3 Ways the New Tax Law Will Hit Seniors Hard in Health Costs

The following is a guest post from Chris Orestis, Executive Vice President of GWG Life. Chris has more than 20 years of experience in the insurance and long-term care industries and is nationally recognized as a healthcare expert and senior care advocate. He is a former Washington, D.C., lobbyist who has provided legislative testimony and the author of two books: Help on the Way and A Survival Guide to Aging.

Trump’s new Tax Law, which will result in a $1.5 trillion tax cut, is seen by some as a Christmas present to most American taxpayers. Critics of the law, however, suggest that the Grinch will have stolen Christmas from some seniors.

Decision Time

Older Americans have some important issues to consider in terms of how the new tax law will affect their health-care costs.

For starters, the tax reform eliminates the tax deduction for medical expenses, and although a relatively small percentage of the population claim this deduction, it had a coalition of opposition to the largest tax reform proposal in a generation. According to the IRS, about 8.8 million households filed 2015 tax returns that claimed the medical expenses deduction. The American Association of Retired Persons’ (AARP) Public Policy Institute says 69 percent of those taking the deduction had income of under $75,000, and 49 percent were below $50,000.

Jeff Sheldon

The irony of the new tax law is that it penalizes people who are covering their own costs instead of relying on taxpayer-funded coverage through Medicaid.

How three pieces of the new tax law that could adversely impact seniors and their health care:

  • Eliminates medical expense deduction. Under the previous tax law, you could deduct family medical expenses if the cost exceeded 10 percent of your adjusted gross income. The new law, ended this deduction and will particularly impact seniors paying for long-term care. This tax deduction was especially beneficial for seniors who are paying for long-term care costs not covered by Medicare or private insurance. It provided a critical tax break for seniors in this category and the elimination of this deduction will have a disproportionately negative impact on seniors paying for the expensive costs of skilled nursing homes and long-term care.
  • Eliminates Obamacare’s insurance mandate. The AARP opposed the repeal of the insurance mandate because of the spikes in insurance premiums that will result. De-incentivizing the young and healthy to get insurance or basically allowing them to drop coverage will make coverage for the old and sick more expensive.
  • Cuts to Medicare and Medicaid. One reason for the failed efforts to “repeal and replace” the Affordable Care Act was the likelihood that millions would have lost coverage due to Medicaid cuts. The new Tax Law triggers a $25 billion slice to Medicare in 2018 to help to begin accounting for the $1.5 trillion tax cut. Medicaid covers 60 percent of those in nursing homes. It’s important to recognize the fact that Medicaid is the nation’s primary payer of long-term care services, in the same way that Medicare is the nation’s payer of hospital and doctor visits for anyone over the age of 65.

Final Thought

A more sensible approach to tax reform is to look for ways to use the tax code to create incentives for people to take personal responsibility, whenever possible, over relying on taxpayer-funded government programs such as Medicaid.


Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.


  1. Good article JM. Seniors (under age 65 and retired) where we live have had a terrible time under the current ACA program, namely $6,500 annual deductibles and monthly premiums in excess of $1,200 per month. Many have delayed medical procedures until reaching age 65 when they can fall under Medicare. It’s wonderful to count the number of new Medicaid recipients, but they’re paying nothing into the system, only receiving benefits. These seniors are supporting them and now under the new tax law, they’ll be hit again. Granted, the standard deduction has doubled which in theory is supposed to aid in covering some of these expenses. Here in Arizona, one in four citizens are now on Medicaid(ACCHS). This explains why premiums are going through the roof. Your last line, where you comment on the personal responsibility aspect is spot on……health care really is a tough nut to crack!

    • No doubt it is tough nut to crack. However, it is in our best interest to build a better system. Health care as it existed before the ACA was not working for the vast majority of Americans and was unsustainable. We are all better served when we have a populace which has guaranteed access to health care, particularly preventive care which improves productivity and saves money in the long run.

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