Healthcare

A compendium of all of my thoughts on...

OBAMACARE

aka the Patient Protection and Affordable Care Act (PPACA) 
aka the Affordable Care Act (ACA)

History of Health Reform: A Legislative Timeline of Obamacare

At some point, I hope to come back and flesh out a fuller history of U.S. healthcare reform attempts prior to passage of the ACA ("Obamacare"), but for now, I’m going to skip over some of the more interesting details. That back story includes Pres. Richard Nixon’s role in shaping how the vast majority of us get healthcare and his work with Sen. Ted Kennedy on a proposal that shares some similarities to today’s ACA, the political collapse of Pres. Bill Clinton’s proposal (known derisively as “Hillarycare”) before ever receiving a vote^[1], and the Heritage Foundation’s counter proposal which became the basis for the Massachusetts reform which in turn became the basis for the ACA.

Until then, a timeline:

• In March 2009, congressional committees begin holding public hearings on health reform. While five committees (Energy and Commerce, