Congressional Update

On Wednesday, Senate leaders revealed their $849 billion proposal of health care over haul, projected by the Congressional Budget Office (CBO) to reduce the deficit by $127 billion over ten years. The Senate version comes within the President’s $900 billion proposed spending cap for health care and at $200 billion dollars less than the proposal from the House. It is estimated that 94% of Americans would have health insurance under the Senate’s proposal for health care overhaul.

Although it does not expand Medicaid as greatly as the House version, Medicaid eligibility would be expanded to include all non-elderly Americans with income below 133% of the federal poverty level under the Senate proposal.

To create a competitive market with private insurers, the Senate version would create a government run public option, but states would be give the choice to opt out if they deem necessary. Americans who buy insurance via the proposed government run marketplaces known as “exchanges,” would not receive as much of a tax credit as the House version suggests they should receive. To limit federal funding of abortion, “exchanges” would offer at least one plan that covers abortion and one plan that does not. The revenue collected via a plan that covers abortion, would be treated as a private premium from federal subsidy revenue and only the revenue from private premiums could be used to pay for the procedure.

To assist with the costs of Medicare, creating a projected $149.1 billion over ten years, Americans with costly health insurance plans known as “Cadillac” insurance plans would see a surtax on plans that exceed $8,500 for individuals and $23,000 for families. States with higher health care costs would get a 3 year transition period and a $3,000 increase in the thresholds. The ultimate goal of the surtax being, stop companies from offering “Cadillac” health insurance plans.

In addition, individuals with an income greater than $200,000 or couples with an income greater than $250,000 would see an increase in their Medicare payroll tax from the current 1.45%, up .5% to 1.95%. This payroll tax would take affect in 2013 and is projected to generate $53.8 billon over ten years. It would only apply to employees, not employers and only to wages not to investment income. For example if an employee has a salary of $100,000 and capital gains of $200,000, the payroll tax will not be imposed. The House version of health care overhaul does not propose an excise tax, but instead 5.4% surtax on adjusted gross income for individuals who make above $500,000 dollars and couples who make above $1,000,000.

Several other provisions of the recently introduced Senate health care overhaul bill include an additional 5% tax on cosmetic surgery that is not medically necessary; the cosmetic surgery tax is expected to generate $5.8 billion over ten years. Fees on medical devices would be reduced from $4 billion (Senate Finance proposal) to $2 billion. The House bill proposes a 2.5% excise tax instead of an industry wide fee. Projected to generate $400 million, there would also be a limit on a deduction available for Blue Cross Blue Shield plans; the deduction would only apply if companies have a medical loss ratio of at least 85%.

A procedural vote to begin debate on the bill is set for Saturday, November 21.

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