Acid Test for Health Care Reform: Reconciling Senate and House Versions

The Senate's passage of the Patient Protection and Affordable Care Act this morning leaves one last step before this year's health care reform odyssey is completed. Conventional thinking about reconciling the House and Senate versions could be flawed. Apparent obstacles would seem to portend intractable problems before a bill is actually ready for President Obama's signature. But the wiring to meld the two versions together may be better than many of us think.

Looking just on the tax (and fees) front, a snap shot of House and Senate provisions shows some similarities and some discrepancies.

Senate - Patient Protection and Affordable Care Act - H.R. 3590.AS

• Medicare payroll tax increase to 2.35 percent on annual income exceeding $200,000 for individuals and $250,000 for married couples. Employers will continue to pay 1.45 percent.).
• A 40 percent excise tax on insurance companies, tied to health care plans exceeding $8,500 or $23,000 per year for individuals or families, respectively.
• Fees imposed on employers to mitigate government insurance premium subsidies for employees who qualify for such aid.
• Fines imposed on people who elect not to buy insurance, excepting those who qualify for exemption due to economic hardship. The fines will be $95 beginning in 2014 and will increase incrementally to $750.
• Medicare and Medicaid cuts (admittedly, this is not in the tax or fee category).
• Tanning salon patron sales tax of 10 percent.
• Last but not least, fees imposed on insurance companies and on medical device and drug manufacturers.
  

House - Affordable Health Care for America Act - H.R. 3962

• Medicare and Medicaid cuts totaling $400 billion.
• Increased income taxes to generate $480 billion, imposed on individuals and couples with annual incomes exceeding $500,000 and $1 million, respectively.
• Medical device manufacturers will be subject to fees totaling $20 billion.
• New restrictions on flexible spending accounts will generate $13 billion.
• Tax credits for employers with ten employees or less, to subsidize insurance coverage.
• Penalties for individuals who elect not to buy coverage and who are not qualified for hardship exemptions (2.5 percent of income).
• Penalties on employers (8 percent of payroll) if their payrolls exceed $500,000 and they elect not to buy coverage. (For employers with payrolls over $500,000 but under $750,000, the 8 percent penalty is phased in incrementally.)

Tax issues would appear to be the "easy" part of reconciling differences between the House and Senate versions.  But appearances can be deceiving.