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JCT Releases Score of Provisions in Reid Health Care Reform Bill

2 min readBy: Gerald Prante

The health care reform bill put forth by Senate Majority Leader Harry Reid and other Senate Democrats this evening will raise the bulk of its revenue via an excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. high-valued health insurance (scaled down from the Baucus bill), along with an increased taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. on Medicare for high-income wage earners and various fees on health care manufacturers.

The bill’s title is the “Patient Protection And Affordable Care Act.”

The JCT score is available here. Here’s the list of tax increases (score):

40% excise tax on health coverage in excess of $8,500/$23,000 indexed for inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. by CPI-U plus 1% and increased thresholds for over age 55 retirees or certain high-risk professions; levied at insurer level; employer aggregates and issues information return for insurers indicating amount subject to the excise tax; nondeductible ($149.1 billion)

Conform the definition of medical expenses for health savings accounts, Archer MSAs, health flexible spending arrangements, and health reimbursement arrangements to the definition of the itemized deductionItemized deductions allow individuals to subtract designated expenses from their taxable income and can be claimed in lieu of the standard deduction. Itemized deductions include those for state and local taxes, charitable contributions, and mortgage interest. An estimated 13.7 percent of filers itemized in 2019, most being high-income taxpayers. for medical expenses (excluding over-the-counter medicines prescribed by a physician) ($5.0 billion)

Increase the 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)

Impose annual fee on manufacturers and importers of branded drugs ($22.2 billion)

Impose annual fee on manufacturers and importers of certain medical devices ($19.3 billion)

Impose annual fee on health insurance providers ($60.4 billion)

Eliminate deduction for expenses allocable to Medicare Part D subsidy ($5.4 billion)

Raise 7.5% AGI floor on medical expenses deduction to 10%; AGI floor for individuals age
65 and older (and their spouses) remains at 7.5% (sunset 12/31/16) ($15.2 billion)

$500,000 deduction limitation on taxable year remuneration to officers, employees, directors, and service providers of covered health insurance providers ($0.6 billion)

Additional 0.5% hospital insurance tax on wages in excess of $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 and similar procedures ($5.8 billion)