Healthcare and seniors

Editor's note: The following is a copy of a letter that Peter Kerr sent to Rep. Jason Smith and Sen. Roy Blunt.

The prohibition on deducting insurance premiums for tax purposes remains one of the major injustices in the provision of health care. This problem is particularly acute with seniors. Allow me to illustrate.

Prior to my retirement I was in an employer group plan; all of my premiums were deducted from pretax income. While I was able to exercise some discretion in coverage with respect to vision (which I did not have) and dental (I opted for the premium coverage), the costs of coverage were essentially fixed Â… save one. The optional long term care was quite variable. For the sake of illustration, I bought a policy that will pay $3,000 per month for 84 months. The premium is $200 per month. I would like to have purchased more.

At the age of 65, Medicare A began. Medicare B kicked in upon retirement a year later. The $105 monthly premium (OK, $104.90) is automatically deducted from my Social Security benefit, taxable income. I picked up supplemental insurance from Mutual of Omaha and a Part D policy from Aetna at $168 and $24 per month, respectively. I continued my Delta Dental at $37 per month as well as my LifeSecure long term care at $200 per month.

My total out-of-pocket expenses for health related insurance is $534 per month, approximately $6,400 per annum. Prior to my retirement, I would pay zero taxes on the income dedicated to these expenses. Post retirement, I pay $1,600 in Federal taxes (marginal tax rate of 25 percent) atop these outlays. I would ask my more liberal friends, "Where's the social justice in this?" This, of course, ignores the 10 percent per annum penalty/tax imposed on delayed purchases of supplemental and prescription coverage.

The Devil's advocate would argue, "Hey, seniors get a $1,000 deduction on the Federal return!" Yet this falls $600 short of the increase in my medical insurance premiums. How about this one, "Just itemize your tax deductions." Yet you must incur some whopping medical expenses to do this. At the same time, though anecdotal, I would buy more long term care insurance with the $50 per month that goes to taxes. The State of Missouri does recognize this salutary effect by allowing the deduction of long term care premiums "off the top."

And it's not just seniors, any individual who is not covered by an employer group plan is subject to the same inequity. I am a strong advocate of a simpler tax structure as well as a reduction in the intrusiveness of the Internal Revenue Service. Yet as long as we are saddled with the current tax system, "social justice" screams for the adjustments that the State of Missouri has initiated.

Peter Kerr is a resident of Cape Girardeau. He is an emeritus professor of economics at Southeast Missouri State University, where he was employed from 1980-2014.