Health Care Provisions, New Taxes, and Cuts

23 Mar

After hearing from many of my friends and family members, I decided to put together a summary of when the new provisions of the health bill go into effect. This is a list based on a series of articles I have read and information that has been provided to me from various sources. At the end, I decided to list a summary of the new taxes and medicare cuts that were adopted to provide funding for the bill. I hope this helps with your questions….


· Sets up a high-risk health insurance pool to provide affordable coverage for uninsured people with medical problems.

· Starting six months after enactment, requires all health insurance plans to maintain dependent coverage for children until they turn 26; prohibits insurers from denying coverage to children because of pre-existing health problems.

· Bars insurance companies from putting lifetime dollar limits on coverage, and canceling policies except for fraud.

· Provides tax credits to help small businesses with up to 25 employees get and keep coverage for their employees.

· Begins narrowing the Medicare prescription coverage gap by providing a $250 rebate to seniors in the gap, which starts this year once they have spent $2,830. It would be fully closed by 2020.

· Reduces projected Medicare payments to hospitals, home health agencies, nursing homes, hospices and other providers.

· Imposes 10 percent sales tax on indoor tanning.


· Creates a voluntary long-term care insurance program to provide a modest cash benefit helping disabled people stay in their homes, or cover nursing home costs. Benefits can begin five years after people start paying a fee for the coverage.

· Provides Medicare recipients in the prescription coverage gap with a 50 percent discount on brand name drugs; begins phasing in additional drug discounts to close the gap by 2020.

· Provides 10 percent Medicare bonus to primary care doctors and general surgeons practicing in underserved areas, such as inner cities and rural communities; improves preventive coverage.

· Freezes payments to Medicare Advantage plans, the first step in reducing payments to the private insurers who serve about one-fourth of seniors. The reductions would be phased in over three to seven years.

· Boosts funding for community health centers, which provide basic care for many low-income and uninsured people.

· Requires employers to report the value of health care benefits on employees’ W-2 tax statements.

· Imposes $2.3 billion annual fee on drug makers, increasing over time.


· Sets up program to create nonprofit insurance co-ops that would compete with commercial insurers.

· Initiates Medicare payment reforms by encouraging hospitals and doctors to band together in quality-driven “accountable care organizations” along the lines of the Mayo Clinic. Sets up a pilot program to test more efficient ways of paying hospitals, doctors, nursing homes and other providers who care for Medicare patients from admission through discharge. Successful experiments would be widely adopted.

· Penalizes hospitals with high rates of preventable readmissions by reducing Medicare payments.


· Standardizes insurance company paperwork, first in a series of steps to reduce administrative costs.

· Limits medical expense contributions to tax-sheltered flexible spending accounts (FSAs) to $2,500 a year, indexed for inflation. Raises threshold for claiming itemized tax deduction for medical expenses from 7.5 percent of income to 10 percent. People over 65 can still deduct medical expenses above 7.5 percent of income through 2016.

· Increases Medicare payroll tax on couples making more than $250,000 and individuals making more than $200,000. The tax rate on wages above those thresholds would rise to 2.35 percent from the current 1.45 percent. Also adds a new tax of 3.8 percent on income from investments.

· Imposes a 2.3 percent sales tax on medical devices. Eyeglasses, contact lenses, hearing aids and many everyday items bought at the drug store are exempt.


· Prohibits insurers from denying coverage to people with medical problems, or refusing to renew their policy. Health plans cannot limit coverage based on pre-existing conditions, or charge higher rates to those in poor health. Premiums can only vary by age (no more than 3-to-1), place of residence, family size and tobacco use.

· Coverage expansion goes into high gear as states create new health insurance exchanges — supermarkets for individuals and small businesses to buy coverage. People who already have employer coverage won’t see any changes.

· Provides income-based tax credits for most consumers in the exchanges, substantially reducing costs for many. Sliding scale credits phase out completely for households above four times the federal poverty level, about $88,000 for a family of four.

· Medicaid expanded to cover low-income people up to 133 percent of the federal poverty line, about $28,300 for a family of four. Low-income childless adults covered for the first time.

· Requires citizens and legal residents to have health insurance, except in cases of financial hardship, or pay a fine to the IRS. Penalty starts at $95 per person in 2014, rising to $695 in 2016. Family penalty capped at $2,250. Penalties indexed for inflation after 2016.

· Penalizes employers with more than 50 workers if any of their workers get coverage through the exchange and receive a tax credit. The penalty is $2,000 times the total number of workers employed at the company. However, employers get to deduct the first 30 workers.


