Senate Democratic Leadership Unveils its Health Care Reform Package
Late in the evening of November 18, the Senate Democratic
Leadership unveiled its healthcare reform package, the Patient
Protection and Affordable Care Act. The cost of the bill
is $849 billion over 10 years, is projected to cut the deficit
by $127 billion over 10 years and by $650 billion in the
second decade, and is said to cover 94% of eligible Americans.
Senate Democrats decided to use the shell of H.R.3590 the
Service Members Home Ownership Tax Act of 2009 as the vehicle
to move the bill through the Senate, instead of calling up
the House passed bill.
Legislative text of the Senate bill is available at http://democrats.senate.gov/reform/patient-protection-affordable-care-act.pdf.
The Senate bill's revenue offset provisions to pay for the
cost of health reform include the following:
- An additional 0.5% hospital insurance (HI) tax would apply
to wages in excess of $200,000 ($250,000 for joint filers).
- A 40% excise tax would apply to health coverage in excess
of $8,500 (singles)/$23,000 (families), to be indexed for
inflation, with increased thresholds for over age 55 retirees
and those in certain high-risk professions. The tax would
be levied at the insurer level. The employer would aggregate
coverage levels and issue information returns for insurers
showing the amount subject to the nondeductible.
- Employers would be required to report the value of health
benefits on the employee's W-2.
- The definition of medical expenses for health savings
accounts, Archer MSAs, health flexible spending arrangements,
and health reimbursement arrangements would be conformed
to the definition of the itemized deduction for medical expenses
(thus eliminating the deduction for anything other than a
prescribed drug or insulin).
- The penalty for nonqualified health savings account distributions
would be increased from 10% to 20%.
- A $2,500 cap would apply to health flexible spending arrangements
in cafeteria plans.
- Payments to corporations would be subject to the information
- An annual fee would be levied on manufacturers and importers
of branded drugs, and on manufacturers and importers of certain
- The deduction for expenses allocable to the Medicare Part
D subsidy would be eliminated.
- The 7.5% AGI floor beneath the medical expense deduction
would be raised to 10% (except for individuals age 65 and
older (and their spouses)).
- A $500,000 deduction limit would apply to compensation
paid to officers, employees, directors, and service providers
of covered health insurance providers.
- The Code Sec. 833 treatment of certain health organizations
would be modified.
- A 5% excise tax would apply to cosmetic surgery and similar
- The bill would create a new simple cafeteria plan nondiscrimination
safe harbor for certain small employers.
The bill also would create a credit for qualifying therapeutic
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