Thursday, November 19, 2009
17 Tax Increases in Senate Health Care Bill = $370.2 Billion
The Joint Committee on Taxation has published a list of the 17 tax increases in the Senate health care bill, which are estimated to raise $370.2 billion in revenues over ten years:
- 40% excise tax on health coverage in excess of $8,500/$23,000 ($149.1 billion)
- Employer W-2 reporting of value of health (negligible revenue effect)
- Conform definition of medical expenses ($5.0 billion)
- Increase penalty for nonqualified health savings account distributions to 20% ($1.3 billion)
- Limit health flexible spending arrangements in cafeteria plans to $2,500 ($14.6 billion)
- Require information reporting on payments to corporations ($17.1 billion)
- Additional requirements for section 501(c)(3) hospitals (negligible revenue effects)
- Impose annual fee on manufacturers & importers of branded drugs ($22.2 billion)
- Impose annual fee on manufacturers & importers of medical devices ($19.3 billion)
- Impose annual fee on health insurance providers ($60.4 billion)
- Study and report of effect on veterans health care (no revenue effect)
- Eliminate deduction for expenses allocable to Medicare Part D subsidy ($5.4 billion)
- Raise 7.5% AGI floor on medical expenses deduction to 10% ($15.2 billion)
- $500,000 deduction limitation on taxable year remuneration to health insurance officials ($0.6 billion)
- Additional 0.5% hospital insurance tax on wages > $200,000 ($250,000 joint) ($53.8 billion)
- Modification of section 833 treatment of certain health organizations ($0.4 billion)
- Impose 5% excise tax on cosmetic surgery ($5.8 billion)
Items 8.-10. have been negotiated with the parties affected by the fees:
8. Impose annual fee on manufacturers & importers of branded drugs ($22.2 billion)
9. Impose annual fee on manufacturers & importers of medical devices ($19.3 billion)
10. Impose annual fee on health insurance providers ($60.4 billion)
They represent 20% of the increased profits that those sectors will earn by having additional patients with insurance. The medical loss ratio and profit margins of health insurers participating in the national, regional and state exchanges will be reportable.
Will employers continue to offer coverage in excess of $8,500/$23,000 annual costs? Only to their senior executives. I agree with S. that the revenues will be less than $149.1 billion.
Jane Q. Public may be right that the majority of Americans don't understand what this bill really means, what these taxes are, and what is going to happen to their take home pay for the rest of their lives. Unfortunately, the majority of Americans don't understand how the current American health care system works. They don't understand that Medicare is a single-payer national health insurance system - you just have to live to be 65 or be disabled to get into it. They think that the only people who need health reform are the uninsured. What they do not understand is that employer based has been declining over the past 20 years because of out-of-control health care costs. Unfortunately, slowing the rate of health care inflation without lowering quality and reducing access requires requires time, new systems and investments. The current fee-for-service payment system does not provide the right incentives for those investments. Private health insurers could have acted over the past 20 years to change the incentives, but it was easier for them to simply stick with fee-for-service payment then to do the heavy lifting of reforming the health system.
Posted by: Brad | Nov 23, 2009 7:19:46 AM
I'm a little disappointed to see that flexible medical accounts haven't been eliminated altogehter. While I have personally taken advantage of them, I question their fairness, since only those who work for cooperative employers are able to take advantage of them.
Posted by: Sheila Hard | Nov 20, 2009 10:40:46 AM
Question: Partners and LLC Members are excluded from description of "employee" or "employer", yes?
Posted by: H.T. | Nov 20, 2009 10:19:34 AM
There's no way the 40 percent excise tax will raise that much revenue. Employers will shift to tax-efficient benefits.
Posted by: S | Nov 19, 2009 6:26:03 PM
The saddest thing about this whole issue is that the majority of Americans don't understand what this bill really means, what these taxes are, and what is going to happen to their take home pay for the rest of their lives. I have said it before, and I shout it again: AMERICANS HAVE BEEN ILL-SERVED BY OUR LEADERS IN GOVERNMENT AND BUSINESS! We deserve better. It is time to take our goverment back, and it is going to happen one year from now. Look out, Congress! In 2010, you will pay for the error of your ways. You will be replaced by patriots.
Posted by: Jane Q. Public | Nov 19, 2009 5:53:43 PM
Back in July/August when the then 900+ pages bill was first reviewed I noticed that revenue was the primary objective, along with others, given the fiscal outlook for the feds. The EXTREME urgency/insistency and 1000+ additional pages of legislation of Pelosi/Reid/Bacus et al has only confirmed it.
Posted by: a nobody | Nov 19, 2009 12:40:36 PM
Since there are no cost control mechanisms in the health reform package, the government will simply shift the cost to those that are more capable of paying additional taxes. Right, wrong, or otherwise, the USA has perfected class warefare.
Posted by: Jeffrey | Nov 26, 2009 8:27:12 AM