A recent Yahoo! News article confirmed another “woops, that shouldn’t be in there” part of the Patient Protection and Affordable Care Act, also known as Obamacare or healthcare reform.  The subsidies for health insurance premiums that go into effect starting January 2014 are not means tested in any way and are solely based on income.  What could possibly go wrong?

Of course, if you don’t means test, you could have people with a large amount of assets qualifying for Medicaid or large subsidies from taxpayers.  The key demographic this would apply to is early retirees – they may generate a low enough taxable income to qualify for a subsidy even though they could easily pay the full cost of coverage.  

Take for example a couple with $2 million in assets retiring at 62 years old with only a social security benefit and little other taxable income.  Since social security income will not count against the subsidy calculations, they could have up to about $60,000 per year in income and still qualify for Medicaid, a service generally reserved for low-income individuals.  This loophole could allow an estimated 3 million more people to qualify for Medicaid, placing an even larger burden on cash-strapped states. 

The law may change between now and 2014 when these rules go into effect, or even be repealed altogether.  Keep reading our blog for more healthcare reform updates!