Tag: Medicare

All You Wanted to Know About Medicare Tax

Sanjiv Gupta CPA - 8 years ago
Medicare tax is quite popular in theUS. Like land tax and service tax, Medicare tax is imposed on earning/wage/salary of an employee or a self-employed individual. As per the 2013 budget the US government has announced an increase in Medicare tax rate; from 2.9% to 3.8%.Medicare hospital insurance amount is divided amongst the employees and the employer; both are subjected to pay half the amount of the total taxable money. Those that are self-employed have to pay the total amount as they themselves are employee and employer, rolled into one. However such individuals can file for half the amount paid as Medicare tax when filing for tax return.Medicare tax rate will be increased to bring under its fold higher-income individuals and investment income. This as a part of health care reform laws is called ‘unearned income Medicare contribution tax and it is calculated as follows:Multiply 3.8% tax rate by the lower of either of net investment income or the gross income over a certain amountWhile the net investment amount covers interests, annuities, rents, dividends, capital gains, etc the gross adjusted income includes overseas income/ income from properties abroad, etc.Employers are required to deduct an additional 0.9% from their employee’s salary which is calculated on the threshold amount. This deductible amount is the difference between 3.8% unearned Medicare tax and the 2.9% Medicare contribution tax. Because employers may not have knowledge of whether an employee is subjected to additional Medicare tax or not the tax amount is decided upon the individual’s income tax return. All extra tax amounts are to be cleared by the individual who is filing for tax return. On the other hand, if employers do not calculate on this basis then they can be subjected to penalties and fines.If you fall within the higher income group then you might want to calculate the amount that you have to pay as additional Medicare tax at the rate of 3.8%.Tax-deferred plans such as IRAs and 401(k) accounts should be the place where you would need to shift income-producing investments.Avoid taxable bonds in favor of tax-exempt bonds.To ensure net capital gains to be as low as possible you need to pair capital gains with capital losses.When the additional Medicare tax would not apply you would need to postpone selling investments with a capital gain by about a year.Children or other family members who aren’t subject to the additional Medicare tax should be bestowed with income-producing investments.Increase payroll withholding or estimated taxes to cover the additional Medicare tax.By all these methods you would be able to ensure that you plan your medicare axes well and gain greater savings.

What Are The Available Medical Deduction Plans?

Sanjiv Gupta CPA - 8 years ago
A medical deduction plan helps to reduce tax on medical expenses.  This type of plan is beneficial for one who has to spend excessively on medical issues.   Medical deduction plans allow a person to qualify for tax exemptions. However, to file a tax return on medical expenses it is essential for an individual to present all supporting medical documents.Tax Deductible ExpensesTax deduction for medical expenses is available for a large number of issues. One can get a deduction on diagnosis cost, cost of treatments and even cost of medical supplies. Medical deduction plans are available for the following issues generally. Fees payable to doctors and dentistsExpenses that one has to pay for medicines that are prescribed by a doctor.For medical aids and equipment like pacemakers, wheelchairs, hearing aids and dental equipment.Charges of weight loss program which is prescribed by a doctor.  However, the charges of low-calorie foods can not be tax-deductable.Travel expenses due to medical treatment. The cost of any type of surgery including eye surgery and cosmetic surgery.However, one point to remember is that medical expenses that improve general health such as vitamin deficiency are not tax-deductible.Who can have the benefits of a tax deduction?A taxpayer can deduct medical expenses for his/her own medical treatment, cost of equipment and surgery.A taxpayer can receive tax deduction for the treatment of a spouse.A taxpayer can claim a tax deduction for the medical issues of a person who is dependant on him/her.  Is there any exposure for non-dependant?IRS generally offers no tax deduction offers for the non-dependants. However, in some special cases tax deduction rules can be changed.IRS does not offer any coverage for a non-dependant even if it is one’s, own child. But if the child is a non-dependable according to the law of divorce or separation. A taxpayer can not claim a person as a dependent if he/she gets $3,700 and more. How to apply for tax deduction? A taxpayer can claim a deduction of medical and dental expenses if the services were made during the tax year.  An applicant can apply for a tax deduction when the payment is complete. This is applicable for each type of payment, such as online payment, payment by phone or credit card.Deduction plans for long term medical expensesIRS offers a tax deduction for long term medical expenses.  If a person suffers a long time from a severe medical issue, he/she can claim a tax deduction for diagnostic, therapeutic, treatment and personal care costs. In order to avail of a long-term medical deduction, one must meet all criteria as specified by the IRS.Medical issues must be of chronic type:  a person can be diagnosed as a chronic sufferer if he /she has been suffering for one year or more and is unable to perform daily activities without substantial cooperation.  if the mentioned person requires extensive care to maintain personal care andDiagnosis, treatment and all other necessary medical services should be executed under the supervision of a recognized doctor or medical practitioner. What should be included in long term medical deduction plans?A tax deduction can also be granted for the following issues. Expenses of meals that a person takes at a hospital or nursing home. However, such meals must be part of medical care. Charges paid for the medical conferences including transportation and admission costs. The time of the conference must involve medical sessions. A person is not capable to claim a tax deduction for food and lodging charges that he/she has to pay during the medical conference. IRS offers a tax deduction for medicines, injections and other medical supplies that are prescribed by a certified medical practitioner. For diabetes patients, the charge of insulin is deductable without prescription. A chronic patient some times requires additional nursing services to perform regular activities. In such a case, the cost to appoint a nurse or an attendant or a caregiver is deductable. Cost of operation, eye surgery can be tax-deductible. On the other hand, IRS does deduct amounts that are spent due to unnecessary surgical treatments such as some kind of cosmetic surgery, artificial implantation, etc.IRS offers a tax deduction for certain issues. These are mentioned in the following points.Stop smoking programPsychoanalysisSterilizationPregnancy test kitsSpecial educationWeight loss programIssues that do not tax deductableChildcare services for a healthy babyCosmetic Surgery except for a medical requirement.The weight loss program is only for general health and appearance improvement.Household serviceElectrolysisExpenses for funeralHair TransplantIllegal surgical treatmentsCost of Insurance PremiumsImported drugs and medicinesNutritional SupplementsFees for Veterinary treatmentDiaper Service

