Who would have thought the IRS was on our side?
Go figure. Just when it looks like the federal government is bent on making life harder for the home health industry, along comes a decision that most likely will be a boon for patients and providers, both hospital-affiliated and freestanding.
Long before Congress and the Clinton administration announced intentions to cut Medicare’s home health benefit, lawmakers already had provided a tax incentive to help individuals defray the nonmedical cost of their home care. The tax change allows medical deductions for the care of a chronically ill person of any age who needs help with at least two activities of daily living (ADL), or needs supervision because of Alzheimer’s disease or other cognitive impairment.
Traditionally, the Internal Revenue Service has permitted deductions for legitimate medical services like skilled nursing, but not for ADL services. Now, under the tax law change that took effect Jan. 1, 1997, those expenses are deductible. However, like all deductible medical expenses allowed by the IRS, ADL expenses are deductible only after they exceed 7.5% of a person’s adjusted gross income.
And, irony of ironies, the tax change is part of the Health Insurance Portability and Accountabi lity Act, which Congress passed last July. The act, commonly known as the Kassebaum-Kennedy bill, includes provisions to make health insurance portable from job to job, reduce health care fraud and abuse, and give tax breaks for long-term health-care costs.
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