Author Topic: Obamacare vs Medicaid  (Read 4607 times)

Exflyboy

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Obamacare vs Medicaid
« on: November 25, 2014, 06:53:19 PM »
I'm sure this must have come up before but..

When my Wife retires in 2 years (at 52) our combined income will drop to our rent $15k plus dividends ($7k) last year. i.e $22,000 total. Note we have $50k or so in cash and about $0.5M in stocks and bonds in after tax accounts.

So looking at how the ACA subsidy is calculated, it says the bottom limit is $21,707, below that your enrolled in medicaid if you live in such a State (we do).

So trying my best to understand how MAGI is calculated, it seems you take your AGI then add a few sundries which don't add up to very much money.

 Seeing as AGI (line 37) has Trad IRA contributions removed it seems in our situation we can very easily make our MAGI either fall into medicaid or ACA (with max subsidies).

So my question is.. 1) is my logic above correct and 2) whats the best course of action for reasonable healthcare?

Thanks

Frank

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Re: Obamacare vs Medicaid
« Reply #1 on: November 25, 2014, 10:29:09 PM »
I have a similar problem, but at the other end of the spectrum. My pension and my wife's income put us just over the $62k limit for subsidies. We are going to lower our MAGI with a combination of HSA contributions and a direct rollover of part of my pension payments into an IRA.  Not sure if simply contributing to an IRA will do the job.  Medicaid was never an option for us, so I did not study it.  One thing I did learn is that our current doctor does not take medicaid patients and neither do any of his partners.  Before you go the medicaid route you might want to check the availability of providers in you area.

sol

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Re: Obamacare vs Medicaid
« Reply #2 on: November 25, 2014, 11:17:04 PM »
Before you go the medicaid route you might want to check the availability of providers in you area.

This would be my only concern.  In some parts of the country, medicaid is less than stellar because there are so few providers.

Theoretically the quality of the care is the same because there are no medicaid-only doctors, but I've heard complaints from some people that they can't find a local medicaid specialist for whatever weird thing they need.

I'd start by asking your current care providers if they accept medicaid.

johnhenry

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Re: Obamacare vs Medicaid
« Reply #3 on: November 26, 2014, 12:15:12 PM »
I don't have any good answers, but I have some additional questions.  If other forum members can help us get those answered, maybe a best option will become obvious.

1) Isn't medicaid still "means tested"??   What does medicaid "look like" for someone who has income at a level low enough to qualify, but has enough assets to be comfortably retired?  Someone with an income of $15000, but a net worth of $900K for example.

2) The law says that to be eligible for an ACA plan, your income must be above the threshold to qualify for medicaid.  But isn't it true that when you sign up to actually purchase an ACA plan, you provide an "estimated" income??  Your real income can never really be known until the end of the year.  And for those who buy ACA exchange plans, their monthly premiums are calculated assuming their income will meet their estimated income.  As I understand it, if your income, as reported on tax return, is enough higher that it bumps you into a higher "ACA subsidy bracket", then you'd basically owe the difference between the subsidy you did receive minus the subsidy you should have received. 

So my second question is a technical one:  What is done if the actual income is LOWER than the estimated income?  By the time that calculation can be made, the year will be over.  All premiums will have already been paid and insurance provided.  It seems that I read somewhere that your previous year's tax return should be used to calculate your estimate, but I know from experience when buying an ACA plan for 2014, I was not required to provide any documentation.

Are there any measures in place to keep an early retiree making $14,000 a year from just estimating their income at $30,000, and buying an ACA plan with a subsidy based on that amount?  What about doing that same thing the next year, when their income from the previous year really was $14,000??

The law is so new, there may be no way to make all the unknowns known before you need to buy insurance.  If I was in your shoes, I would lean heavily towards buying a plan on the ACA exchange and dealing with the unknown consequences before I would sign up for medicaid and navigate those consequences.  After all, aren't we really ALL in your shoes?? All of us (not eligible for medicaid) are eligible to buy a plan on the ACA even if our high income or employer-provider coverage prevents a subsidized price.  And even those of us with what we consider a secure job making $300K/yr, could find ourselves in a weird circumstance such as an accident in the second week of January that kept us from working the rest of the year, causing our income to be below the 100% of the FPL.  Obviously, frugal early retirees are more likely than others to find themselves in this situation.  Maybe in January some forum members will find themselves in this situation and be able to report their experience.


Eric

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Re: Obamacare vs Medicaid
« Reply #4 on: November 26, 2014, 01:04:24 PM »
Are there any measures in place to keep an early retiree making $14,000 a year from just estimating their income at $30,000, and buying an ACA plan with a subsidy based on that amount?  What about doing that same thing the next year, when their income from the previous year really was $14,000??

It's my understanding that if your income is low enough to qualify for Medicaid, then you do not qualify for any subsidies.  So you can still purchase an ACA compliant plan, but it would just be at full price.  So in this case, you could could end up owing a lot of extra money at the end of the year as no subsidies would apply since your income was too low.  (yes, I agree this is sort of screwy)

UnleashHell

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Re: Obamacare vs Medicaid
« Reply #5 on: November 26, 2014, 03:34:17 PM »
you could withdraw money from your 401k/ira to take you over the income minimum.  sure you'd pay a 10% penalty but it might work out cheaper when you factor in the subsidies.

I think....

Eric

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Re: Obamacare vs Medicaid
« Reply #6 on: November 26, 2014, 03:52:51 PM »
you could withdraw money from your 401k/ira to take you over the income minimum.  sure you'd pay a 10% penalty but it might work out cheaper when you factor in the subsidies.

I think....

You wouldn't have to withdrawal it.  Just roll it over into a Roth.  10% Penalty avoided, income increased, and taxes pre-paid for future use.

UnleashHell

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Re: Obamacare vs Medicaid
« Reply #7 on: November 26, 2014, 04:00:46 PM »
you could withdraw money from your 401k/ira to take you over the income minimum.  sure you'd pay a 10% penalty but it might work out cheaper when you factor in the subsidies.

I think....

You wouldn't have to withdrawal it.  Just roll it over into a Roth.  10% Penalty avoided, income increased, and taxes pre-paid for future use.

Nice!

(can you tell its not an issue for me yet - still working :D )

seattlecyclone

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Re: Obamacare vs Medicaid
« Reply #8 on: November 26, 2014, 04:28:34 PM »
Yes, under your projected income you will be flirting with the border between Medicaid and exchange plans. What type of account are your stocks and bonds held in, exactly? Is it a Roth IRA/401(k) or is it a taxable account? Based on the dividend income you report it seems like it's likely a taxable account, but I just want to make sure. If so, you can do "tax gain harvesting": selling enough appreciated stock to bring your income above the ACA subsidy cutoff. You're in a low enough tax bracket that you won't owe any capital gains tax for doing it.

If you stay just above the cutoff, you'll not only qualify for extremely generous premium subsidies, but there are cost sharing subsidies that reduce the deductibles and coinsurance figures that you would pay under silver plans. I would personally go this route rather than relying on Medicaid because it seems to give a bit more choice about who to see for a problem and when to see them. Options are nice, and in your case the ACA plan would be very heavily subsidized.