Everything Everyone Must Know About Medicare

Sanjiv Gupta CPA - 3 years ago
Medicare is the single-payer and social insurance health policy program in the national setting that is administered by the federal government. This has been around since 1966. It is also currently using 30 to 50 privately owned insurance companies all over the United States and is also under contract in the administration.Medicare in the US is funded by payroll taxes, surtaxes, and premiums from the beneficiaries as well as the general revenue. It also provides health insurance for Americans who are also over the age of 65 and are 65 years old, as long as they have worked and paid the system through the deductions in their payroll in the form of taxes. Medicare also offers health insurance to the young generation who have disability status as long as it is determined by the SSA or the Social Security Administration. They also consider the individuals who are suffering from the end stages of renal diseases as well as the end stages of amyotrophic lateral sclerosis.On average, the health policy Medicare covers half of the health care plan policies and charges for those who have been enrolled. These enrollees and participants must also cover the remaining costs using their supplemental insurance or their separate insurance. There are others who even get the payments fresh from their pockets. These costs also vary and depend on the total of the health care policy that the enrollee from the Medicare needs. There might also be costs of the services that have been uncovered. For example, for the long-term policies, these include the hearing, dental as well as vision care. These also include insurance premiums that are supplemental.It is important to know that Medicare has four Parts. Part A covers hospice and hospital services and costs. Part B covers the costs for outpatient services. Part D is the portion that covers the prescription drugs that are self-administered. Part C serves as the alternative to all the other parts that are allowed to experiment with structured plans that are set up differently which also reduces the costs to the government. This lets patients decide which plans to choose and they usually opt for one that has the most benefits.History of Medicare Medicare has always been known as Medicare. This was the original name given to the program that has provided medical care for different families of the people who were serving in the military. They were part of the military and members of the Dependent’s Medical Care Act. This was passed in Congress in 1956. It was President Eisenhower who held the very first White House Conference on the topic of Aging. This was in January 1961. This was also the time when the program for health care that would provide social security benefits was proposed. In July 1965, when Lyndon Johnson was the president, Congress has enacted under the benefits of Medicare as stated in Title XVIII and stated in the Social Security Act. It also provided the health insurance coverage and policies to individuals aged 65 and even older, no matter how much they earn and their medical history. Johnson then signed the bill and it became a law on July 30, 1965. This was done at the Presidential Library named after Harry S. Truman in Independence, Missouri. The first recipients of the said program were Former President Truman along with his wife, the former First Lady named Bess Truman.Before Medicare was created, around 60% of individuals who were over the age of 65 had access to health insurance. The coverage, unfortunately, was often unaffordable and unavailable to most, simply because the older individuals paid more than thrice as much for the younger people who had health insurance. Many of this younger group have become eligible for both Medicaid and Medicare because the law was passed and this gave them the benefit.In 1966 Medicare combatted the racial integration of many people who were in the waiting room. They also promoted desegregation in hospital floors as well as physician practices and made sure that any race is equal whenever they made payments to their health care issuers and providers.Medicare has been operating for almost half a century and it has gone through several changes. For example, since 1965, the provisions of Medicare have already expanded and included benefits for physical, chiropractic therapy and speech in 1972. Medicare also added the beneficiaries to opt and pay for health maintenance in the 1980s. Through the years, Congress has already expanded the Medicare eligibility to younger individuals who have been diagnosed with permanent disabilities and also received the SSDI or the Social Security Disability Insurance payments. Those who have also been diagnosed with ESRD or end-stage renal disease are also eligible for this.In the 1980s, the association of Medicare with HMOs has begun and it was formalized under the presidency of Bill Clinton. It started in 1997 in the form of Part C of Medicare. In 2003, under the presidency of George W Bush, the program under Medicare that covered almost every drug was submitted to the congress and was passed as the bill. It was also taken in effect in Part D of Medicare.In the year of 1982, the government has also added the benefits to hospice in order to assist the elder policyholders but only on a temporary basis. It became permanent in 1984. Congress has also expanded this further in 2001 to include the younger individuals with Lou Gehrig’s disease, also known as ALS or the scientific name is amyotrophic lateral sclerosis.Administration of Medicare The CMS or the Centers for both Medicare as well as Medicaid Services is the component of the HHS or the Department of Health and Human Services that also administers Medicaid, Medicare, CHIP which is also the Children’s Health Insurance Program, CLIA and Clinical Laboratory Improvement Amendments and also parts of the ACA or the Affordable Care Act. Along with the