Obamacare for multi-millionaires

A friend told me how pleased he was with MassHealth, our state’s version of Medicaid. “It is much better than Blue Cross. There are no deductibles and dental care is included and free,” said the father of two. His wife said “the only thing that would be better is if we got divorced and then I could get all of the single mom stuff.”

The potentially interesting part of this story is that my friend’s mailing address is a suburban house on 2.6 acres of land with a Zestimate of $3.2 million and a price/tax history indicating that he purchased it for $2.1 million back in 2006. The health insurance ministry probably wouldn’t have been aware of the family’s 50-acre 8-bedroom (including guest house) vacation estate.

“Obamacare removed the asset test for Medicaid,” he explained. So they look only at income? “No. I actually had a good year in 2015 with a lot of capital gains.” [“A lot” of capital gains for this guy would be hundreds of thousands or single-digit millions of dollars.] What was the method for determining whether or not the taxpayers would pick up the tab for this family of four’s health and dental care? “They look only at W-2 income.”

Note that this makes collecting alimony and child support relatively more lucrative compared to working. Child support revenue, regardless of the amount, doesn’t count as “income” to qualify for this taxpayer-funded benefit. Alimony profits can be banked without a W-2 being issued. Jessica Kosow, the plaintiff in a typical higher-income Massachusetts case (see this chapter on Massachusetts family law), would qualify for free MassHealth despite having obtained, via litigation, triple the spending power of her Ivy League classmates with W-2 jobs:

In a June 22, 2011 status conference for this case [wife sued husband after four years of marriage when their daughter was two years old], Judge Maureen Monks explained her philosophy in setting child support for high income defendants: “when I look at how the current guidelines play out against most parties’ income it comes around between 20 and 25 percent, sometimes it’s a little higher. If there’s a big disparity it’s closer to 28 percent. Does that mean it makes sense is that what to assess up to a certain amount on his income. Maybe there is no limit right now…”

How did she do compared to her University of Pennsylvania classmates? payscale.com reported that in 2014 the median “mid-career” salary for a graduate of this Ivy League college was $112,200. If that graduate stayed in Pennsylvania, his or her earnings would be approximately $77,240 per year after taxes (ADP Paycheck Calculator). Kosow’s after-tax earnings, on the other hand would be approximately $132,786 in cash plus the free $1 million house (assume a rental value of $6000 per month), health insurance, and nanny services. Her total after-tax earnings from the Massachusetts divorce and child support system therefore would be about $250,000 per year, 3.2X what a Penn graduate working full-time would earn.

[Of course, this particular plaintiff might not take the time to fill out the forms for MassHealth due to the fact that she obtained a court order that her former husband pay her health insurance bill.]

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10 thoughts on “Obamacare for multi-millionaires

  1. When BC/BS charges amounts approaching $25,000 per year for a high deductible family plan, it just isn’t fair to small employers in BC/BS “under 100 employees” actuarial group to give away MassHealth to those who don’t have enough W-2 income. It is time to let workers keep their paycheck and employers keep their profits and stop creating new categories of people who are ‘entitled’ to get for free what the rest of us work to pay for.

  2. http://www.mass.gov/eohhs/consumer/insurance/masshealth-coverage-types/masshealth-standard.html#Magi

    says

    “Financial eligibility is based on Modified Adjusted Gross Income (MAGI). MAGI is the income reported on line 22 on the personal 1040 income tax return after the deductions from lines 23-35. Then tax-exempt interest and foreign earned-income exclusions are added back in.”

    I think line 22 is a sum whose summands include
    line 13, [realized] capital gain
    line 9a, ordinary dividends,
    and line 11, ( since this is a divorce blog ) alimony received.

    That’s not just W-2 income. If your only asset is Berkshire Hathaway,
    which doesn’t pay any dividends,
    and you don’t sell any shares, so that you don’t realize any capital
    gains, the above link does seem to imply you will be eligible for MassHealth.

  3. I think it is possible that the regulations say that MAGI is to be used, but my friend was asked only about W-2 income when signing up. My friend definitely had realized capital gains as well as dividend income. He definitely was able to get 100% taxpayer-funded insurance without lying.

    (If they ever do patch this up to use the 1040 data that will be another boost to out-of-wedlock pregnancy over divorce-then-alimony-litigation because tax-free child support won’t show up whereas alimony will (at least when people report it; http://www.realworlddivorce.com/History cites some U.S. Treasury data suggesting that about half of alimony recipients don’t report the income))

  4. Having just gone through the Mass Health enrollment process for 2016 (just retired early) I can tell you that the system does have some sort of automated pull of tax return information. One is required to fax or mail income verification if the numbers entered during on-line enrollment differ significantly from the database information.

    As to the cost for healthcare premiums and plans available, there are subsidies for anyone whose MAGI is below 400% of the Federal Poverty Level. As an early retiree, Mass Health is very generous as long as income is managed to stay below that 400% number. I was somewhat incredulous at the subsidy offered in my case, and elected to contribute some of my premium during the year which presumably I well get back when filing my state return next year – as long as there haven’t been any mistakes due to incorrect assumptions.

    I believe there should be more thorough means testing for benefits.

    As a side note, the Massachusetts plans were way more generous in terms of premiums and out of pocket costs compared to the same income input parameters used for a State with ACA such as Illinois.

  5. @philg

    The obamacarefacts.com site appears to be a nongovernmental site with no accountability to anybody. I do not trust them on the estate-recovery issue. Here are some media reports on the topic:

    http://www.wsj.com/articles/medicaid-cost-recovery-law-spurs-fears-of-asset-seizures-1428880153

    “For more than 20 years, federal law has allowed states to recover almost all Medicaid costs if recipients are 55 or older when they die. This now applies to many of the 11 million people who joined Medicaid since the health law’s expansion of the state-federal insurance program.”

    http://www.sfgate.com/business/networth/article/Medi-Cal-has-booby-trap-for-some-estates-5708200.php

    “Many low-income Californians who became eligible for Medi-Cal, the state’s version of Medicaid, under the Affordable Care Act were happy to get free health care. But for those 55 and older, it came with a booby trap. When they die, the state will attempt to recover anything it spent on their health care from their estates, including their home.”

    http://www.mercurynews.com/health/ci_26608876/gov-brown-vetoes-bill-limiting-estate-recovery-medi

    “In a blow to tens of thousands of low-income Californians newly enrolled in Medi-Cal under a provision in the Affordable Care Act, Gov. Jerry Brown on Thursday vetoed a bill that would have limited the state’s seizure of assets from their estates after they die — a legal wrinkle that most only discovered after they had signed up for the health care plan for the poor.”

  6. There are lawyers who specialize in helping you protect your ‘estate’ from seizure after the taxpayers have subsidized you via medicaid. You give your estate to your children at least 5 years before you die, set up an irrevocable trust, or work for cash and keep it out of your name.

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