SoCal retiree says losing medical deduction would be 'a huge hit'

After he experienced heart trouble a few years ago, Royce Stutzman says he and his wife moved into a retirement community "to get closer to health care." Now the former accountant worries that Congress may do away with the deduction for medical expenses, which he says would drive up his tax bill by $7,000.

House Republicans' tax plan would eliminate the deduction, while the Senate version would preserve it. Current law allows taxpayers who itemize to write off medical costs that exceed 10 percent of their income.

Stutzman, who says he wrote off $38,000 of medical expenses last year, adds that without the deduction, he would have to dip into his retirement savings, which would "make it more difficult for us as we age."

A lot of people's finances are threatened by the House GOP proposal, he says. "Anyone who’s in a situation where they are not what I would consider wealthy, this will be a huge hit to them," says Stutzman, who worked as an accountant for more than 40 years.

He says that includes him and his wife Susan, who’s also retired and on a fixed income.

"It’s probably fair to say that Californians numbering in the high hundreds of thousands benefit from the federal medical expenses deduction each year," says Scott Graves, director of research at the California Budget and Policy Center.

The Stutzmans live at Mt. San Antonio Gardens, a continuing care retirement community in Claremont with manicured gardens, fish ponds and on-site access to health care services.

He says they decided to move there after he had surgery to replace an aortic valve.

Just up the path from their home, the Stutzmans pay a visit to Royce’s sister, Rosemary Bohlka, in Mt. San Antonio Gardens' skilled nursing facility. Bohlka’s husband, Dale, is sleeping in a hospital bed.

"Well he wasn’t well anymore and he has Alzheimers," Rosemary Bohlka says. "And [ I ] couldn’t handle him at home anymore, so we had him come here."

The bill for Dale Bohlka's care could end up costing at least $100,000 a year, says Stutzman. According to AARP, which is lobbying Congress to keep the medical deduction, many of those who use the write-off suffer from major illnesses, like Alzheimer's.

There is support for ending the medical deduction.

"In the context of the broader tax reform bill, removing the deduction is also paired with increasing the standard deduction and lowering rates," says Adam Michel, a policy analyst at the Heritage Foundation. "So in the broadest sense, these changes are largely compensated for through other changes in the tax code."

Michel also argues the medical expense deduction could lead to wasteful spending.

"Any time you allow someone to write off an expense, you’re subsidizing that activity ... It encourages overspending on medical expenditures," he says. "And removing - in abstract terms - removing the deduction is a good policy."

It’s misleading to call the deduction a subsidy, says Allison Hoffman, a law professor at the University of Pennsylvania Law School who specializes in health care. 

"I don’t think most people are choosing to buy long-term care or nursing home care because they enjoy it," she says. "They’re buying it because they need it."

Hoffman argues that the deduction represents an important government commitment.

"We are one of the only developed countries in the world that doesn’t have any kind of social insurance program for long-term care, so this is the small gesture we make towards helping people pay for something they can’t finance on their own," she says.

Walking through their retirement community's gardens, the Stutzmans’ conversation turns to politics.

"I’m a registered Republican," Stutzman says. Susan says she’s a dyed-in-the-wool Democrat.

But they are in agreement that Congress would be wrong to get rid of the medical expense deduction.

So as the House and Senate debate tax reform, the Stutzmans say they’re going to be busy writing their representatives.

This story has been updated to correct Allison Hoffman's academic affiliation. An earlier version said she teaches at Penn State. KPCC regrets the error.