· Imposes a tax on employer-sponsored health insurance worth more than $10,200 for individual coverage, $27,500 for a family plan. The tax is 40 percent of the value of the plan above the thresholds, indexed for inflation.


· Doughnut hole coverage gap in Medicare prescription benefit is phased out. Seniors continue to pay the standard 25 percent of their drug costs until they reach the threshold for Medicare catastrophic coverage, when their copayments drop to 5 percent.

How do you pay for the new health care bill?

$569.2 billion in new taxes Included in the Legislation

  • A first-time ever tax on health care benefits, commonly referred to as the “Cadillac tax,” which raises taxes by $32 billion.
  • A new Medicare tax on wages, self-employment income and certain investment income that increases taxes by $210.2 billion.
  • A new tax on health insurance providers and totals $60.1 billion.
  • A new employer mandate tax that will increase taxes on employers by $52 billion.
  • A new tax on drug manufacturers and importers of $27 billion.
  • A new tax on medical device manufacturers and importers of $20 billion.
  • New requirements on information reporting on payments to corporations that raises $17.1 billion.
  • A new, higher floor for medical expense deductions for people with high-medical bills that raises $15.2 billion in taxes.
  • A new individual mandate tax, which forces Americans to purchase health care. This raises $17 billion and an earlier analysis of this provision by the Joint Committee on Taxation said nearly half of that will be paid by Americans earning less than 300 percent of the federal poverty limit, which is $66,150 for a family of four.
  • There are also new limits on Flexible Spending Accounts in cafeteria plans that raise $13 billion in new taxes.
  • There is an elimination of the deduction for expenses allocable to Medicare Part D subsidy in order to raise tax revenues by $4.5 billion.
  • Other restrictions on Health Savings Accounts, Health Reimbursement Arrangements and Flexible Spending Accounts increase taxes by $5 billion.
  • There are new taxes on tanning services to the tune of $2.7 billion.
  • A limit to the deductibility of compensation paid to employees of certain health insurance providers that increases taxes by $600 million.
  • There is a modification of section 833 treatment of certain health organizations that raises $400 million in new taxes.
  • The bill denies the use of the so-called “black liquor” for the cellulosic bio-fuel producer credit, which raises $23.6 billion in tax revenues.
  • Codification of the economic substance doctrine that increases taxes by $4.5 billion.
  • Additionally, there are other “revenue” effects of $60.3 billion.

Medicare Cuts included in the bill

These bills cut Medicare by nearly the same amount – $523.5 billion. They are:

  • $202.3 billion in cuts to seniors’ Medicare health plans, including cuts targeting the extra benefits and reduced cost-sharing seniors receive through Medicare Advantage. CBO predicted a similar policy would result in 4.8 million fewer seniors will be enrolled in these plans in 2019, while the independent Medicare Payment Advisory Commission predicted a similar policy would result 1 in 5 seniors no longer being able to enroll in Medicare Advantage as a result of this policy.
  • $156.6 billion in cuts to inpatient and outpatient hospital services, inpatient rehabilitation facilities, long-term care hospitals, inpatient psychiatric hospitals, skilled nursing facilities, Ambulatory Surgical Centers, hospice, ambulances, dialysis facilities, labs and durable medical equipment suppliers.
  • $39.7 billion in cuts to the home health providers.
  • $22.1 billion in additional cuts to hospitals by decreasing reimbursements designed to assist hospitals that serve low-income patients.
  • $20.7 billion in cuts to the Medicare Improvement Fund, which had been intended to fund improvements to seniors’ Medicare benefits.
  • $13.3 billion in yet-to-be-determined Medicare cuts from the hands of the Medicare federal board.
  • $2.3 billion in cuts to imaging reimbursements when seniors have MRIs, CT scans, and other procedures.
  • $ 800 million in cuts to power wheelchair suppliers.
  • $65.7 billion in the form of higher premiums and additional cuts to Medicare beneficiaries and providers.

Between the new taxes and the cuts listed above, the total revenue from this bill is $1,092,700,000.00. The CBO scored this bill at $940 billion.

1 Comment

Posted by on March 23, 2010 in Uncategorized


One response to “Health Care Provisions, New Taxes, and Cuts

  1. marry

    April 14, 2010 at 7:11 am

    Blogs are so informative where we get lots of information on any topic. Nice job keep it up!!_____________________________Literature Review


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