Department of Treasury and Department of Labor, CMS also looks into the implementation of the insurance reform and the provisions on the Accountability Act of 1996 which is Health Insurance Portability. This is also known as HIPAA. Most aspects and parts of the PPACA or the Patient Protection and Affordable Act. The SSA and the Social Security Administration is also responsible for determining the eligibility for Medicare, payment, and eligibility for Extra Help as well as the Low-Income Subsidy Payments that are related to the Part D of Medicare. It also collects the payments that are premium for the program that Medicare conducts.The Chief Actuary of the CMS is also responsible for providing the necessary cost projections and accounting information to the Trustees of the Medicare Board. It is essential in assisting them and also assessing the financial care and health of the Medicare program. The Board is also required by the law to give out annual reports regarding the financial status of the Trust Funds of the Medicare. Those reports are also required to contain the actuarial opinion statement from the Chief Actuary.Since Medicare programs started, CMS has always been the institution that was contracted with the insurance companies that are privately owned in order to operate the intermediaries between the medical providers and the government to be responsible for administering Part B as well as Part A benefits. The processes that are contracted also include the claims and the processing payment along with clinician enrollment, call center services as well as a fraud investigation. In 1997, other insurance and policy plan companies started administering Part C. In 2005, other insurance plans started administering Part D.The RUC or the Relative Value Update Committee or what is also known as the Specialty Society Relative Value Scale Update Committee is composed of a group of physicians that are associated with the AMA or the American Medical Association. This institution advises the policyholders as well as the government regarding the pay standards for the insurance plan of Medicare as well as the procedures that patients should be performed by professionals as well as doctors under Part B of Medicare. A similar yet different CMS system that also determines the rates that are paid for hospitals along with acute care. This also includes nursing facilities that are under Part A of Medicare.Financing of Medicare Medicare has also several sources where it gets its finances. The inpatient under the portion Part A can be admitted in skilled nursing and hospital coverage and this is largely funded from 2.9% of the revenue and payroll tax. The law also provided a maximum amount when it comes to the compensation of the Medicare tax as well as its being imposed every year. The Social Security tax also works in a similar way. On January 1, 1994, the government removed the compensation limit. Employees who are also self-employed are required to pay the full 2.9% on the net earnings of the self-employed individual because they are for the employer as well as the employee. They can also deduct half of the taxes from their income by calculating the income tax.Starting in 2013, the portion of Part A and its taxes from the earned income has exceeded $200,000 for every individual plan. As for married couples that filed jointly, this reached $250,000. It also rose an additional 3.8% so that the portion of the subsidies can also be paid and mandated by the PPACA.Parts D, as well as Parts B, are funded partially by the premiums that have been paid by the Medicare enrollees and these are also considered as the general revenue fund. In 2006, Medicare started adding surtax on the premium of Part B. This was targeted to seniors who earned a higher income in order to fund Part D partially. In the PPACA legislation of the income tax year 2010, Medicare added surtax to the premium portion of Part D and also targeted these to the seniors who were earning lots of income. This is also conducted so that the PPACA can be partially funded along with the beneficiaries from Part B and subject to the double surtax. There is a double amount so that it can also partially fund PPACA.Parts A, B, and D all use trust funds that are separate from one another so that there can be a reimbursement of both the receipt and disbursement of the funds that are mentioned. Part C utilizes all these trusts funds in proportion to one another so that it can be determined by the CMS and reflect that all the beneficiaries of Part C are complete in the full parts of Part A and Part B. Medicare, as well as the medical needs for each capita, are regarded as fee for service or what is also known as FFS.Medicare and its spending amounted to 15% of the whole federal spending of the United States. Research all show that this can even exceed 17% by the year 2020.The retirement of individuals who are called the Baby Boom generation is expected to increase its enrollment by 2030 and reached up to 80 million because that was how the number of workers who are enrolled in the program has declined. The figures dropped from 3.7 and to a low of 2.4. There are the rising and total health care costs that also pose the financial challenges that are substantial to the program. Medicare spending is also projected to even get higher and reach $1 trillion by the year 2020.It is important to note that for every three dollars, one dollar is spent on Medicare as part of the cost-reduction program. The cost reduction is also influenced by the various factors that include the reduction in unnecessary and inappropriate care through the evidence-based practices of evaluation along with reducing the total amount of duplicative health care. The cost reduction can also be affected by the medical errors that are done when administrative agency increases and the development of clinical guidelines reach the quality standards
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