Today, President Obama released his proposal to reform health care, in advance of Thursday’s health care summit. Although it is really just an outline, it appears at first blush to incorporate all of the provisions in both the House and Senate plans that are guaranteed to raise the cost of health care in this country.
Your insurance premiums will rise, your prescription drugs will cost more, and any medical device, from wheelchairs to crutches, will cost more.
What follows are a few highlights of his proposal.
Beginning in 2014, insurers are prohibited from imposing lifetime benefit limits, must accept all applicants regardless of their physical health, and beginning in 2018, all insurance plans must cover “preventive services” at no cost to the insured. (see page 3)
As in the pending legislation, individuals will be required to maintain insurance, or, pay a tax for failing to do so. The president has decided that the amount of tax you pay over the flat dollar assessment should be increased from 2 percent of your income to 2.5 percent of your income. (see page 4)
Currently, you and your employer pay a Medicare tax on your salary. “In the interest of fairness” the president is proposing that all individual tax payers making more than $200, 000 pay an additional tax of 2.9 percent on any interest and dividend income they receive. (see page 8 )
The Senate bill proposed a tax on pharmaceutical drug manufacturers of $23 billion over ten years. The president believes it would be much more fair if that tax was increased to $33 billion over ten years. (see page 9)
There will still be a $20 billion tax on medical device manufacturers, but now it will be called an “excise tax”. I can only assume this will make it easier to keep this tax in place well beyond the ten year period. (see page 10)
None of these things will lower the cost of health insurance premiums, health care costs, prescription drug costs, or the cost of medical procedures. In short, the very same things that have caused the American people to dislike the House and Senate bills are still “in play.”
Update (Steve): There are additional taxes in the president’s proposal, some of which will crush American small business. Details courtesy Americans for Tax Reform. Added up, ATR notes $629 billion in taxes in the president’s proposal. Some have already been mentioned above, but here is a list of $544 billion in tax hikes…
- Corporate 1099-MISC information reporting ($17 billion): Requires businesses to send 1099-MISC information tax forms to corporations (currently limited to individuals), a huge compliance burden for small employers
- Black liquor credit repeal ($24 billion): This is an excise tax hike which is contained in the President’s budget
- Economic substance doctrine ($4 billion): This would require taxpayers to prove to the IRS that a perfectly-legal tax deduction or strategy is “economically substantial,” and not simply a way to pay less in taxes
- Medicare payroll tax hike ($87 billion): Increases Medicare payroll tax rate from 2.9 percent to 3.8 percent on wages and self-employment income which exceeds $200,000 ($250,000 married)
- Apply Medicare tax to unearned income ($150 billion): Would apply this new, higher Medicare tax rate to unearned income (interest, dividends, rent, royalties, and passive investment in pass-throughs like S-corporations and partnerships–capital gains not mentioned)
- Cadillac plan excise tax ($125 billion): 40 percent excise tax on health insurance plans to the extent they exceed $27,500 in cost for family plans, and $10,200 for single plans
- Innovator medicine company tax ($22 billion): $2.3 billion annual tax on the industry imposed relative to share of sales made that year
- Medical device manufacturer tax ($19 billion): $2 billion annual tax on the industry imposed relative to shares of sales made that year. Exempts items retailing for <$100. Rises to $3 billion annually in 2017
- Health insurance company tax ($60 billion): $10 billion annual tax on the industry imposed relative to health insurance premiums collected that year. Phases in gradually until 2017. Fully-imposed on firms with $50 million in profits
- Tanning tax ($3 billion): New 10% excise tax on indoor tanning salons
- Increase HSA distribution penalty by 10 percentage points ($1 billion): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.
- $2500 FSA cap a.k.a. special needs kiddie tax ($13 billion): Imposes cap on FSAs of $2500 (now unlimited). Indexed to inflation after 2011
- Employer-provided retiree Rx deduction repeal ($5 billion)
- Medical itemized deduction “haircut” raised from 7.5 to 10 percent of AGI ($15 billion)
- $500,000 executive compensation limit for health insurance companies ($1 billion)
- Miscellaneous tax relief (-$2 billion)