If Your Income is Less Than $45,000 a year, Consider a Medical Savings Account and Medi-Cal

Dear Ask the CPA:

My wife and I have two children, ages 19 and 16. One is off at College. Our monthly budget is $5000, half of which goes to health insurance. I am 60 years old.

This morning, during our morning walk, I told her we'd be better off using medicare/mediCal, and putting the $ into a Medical Savings Account.

She said, the kids need health insurance, but I would assume it's much cheaper to just buy health insurance for them.

What do you recommend? At what age do we qualify for mediCal/Care?

Health insurance is the same price as a mortgage payment for most California families.

Firstly, your daughter is covered by the health fess she pays in her tuition every year. I don't know if it covers her when school is not in session. However this is worth looking into.

I would say that, with your income level, you are most likely all covered under Medical if you apply under California Cares, or whatever they are calling it today. Which means you pay zero premium, and zero or little co pay for medical care and pharmaceuticals. But the big caution here is that it takes FOREVER to get assigned a health plan, and that plan only covers their providers. Which are iffy.

My clients who are currently covered under Medi-Cal, report mixed results. On the one hand, it saves me a lot of money, the doctors are a crap shoot. They say they have to research every potential provider and some of them are not well thought of. Not to mention the hospitals, (good thing Medicare is only five and a half years away), 65 to answer your question.

You also may qualify for a reduced premium under the california cares program. I do encourage you to apply.

A medical Savings plan is a great idea. The caution here is that the money you put into it can ONLY BE USED FOR MEDICAL EXPENSES, nothing else. You really have no use for the medical plan deduction, however being self insured does keep you qualified under the current health insurance laws.

A medical savings account (MSA) is an account into which tax-deferred amounts from income can be deposited. The amounts are often called contributions and may be made by a worker, an employer, or both, depending on a country's laws.

The money in such accounts is to be used to pay for medical expenses. Withdrawals from the account often called distributions, if made for that reason, may or may not be subject to income tax. Withdrawals without adequate documentation of use for medical expenses are subject to penalties.

The United States has two medical savings account programs:

Medical savings account (started 1993, still prevalent in California)

Health savings account (created 2003, supersedes MSAs, more widely available)

For more information, ask your Certified Public Accountant, Financial Planner, or other financial advisor.