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Investing for free healthcare?

1,474 357 November 5, 2017 at 11:02 AM
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I have been looking for ways to legally get ahead and I think I have found something that seems to fit the bill and could save me a lot in the long-run. I would just like some expert minds to chime to to make sure I am not royally messing up and having to pay fees later.

I currently make $35k at a job with a 401k and I have low expenses. If I contribute $18k to my 401k and $5k(not necessary to meet the threshold but I have large savings to hold me over) to my IRA, that will leave me with an MAGI of $12k. In my state of Maryland, if you have an MAGI of $16k or less, you will qualify for Medicaid which is health insurance that the state pays for, and the consumer pays no office deductibles but they do pay small copay's for Rx medication. This seems like a no brainer to not have to pay for health insurance but for some reason or another, it seems like I may be missing something big here. Does anyone see any issue with what I am trying to do?

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#2
what do you pay for healthcare now?

e.g. what is the "before" and "after"? Is it ~ $23k? Seems like a GIGANTIC chunk of income - so you get "free" healthcare - can you live on the balance?
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#3
I think you have to add back in your 401
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bulb save money by checking your insurance every 2 years (and not every 20) Thanks Liberty Mutual for reminding me to shop. The $842 increase this year sums it up. Across the board increase for Ohio....whatever
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#4
Quote from stufine
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I think you have to add back in your 401

I tried checking on that but the website only says "income"..... not AGI, MAGI, etc. I agree that this would be some GIGANTIC loophole if all you needed to do was hide $$ in a 401k - cause let's face it, these programs are for people that by in large wouldn't be able to afford socking $18k/yr away in retirement accounts.
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#5
What you're missing is that this only applies to very, very few people. Can you live on <$16,000 a year in Maryland?

Second question is, what would health insurance cost you anyway? I assume you're buying on the open market as an individual, but even at $35k you should be eligible for some government subsidies to help with that cost.

Being able to save that much for retirement is great if you can do it... I just don't know that "free healthcare" is the reason to do so.
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#6
I don't think you can do it AGI and MAGI are different (i know you know)
I'm pretty sure you have to add deductions back in.

If it is the way OP would like, in my book I would do it.
Why pay for insurance when you can get it for free and add that money to a 401.

Most assistance doesn't go buy Federal income, they go buy what's reported to SS which is gross wages
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#7
Self-Employed deductions\Solo 401ks\401ks in general are deducted from a person's income in calculating the AGI and as far as I know are not put back in wrt the MAGI calc (see below). Obviously consult a tax pro first before doing anything as the laws change. IRA contributions are added back. Whether you can qualify for Medicaid I have no idea, but I believe it does allow you to reduce your income to increase your Healthcare subsidy as such. You accountant should be able to run the numbers.

https://www.mysolo401k.net/solo-4...-care-act/
https://budgeting.thenest.com/mod...30331.html
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#8
I think the OP may be in the clear.

the "income" levels referenced are based off of FPL (Fed Poverty Level). Apparently...

"Income [healthcare.gov]" above refers to "modified adjusted gross income" (MAGI). For most people, it's the same or very similar to "adjusted gross income" (AGI). MAGI isn't a number on your tax return.

MAGI [investopedia.com]- A taxpayer determines modified adjusted gross income by taking his adjusted gross income (AGI) and adding back certain items, such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions, and deductions for higher-education costs.

Traditional 401(k) contributions effectively reduce [investopedia.com] both adjusted gross income (AGI) and modified adjusted gross income (MAGI).

SO;

<~ $16k MAGI for a single person should qualify OP for Medicaid, and 401k is not included (added back) to AGI or MAGI, so he should be good.

The remaining question is if it's worth it.
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#9
I can easily afford the hit to my income, my expenses are low ($1200 per month) and I have a savings account that could hold me over/generous parents if need be.
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#10
You could, but why? Medicaid is the most bare bones insurance you can get. The coverage is actually pretty good but the problem is not many doctors will take it. Those who do are not exactly the best doctors out there. It works perfectly fine as catastrophic insurance though. Since a hospital couldn't care less if you are on medicaid or not. In fact, if you can't pay the first thing they bring up is to apply for medicaid.

Back to but why? The Obamacare subsidies are still in effect. If you shoot above the medicaid limit by just a $1, you qualify for a subsidy that basically pays for it all anyways. You end up paying literally a few dollars. You get much better choice and much better coverage. More importantly, you get much better access to more doctors.

Obamacare enrollments are on fire right now. Open enrollment just started and I think it's breaking records.
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Last edited by ghostofposterspast November 7, 2017 at 07:44 PM.
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#11
That's a shitty thing to do.
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Quote from ghostofposterspast
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You could, but why? Medicaid is the most bare bones insurance you can get. The coverage is actually pretty good but the problem is not many doctors will take it. Those who do are not exactly the best doctors out there. It works perfectly fine as catastrophic insurance though. Since a hospital couldn't care less if you are on medicaid or not. In fact, if you can't pay the first thing they bring up is to apply for medicaid.

Back to but why? The Obamacare subsidies are still in effect. If you shoot above the medicaid limit by just a $1, you qualify for a subsidy that basically pays for it all anyways. You end up paying literally a few dollars. You get much better choice and much better coverage. More importantly, you get much better access to more doctors.

Obamacare enrollments are on fire right now. Open enrollment just started and I think it's breaking records.
I was looking into it since my friend has it and she has a couple of health problems and she has no problems with doctors. We actually go to the same GP's but her only difference is that she has no co-pays for anything except a $1 co-pay on RX's. As a whole, I have not had any serious medical conditions so I am planning to use it as catastrophic type insurance, if I get hit by a bus or need an emergency surgery.

When I went on the Obamacare site, the only plans were for Kaiser and BCBS. While on the other hand, the Medicaid through my state is through United Health Care.
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#13
Quote from cra888zy
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I was looking into it since my friend has it and she has a couple of health problems and she has no problems with doctors. We actually go to the same GP's but her only difference is that she has no co-pays for anything except a $1 co-pay on RX's. As a whole, I have not had any serious medical conditions so I am planning to use it as catastrophic type insurance, if I get hit by a bus or need an emergency surgery.

When I went on the Obamacare site, the only plans were for Kaiser and BCBS. While on the other hand, the Medicaid through my state is through United Health Care.
I would make sure your friend signed up since Obamacare. Medicaid before Obamacare was a whole different matter and more doctors took it because it was more rare. Once there was a flood of medicaid patients, a lot of doctors that took it dropped out. So ask your GP if they still take medicaid assignment.

Given those choices, I would go Kaiser under a heavily subsidized plan. Kaiser is Kaiser. They don't care if you paid $1/month under a subsidized Obamacare plan or $3000 yourself. You still get pretty much the same access to doctors.
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Quote from IvoryCadenza
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That's a shitty thing to do.
Why? People do things like that all the time on taxes. It's within the rules. In essence, a 401K plan itself is a way to dodge taxes. That's mild compared to what a lot of people do.
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Quote from ghostofposterspast
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Why? People do things like that all the time on taxes. It's within the rules. In essence, a 401K plan itself is a way to dodge taxes. That's mild compared to what a lot of people do.

defer, not dodge.
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