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The Impact of the New Tax Law on Government Benefits

During a recent Founders Series webinar, the owners of ElderCounsel discussed the new tax law and some concerns with what may be coming now that this new legislation is in place.

On December 22, 2017, President Trump signed H.R. 1 into law. This new tax law went into effect January 1, 2018 and put into place permanent and massive cuts to corporations and wealthy Americans. It is partially funded by eliminating health insurance for 13 million Americans and by limiting tax deductions that benefit lower and middle-income Americans. With the new tax law in place, there is a $1.5 trillion increase to the deficit to make-up in some way or another. As elder law and special needs planning attorneys, we are concerned that this will result in a severe impact on government benefits.

We are expecting many of these cuts to Medicare and Medicaid.

  • $473 billion in cuts to Medicare are expected
  • Over $1 trillion in cuts to Medicaid expected (through block grants or per capita spending limits)

According to the leadership of the House, we can expect cuts to begin as early as 2019. It's clear that with these budget issues looming, it is going to put significant pressure on all government programs such as Medicaid and Medicare, but also including other areas such as food stamps.

One of the items we are watching very carefully is anytime there is a budget deficit through the change in the law, if the change in the law results in costs savings elsewhere that you can offset, and you may not trigger PAYGO. PAYGO is a budget rule that has been around since 2010. PAYGO requires across-the-board cuts to many mandatory programs, including Medicare, if economic growth fails to offset the loss of revenue from the tax cut. There is concern that through the existing framework in this provision that we are going to see $410 billion in cuts to Medicare over 10 years. And in fact, but for congressional action, $25 billion was supposed to be cut from the Medicare program this year. Congress waived the 2018 cuts. It remains to be seen if they will waive 2019 as well.

Other impacts to the Medicare program we as elder law attorneys need to pay attention to are:

  1. Republicans are calling for raising the age of Medicare eligibility from 65 to 67.
  2. Republicans are calling for moving to a premium-support, or voucher program.
  3. Donut Hole Closure may be in Jeopardy, involving the Medicare Part D prescriptions drug program. Efforts to close the donut hole by 2020 may not happen.

The final government program we are paying attention to is the announcement from the White House on February 19, 2018 regarding a new program called "America's Harvest Box." They want to move away from delivering food stamps to the beneficiary to a system that operate to food delivery directly to the recipient’s home. They are addressing the fraud in the system with this program and state they will save $213 billion over 10 years. If they did this program, there are more than 42 million Americans on this program that will be affected.

We continue to track the impact of the new tax law on government benefits programs and are dedicated to keeping our membership community up-to-date as well.

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