|
Healthcare Bills Pass
On March 23, 2010, President Obama signed the Patient Protection
and Affordable Care Act (H.R. 3590). The Act had initially
passed the Senate in December and was passed by the House on
March 21. President Obama stated, "While the Senate still
has the last round of improvements to make on this historic
legislation – and these are improvements I'm confident they
will make swiftly – the bill I'm signing will set in motion
reforms that generations of Americans have fought for, and
marched for, and hungered to see."
The President was referring to a companion bill that was
submitted to the Senate with the title Healthcare and Education
Reconciliation Act of 2010 (H.R. 4872). The companion bill
included a number of changes that the House members demanded
prior to passing the Senate bill.
The reconciliation bill passed the Senate by a vote of 56-43 and
also passed the House later on March 25, 2010 by a vote of
220-207.
The compromise reconciliation bill included five major
healthcare bill modifications:
1. Closing the Medicare prescription drug "donut hole"
– Seniors will be covered by 2020. In addition, there is a
$250 rebate for seniors who currently spend more than $2,830 on
prescription drugs.
2. The "Cadillac" Tax – A 40% excise tax on
insurance plans with value over $10,200 for an individual or
$27,500 for a family will be applicable in 2018.
3. New Medicare Tax on Investment Income – A 3.8% tax will
apply in 2013 for single persons with incomes over $200,000 and
married couples over $250,000 in income.
4. Individual No-Insurance Fine – The fine for individuals
with no medical insurance is reduced from $750 to $695 per year.
5. Large Company No-Insurance Fine – For a large company that
does not provide healthcare insurance to employees, the fine is
increased from $750 to $2,000 per employee.
Editor's Note: Your editor and this organization take no
position with respect to these specific provisions or the
comments on healthcare below. This information is offered as a
service to our readers.
Praise and Concerns on Healthcare Bills
Following the passage of major healthcare legislation, leaders
of both parties responded with both praise and expressions of
concern. As most observers expected, the praise was largely from
the Democratic side and the concerns were primarily from the
Republican side.
Senate Finance Chair Max Baucus (D-MT) had labored diligently
for several years to pass healthcare. He praised the final
legislation and stated, "Too many families and small
businesses in Montana and across America have struggled with the
instability created by our broken healthcare system. Today's
passage of health reform means Americans will not have to wait
any longer for meaningful health reform that will end insurance
company abuses, lower costs and increase choice and competition
for consumers." Sen. Baucus believes that the bill will
reduce insurance company abuses and promote increased choices
and competition.
Sen. Kent Conrad (D-ND) is Chair of the Senate Budget Committee.
He indicated, "It ends insurance abuses. Insurers will no
longer be able to deny coverage for you or your children because
of pre-existing conditions or raise premiums when you get sick.
It provides tax breaks for small businesses. Small businesses
will get tax credits to help buy coverage for their
workers."
Sen. John Kyl (R-AZ) expressed concern about the taxes in the
new bill. He observed, "It taxes many of those who have
health insurance. It taxes you if you don't have health
insurance. The taxes in the bills hit families, it hits seniors,
it hits the chronically ill, small businesses, those who have
flexible spending accounts and those who use medical devices.
All of those things create a tax that you pay."
Sen. Charles Grassley (R-IA) has advocated greater oversight of
medical centers. He negotiated provisions that he believes will
encourage medical centers to provide greater levels of charity
care.
Sen. Grassley published a press release that stated, "The
bill requires that a hospital complete a community needs
assessment once every three years and adopt and publicize a
financial assistance policy; prohibits billing those who qualify
for financial assistance at the top rates; and prohibits a
hospital from taking extraordinary collection actions if a
hospital has not made reasonable efforts to notify patients of
its financial assistance policy. The bill also requires the IRS
to review the tax-exempt status of each hospital every three
years; requires Treasury and Health and Human services to submit
an annual report to Congress on the level of charity care, bad
debt expenses and the unreimbursed costs of means-tested and
non-means-tested government programs."
The National Federation of Independent Businesses (NFIB) also
expressed concern about the new taxes. Senior Vice President of
NFIB Susan Eckerly noted, "This is a tax bill wrapped up in
healthcare paper. It will raise, not lower, insurance costs and
it will increase both taxes and the cost of doing business for
the very people they said they wanted to help – small
business."
Healthcare Revenue Provisions
As the actual language was disclosed in the 2,733 page
healthcare bill and 150 page reconciliation bill, a clearer
picture of the actual revenue provisions within the bill
emerged. There are six major revenue provisions that will have
widespread impact. These include the following:
1. Medicare Tax Increase
The Medicare tax increase will apply for single persons with
incomes over $200,000 and married couples with income over
$250,000. The regular Medicare tax is 1.45% on the employee and
1.45% on the employer, for a total of 2.9%. Upper income
individuals will face an added 0.9% hospital insurance tax,
raising the total Medicare rate at those levels to 3.8%. The
additional tax will be on the employee and not on the employer.
The increased Medicare tax will be effective starting in 2013.
If the upper income rate is increased from 35% to 39.6% in 2011,
the top marginal federal tax rate (income tax plus Medicare tax)
for high-income persons in 2013 will be 43.4%. State and local
taxes will be added to this number.
2. Medicare Tax on Unearned Income
Starting in 2013, the 3.8% tax for single persons with incomes
over $200,000 and married couples with income over $250,000 will
apply to unearned income. This is defined as interest,
dividends, capital gains, annuities, royalties, rents and other
types of passive income. The reconciliation bill did exclude
qualified retirement plan distributions. Therefore,
distributions from a 401(k), 403(b) or other qualified
retirement plan will be excluded from this 3.8% tax. Pure
charitable trusts with only charitable interests are also
excluded.
If the capital gain rate increases to 20% in 2011, then by 2013
the federal tax rate (capital gains and Medicare) for
substantial sales of property will be 23.8%.
3. Cadillac Plan 40% Excise Tax
As part of the negotiation process during the development of the
healthcare bills, the Senate decided to tax "Cadillac"
or expensive healthcare plans. Under the reconciliation
compromise, the 40% excise will be paid by the insurer and it
will apply if the total medical coverage for a single person is
over $10,200 or $27,500 for a married couple. The reconciliation
bill excludes dental and vision benefits from the plan. There is
also an increase of $1,350 for individual coverage and $3,000
for family coverage for certain high-risk professions. The
excise tax will apply in 2018 and later years.
4. Health Insurers Fee
There will be a new fee on large health insurers based upon
their market share. The fee is scheduled to raise $101 billion
over 10 years. It is expected that the fee will lead to higher
insurance premiums.
5. Fee on Pharmaceutical Manufacturers
A new fee of $23 billion over 10 years will apply to
pharmaceutical manufacturers. There are various exclusions for
most federal programs in the determination of market share and
the applicable fee. However, drugs sold to the general public
will subject the pharmaceutical manufacturers to the new fee. It
is expected that drug prices will increase to reflect the new
fee.
6. Medical Device Fee
There is a new 2.3% tax on medical devices sold in year 2013 and
later years. The tax will not apply to eyeglasses, contact
lenses and hearing aids. This tax will increase the cost of
medical devices to consumers by 2.3%.
|
