A large portion of adoption expenses for a newborn are for medical costs. Most of the time there are insurance and/or other sources available, such as:
Birth mother’s insurance through employer
Birth mother’s parent’s insurance if she is a minor or student
Adoptive parent’s insurance
Adoptive parent’s employer benefit programs
Adoptive parent’s 401K plan
Medicaid/Healthy Start coverage if birth mother is low income
Child may be eligible for ADC/Healthy Start coverage. If child is ward of an agency and/or special needs, a targeted adoption through an agency may be received.
Although a birth parent may be covered by Medicaid/Healthy Start, there have been cases where the Department of Job & Family Services has denied or refused to pay for coverage or where the hospital/doctor has declined to accept Medicaid payment for medical services in an adoption. The rationale behind these occasional denials is that it is unfair to obligate taxpayers with the responsibility of paying for your adoption medicals.
If your insurance covers the child, determine whether coverage begins at birth or date of placement. Unfortunately, most policies only provide coverage effective as of date of placement which may affect payment of the hospital bill. Insurance coverage for adopted children should cover all pre-existing conditions as of the date of placement. Verification should be obtained in writing.
Any group health insurance plan that provides coverage for dependent children should provide the same benefits to adopted children. Coverage should begin at time of placement and not be contingent on finalization of the adoption.
FAMILY LEAVE ACT
The Family and Medical Leave Act (FMLA) requires employers provide time off and continue benefits without risk to losing employment. For information on the FMLA to adoption, ask for a brochure from Resolve at 1310 Broadway, Somerville, MA 02144, Attention: FMLA Guide.
Payment for the adoptive child’s medical costs may be deductible. See I.R.C. §152(b)(2), §213 and Kilpatrick v. Commissioner, 68 U.S.T.C. 469 (1977). Consult with your tax preparer.