Back in August 2010 Retire Early noted that "Obamacare makes it easier for millionaires to retire early". A retiree taking a 4% or $40,000 annual withdrawal from a $1 million portfolio could be eligible for a sizeable refundable tax credit under the program.
Last week the Associated Press reported that a recently discovered loophole in the Affordable Care Act (aka Obamacare) would allow a retired couple with as much as $64,000 per year in income to qualify for Medicaid. Apparently, in a major change from today's rules, the Affordable Care Act exempts most Social Security income in determining eligibilty. Thus, a married couple both drawing the maximum annual benefit of about $23,500 each could still get about $17,000 in income from other sources and qualify for Medicaid, the free health program for the poor.
Of course, many millionaires might be hesitant to get their health care in the types of venues frequented by the underprivileged -- what would the people at the country club think? But they don't have to, and they can still get a sizeable refundable tax credit.
For example, let's say a married couple of 60-year-olds living in an area with high health care costs had an income of $65,000 (Combined Spcial Security benefits of $47,000 annually plus $18,000 from other sources, about $1,000 above the cut-off for Medicaid eligibility.) The Kaiser Family Foundation estimates that this couple could see a health insurance premium of $12,206 per year each ($24,412 for a the couple.) However a couple earning just $1,000 over the Medicare eligibiliy threshold would only be required to pay about $1,000 out-of-pocket for health insurance premiums and would receive a refundable tax credit for the other $23,412. The upside being that they could still go to the same doctors as their wealthy friends at the club.
Will this last?
Probably not. If this loophole in the Affordable Care Act was a multi-million dollar windfall for some big corporation, our Congresscritters who are bought and paid for by Big Business would likely let it stand. But since it benefits largely middle-class retirees, expect it to be "fixed" in some way. A sensible plan is still to delay taking Social Security until at least age 65 when Medicare eligibility begins. And then manage your retirement portfolio to reduce taxable income in the years prior to Medicare eligibility to maximize the size of the refundable tax credit under Obamacare.
Related Web Sites for additional information.U.S. Department of Health & Human Services -- www.healthcare.gov - The Obama Administration website that explains the implementation of the new Health Care Reform law.
Kaiser Family Foundation -- Summary of New Health Reform Law - A 13 page PDF document that explains the new Health Care Reform law.
2011 Federal Poverty Level -- poverty level for each of the 50 states.
Health Care and Education Affordability Reconciliation Act of 2010 - Full text of Health Care Reform law passed by the Senate and House of Representatives.
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Copyright © 2011 John P. Greaney, All rights reserved.