Don't Mess With Taxes

In the closing days of the 111th Congress, lame duck lawmakers finally passed major tax legislation.

Now some newly-elected Representatives say they plan to repeal another huge bill, the health care reform act.

House Republicans have scheduled a vote to roll back the Patient Protection and Affordable Care Act, Obama's signature legislative piece that he signed into law on March 30, 2010, and which is still being phased in.

The first vote, a procedural one, is likely to be held on Friday. The meat of the measure will come before the House, now under Republican control, next week.

The drafted measure, entitled "Repealing the Job-Killing Health Care Law Act," is posted on the GOP's House Rules Committee website. 

This initial effort to repeal the historic health care bill looks, at this stage, to be mostly symbolic. Although the GOP has promised to repeal and replace the law, the replacement plans are still vague.

Instead, in a separate resolution, Republicans instruct members of four committees -- Education and the Workforce, Energy and Commerce, Judiciary, and Ways and Means -- to each come up with their own separate pieces of legislation within their respective jurisdictions that propose changes to existing health care law.

The committees are given a dozen mandates, specifically to include provisions that:

1. Foster economic growth and private sector job creation
2. Lower health care premiums through increased competition and choice
3. Preserve patient choice of health care coverage
4. Provide individuals with pre-existing conditions access to affordable health care coverage
5. Reform the medical liability system to reduce wasteful health care spending
6. Increase the number of insured Americans
7. Protect the doctor-patient relationship
8. Provides states greater flexibility to administer Medicaid programs
9. Expand incentives that encourage personal responsibility for health care coverage and costs
10. Prohibit taxpayer funding of abortions and allow health care provides to opt out of participating in such procedures
11. Eliminate duplicative government programs and wasteful spending

And finally, the 12th committee directive is that any proposals "not accelerate the insolvency of entitlement programs or increase the tax burden on Americans."

Legislative déjà vu: Hmmm. Seems like much of what's covered in those 12 legislative guidelines is already in place in the health care reform act.

And wasn't the Patient Protection and Affordable Care Act cobbled together by multiple Congressional committees?

Don't forget about the Democrats, who actually remain in nominal control of the Senate. They say they'll use that body's rules to block any efforts to dramatically scale back reforms.

And even if the Senate goes along with any changes, Obama certainly would veto any major health care reform alterations.

So it looks like the GOP-controlled House will be operating in much the same way as did the one under Democratic leadership for the last two years.

As I said, standard operating procedure. The new guys and gals in charge are taking early advantage of making it clear who's now running the show in the House.

Prospects for repeal: As indicated by the GOP four committee proposals resolution, some sort of health care reform will remain. And I suspect, despite the political fodder it provides, much of act will stay pretty much the same.

That will be truer as health care reform really begins to roll out. In 2010, individuals faced just a few of the changes, such as the option for parents to add their dependent children who are age 26 or younger to their individual and group policies.

There also was the implementation of the tanning tax (sorry, Snooki!) last year and, more substantively, the provisions that prohibit health insurers from placing lifetime limits on the dollar value of coverage, rescinding coverage except in cases of fraud and from denying children coverage based on pre-existing medical conditions or from including pre-existing condition exclusions for children.

In 2011, we'll see the already announced limits on medical flexible savings accounts as far as over-the-counter drugs are concerned. This year also will bring increases in the tax on distributions from a health savings account or an Archer Medical Saving Account that are not used for qualified medical expenses.

2013 is a big one for health care-related tax law changes. The threshold for the itemized deduction for unreimbursed medical expenses will go from the current 7.5 percent of adjusted gross income to 10 percent of AGI for most filers.

The contribution limit in 2013 to a flexible spending account will be $2,500 per year, increased annually thereafter by the cost of living adjustment.

And in two years, the Medicare Part A (hospital insurance) tax rate on wages will go up 0.9 percent (from 1.45 percent to 2.35 percent) on earnings exceeding $200,000 for individuals and $250,000 for married couples filing jointly. A 3.8 percent Medicare tax also will be assessed on unearned income received by higher-income taxpayers.

The Kaiser Family Foundation's Health Care Reform Source Implementation Timeline does a great job of detailing how and when the health care reform provisions take effect over the next several years.

Learning to love change: Of course, folks hate taxes, but as some of the more positive aspects of the health care law affect people's lives, such as the end of coverage limits and expanded protection from pre-existing condition concerns, many aren't going to want to give up law changes that help them and theirs.

All politics -- and taxes and health insurance options -- are indeed local and personal.

Do you want to be the Representative or Senator who tells Mom that she has to drop Junior, who's just graduated college and looking for a job, from her health care coverage?

Related posts:

• Get ready for FSA changes: IRS issues OTC rules
• W-2 reporting of workplace health care benefits
• Adding adult kids to health care, FSAs
• Don't fall for health care tax rumors
• Health care reform taxes, redux
• Tax provisions in the health care bill

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