. But thanks for calling out the pension event...one which I don't have..or actually do have, but its small enough to be ignored for now. Although I don't have as many things providing income, we're on the same page with spending after tax funds and controlling income and the associated taxes. Nice to know I'm not the only one with carry forward losses as far as the eye can see, hehe!

 

[gozer]

I wish I remembered enough about my undergrad to model the decision using linear programming. Might be a fun side-project. But thanks for calling out the pension event...one which I don't have..or actually do have, but its small enough to be ignored for now. Although I don't have as many things providing income, we're on the same page with spending after tax funds and controlling income and the associated taxes. Nice to know I'm not the only one with carry forward losses as far as the eye can see, hehe!

When the market was down around 2008, I made an effort to realize losses by selling most of my taxable portfolio. The losses out weighed the gains. 45 days later I bought back into ETF index type funds which were more tax efficient than much of what I had been invested in prior to this move. I shifted to almost all index fund type things. Muni bond fund is the only major exception.

This is probably one of the best planned out moves I ever made. Every year since, 3K comes off my income because I have more carry forward loss left, than realized gain for that year. Since I was in the 28% and sometimes 33% marginal tax bracket, it was a nice amount saved each year on top of wiping out any capital gains. I took the losses when I was in a higher tax bracket and paying higher capital gains. Going forward I will be paying 0% capital gains. Which is why resetting my cost basis on that money doesn't bother me at all. When I made the move I was hoping for a 5% capital gains rate based on the tax laws at that time. But at least for now, it's 0%. Jackpot.

 

[wmc1000]

The ACA subsidy makes it possible for me to retire this year but I have actively decided to wait until 2016 to make certain that the subsidy component doesn't go "up in smoke" after the first year or two if it becomes too onerous due to the lack of "healthy individuals" signing up. The potential ER scenario of health costs going from $4000 a year to $18,000 a year without a subsidy program is not one I want to experience.

 

[Rpharmer]

Having worked briefly for the IRS, I worry about the conversations I overheard regarding filers who seemingly/knowingly over or under estimate taxable income. But fortunately, I can choose to do a Roth conversion, and will do one each year until Medicare age 65. I targeted a $14,000 MAGI, which precludes Medicaid eligibility, regardless of what Missouri does with or without expansion or alleged "reform," and maximizes the premium and cost-sharing subsidies for the plan and network I desired.

The modest additional amount of taxes I owe in April has already been dwarfed by the savings in medical expenses, because I bought a BCBS Silver plan with a $250 deductible and a $500 out-of-pocket max. (Not an option for many, I'll admit. I just want to offer proof that not everyone on the exchange faces thousands in out of pocket costs -- far from it.)

In fact, I am within $100 of meeting the OOP max for the year, because of ONE trip to the dermatologist last week, to have two basal cells removed. All I owe is 10% of the allowable charges, whereas last year I would have owed ALL the allowable charges, (yes, thousands) because my old deductible was $5000. On Jan 2, 2014, I met my deductible, at the pharmacy (of course!)

The biggest challenge I faced in ER used to be estimating and budgeting for medical expenses... that's one spreadsheet I'm happy not to need anymore!

 

[ziggy29]

I targeted a $14,000 MAGI...

The modest additional amount of taxes I owe in April has already been dwarfed by the savings in medical expenses, because I bought a BCBS Silver plan with a $250 deductible and a $500 out-of-pocket max. (Not an option for many, I'll admit. I just want to offer proof that not everyone on the exchange faces thousands in out of pocket costs -- far from it.)

Proof isn't needed, but you have to have a *very* low income to have cost sharing this low.

Sure, if you have enough Roth and already taxed savings to live on while you only generate $14K in taxable income you can do this.

That's not most people.

Just change that income from $14K to a still very modest $30K, and all the Silver plans in Missouri shoot up to deductibles of $1750+ and OOP maxes of $3600+.