Is a Patient Advocate or Navigator a Qualified Medical Expense for Patients?

In the process of writing about Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSA) I began looking at what constituted a “qualified medical expense,” which is the list of the products and services the IRS lets us pay for tax-free. They are those expenses that we can either claim on our taxes, or pay for through the use of an HSA, MSA or FSA. (What would the IRS ever do without acronyms> But I digress…)

After looking at the list of expenses, I began to wonder whether a patient / taxpayer who hires and pays for a health or patient advocate can deduct that expense from their taxes or account> Are we, as advocates who improve their healthcare experiences, deductible expenses?

So I went straight to the IRS horses to see what would come from their mouths… and what came from their mouths were big, loud question marks. They don’t know. Advocates might be a deduction. Or they might not.

Frustratingly, the process to figure out an answer requires people willing to test the system, at their own expense, which culminates in a “ruling.”? And even then, when there is a ruling, the answers might change. (Is this a great country, or what?)

The best way to explain this is to use a metaphor – a parallel situation that resulted in a ruling. Acupuncture.

Years ago, patients began to deduct the cost of acupuncture from their taxes. Once in awhile, one of those patients got audited. For the first dozen or hundred or thousand (who knows?) the deduction was not allowed because there was no “ruling.” After awhile, there were enough people who fought for the deduction (paying their CPAs or lawyers to do so) that the IRS finally came up with said-ruling that said, “OK – acupuncture is now included on the list of qualified medical expenses (AKA deductions.)”

So, a couple of notes:

The CPAs and lawyers who successfully got acupuncture reviewed did so by showing evidence that acupuncture has a medical benefit. (ha! If your doctor doesn’t believe in the value of acupuncture, you can tell him it must work – because the IRS says so!)? Our patient advocacy parallel would be that we need to show that patient advocates provide a medical benefit.

Individuals can ask their CPAs and lawyers to ask the IRS for a “private letter ruling.” That would mean that, before the patient deducts something, he asks the IRS to rule on it. (I thought about doing this on behalf of AdvoConnection’s member advocates, however? IRS Guy told me it has to be done by individuals, on a case-by-case basis, and cannot be done on behalf of an organization’s members.)

I reviewed the publications put out by the IRS and found a few parallel expenses that are allowed. From IRS publication 502, I see Christian Science Practitioners (who, like advocates, are not licensed), Nursing Services (these services also do not require a licensed nurse, but can provide everything from true medical services to washing and grooming) to (you’ll love this) guide dogs. When I asked IRS Guy about guide dogs, he said they are deductible because they assist patients who are blind to get the care they need. Honestly, of all the goods and services on that entire list, that is the best parallel for health and patient advocates – guide dogs. (In my own humble opinion.)

It seems clear that in order to become a bona fide tax deduction, a few things are going to have to happen.

1. Patients will need to begin deducting advocate services in order to test the system.

2. Some patients, early adopters, are going to end up paying tax and penalties for their advocacy services because no ruling will yet exist.

3. Those patients should be able to find a CPA or lawyer to help them fight the extra tax and penalty by showing the parallel services that already exist on the allowable deductibles list, and using stats that show that patient advocates do improve a patient’s medical care.

4. Eventually it seems like advocate services will be able to be deducted – but (like everything else) it will take awhile.

So — that big disclaimer! — I’m not an attorney, nor am I a CPA… but it’s a fair question that deserves more review, plus brave patients and caregivers who are willing to be the deductions guinea pigs by claiming these very important and necessary medical services patients’ advocates provide.