Best health care plan for one person sole proprietorship?

Hello,

I have a sole proprietorship to do computer consulting. I was in business for decades as a Subchapter S corporation but, for various reasons, I'm converting to a sole proprietorship.

I'm wondering if there is a good way for me to provide some tax advantaged health care coverage for myself and my wife.

Here are some of the relevant facts about our situation:

- There is only one employee, me. I've never employed anyone else and don't intend to for the future.

- I am 66 years old and my wife is 65. We are both covered by Medicare, which we get through the Kaiser Permanente "Medicare Plus" plan (we've been with Kaiser for 28 years and didn't want to change) however we still have to pay Medicare premiums and copays. The total will likely be between $4,000 and $5,000 for the two of us for next year.

- We live in Maryland and earn our income there.

- I don't know how many years I'll be working. It's a young person's game. Most of the people I work with are younger than my children. I fully expect that, one day, the clients will drag me out by the feet and tell me not to come back. But until then I intend to keep plugging away. My wife has a very stable counseling business where age is seen as something of a plus and she'll probably be working longer than me. So we could use her sole proprietor business as the source for our health coverage.

I looked at maybe using a Health Savings Account but, according to an IRS web page I saw, it cannot be used if I'm on Medicare.

Then I looked at a Health Reimbursements Arrangement. It appears that I might be able to do that if I make my wife the sole owner of the company and myself an employee. But some states apparently require a minimum of two employees (I don't know what Maryland requires yet), and I worry about whether an arrangement like this would be seen as some kind of tax fraud by the government.

Then there are "Medical Savings Accounts" and "Flexible Spending Arrangements". I haven't researched them yet.

At this point I'm thinking that someone else, more expert than I am, has thought about all of this and knows just what is the best thing to do. So here I am, inquiring.

Does anyone have any suggestions? ==============

1) A health savings account cannot be contributed to when you're 65 or over, but it can be used to pay medical expenses (including your basic medicare premiums [Parts A-D], but not for a medicare supplemental policy). Archer MSAs are closed.

2) Medicare qualifies as health insurance for the self-employed health insurance deduction that is an adjustment to AGI (on the front of form 1040).

Since I never established a health savings account, I take it that your point 1 above means that I can't establish one now and put money in it, and so it can't help me with the medicare premiums.

However your second point looks promising. I didn't realize that such a deduction existed.

Thank you very much for the information and the reply.

Alan