Morgan Downey, AOA Executive Director, reacted to the expected ruling saying, "We are tremendously pleased that the effort paid off. The ruling’s effect on the taxpayers is significant and long-lasting. In addition, this ruling will put great pressure on Medicare, Medicaid, and managed care to recognize obesity as a disease."

The Revenue Ruling gives two examples of taxpayers who qualify for the deduction participating in weight-loss programs in which they paid fees and attended periodic meetings and purchased diet plans and booklets. One taxpayer was diagnosed as obese and the other as suffering from hypertension but not obesity. Previously, the IRS had approved weight-loss treatment only if such treatments were necessary to treat other conditions such as diabetes or heart disease. The new ruling cited materials provided by AOA to change the IRS policy, including the treatment guidelines issued by the National Institutes of Health and statements of the Food and Drug Administration and the World Health Organization that obesity is a disease.

The IRS approved the costs related to the taxpayer's weight-loss programs to include the fees to join the program and to attend periodic meetings. The ruling specifically noted that the cost of purchasing diet food items is not deductible. The ruling affects those taxpayers who itemize their deductions and qualify for the medical deduction. To qualify for the medical deduction, the taxpayer must have 7.5% of adjusted gross income in medical expenses not reimbursed by health insurance. As such, it is likely to be very valuable for persons with high out-of-pocket expenses such as those undergoing surgery, residential programs, or extensive medical involvement.

Many more individuals with flexible spending accounts will benefit as well. Under these plans, workers can set aside part of their wages in an account that can be used to pay medical expenses. The amount put into this account is not regarded as taxable income to the taxpayer.

In its press release, IR 2002-40, the IRS noted that the guidance applies not only to 2001 tax returns being filed this year, but also to any year for which taxpayers may file amended returns. Thus, a taxpayer could amend returns from 1998 onward. For flexible spending accounts, however, only the current plan year may be reviewed. If individuals are in a "run-out" period for the prior plan year, flexible spending account administrators could accept submissions. The ruling will not permit employees to change their current flexible spending account election amounts.

Persons who deduct weight-loss treatment expenses or use the flexible spending accounts need to have documentation from a physician recommending weight loss for their obesity or other medical condition.

The ruling specifically prohibits, however, deduction of expenses to participate in weight-loss programs to improve general health or appearance. Health club memberships and spas are not viable treatment options under this ruling.

The Revenue Ruling and a Q&A on this issue are available in the Tax Breaks section of the AOA web site.

More Work Ahead

In spite of this historic IRS ruling, many continue to ask whether obesity is a disease, an indication of the large amount of work that remains on AOA's agenda. AOA plans to help achieve recognition of obesity as a disease worthy of an appropriate level of attention and action by researchers, policymakers, legislators, and the general public. AOA is becoming increasingly visible by taking advantage of a wide range of invitations to make its case before influential audiences, not to mention intense media interest in the IRS ruling (read more about this below).

In addition to the IRS ruling, AOA is having a noticeable impact in a variety of other venues. For example, the American Heart Journal (Dec. 2001 issue) published an article by A0A Executive Director Morgan Downey on obesity as a disease. And this year alone AOA has received a number of invitations to make presentations or contribute to other publications. AOA staff and leadership made presentations at the following meetings (topics appear in parentheses):

• National Association of Social Security Claimants Representatives (new standards for obesity and disability)


• American Society for Baritric Surgery (advocacy and obesity)


• Centers for Disease Control (CDC) April 2001 Conference on Obesity Treatment (obesity as a disease and reimbursement issues)


• North American Association for the Study of Obesity (various posters, oral presentations, and debate on obesity as a disease)


• American Society of Bariatric Physicians (obesity advocacy)

AOA Pushes Changes in Medicare and Medicaid

AOA also has been invited to participate in a number of coalitions and studies, including an Institute of Medicine study on the future of public health programs and a coalition on children's health. And AOA spearheaded coalition letters sent to Congress and the White House regarding the Medicare drug proposals to include coverage for weight-control prescriptions. Bolstered by findings by PriceWaterhouse-Coopers indicating that the benefit would cost only $29 million over five years and $98 million over 10 years - amounts that are within the rounding error of the Congressional Budget Office - AOA advocates that the benefit need not increase the congressional appropriation. The National Governors' Association, seeking to protect Medicaid costs, is against adding weight-loss medication benefits.

In attendance at the April 2001 CDC conference mentioned above was a participant from the Centers for Medicare and Medicaid Services (CMS) (formerly the Health Care Financing Administration). After hearing the AOA presentation, this CMS representative began work to change Medicare and Medicaid coverage regulations and standards to be consistent with treating obesity as a disease.

Several working groups involving AOA sister organizations have since been formed, and AOA Executive Director Downey is chairing a steering committee that (1) is pushing for action on expanding Medicaid's reimbursement for obesity, and (2) has adopted the fundamental goal of having Medicaid incorporate the National Institutes of Health Guidelines on the treatment of obesity. The steering committee includes representatives from trade organizations and managed care providers.

While AOA has lobbied hard on the proposal to create a Medicare pharmaceutical benefit for obesity, as this issue of the newsletter goes to press, AOA is awaiting a decision by CMS on Medicare's recognition of obesity as an illness. The associated reimbursement policies will likely require further work, though.

Media Interest in IRS Ruling Is Intense

The announcement of the Internal Revenue Ruling caught AOA Executive Director Morgan Downey on a train to New York City with his son and friend. "We were going up to enjoy some Spring Break time when the phone started ringing." Back at the office, AOA Public Relations Coordinator Jackie Viteri dropped finishing touches on AOA’s new web site to field press calls.

"First came the Associated Press, then NBC, then everyone was calling," recounts Jackie. By the time Morgan's train pulled into Penn Station, he had already talked to the AP reporter and had to run over to the NBC studios for taping. The afternoon was spent talking with other reporters as Jackie queued up the calls. Before it was over, the story was running across the nation. AOA was featured in television news stories on the Today Show, CNN Headline News, and MSNBC News. International interest was also expressed by South American, British, and Spanish television.

"I think the IRS ruling jarred the public into thinking about obesity as a disease not just a cosmetic issue," said Downey. "In addition, there was a lot of uncertainty just what a 'tax deduction for fat people’ meant." Subsequently, the story was discussed on the political talk show, The McLaughlin Group, and has appeared in several editorial cartoons.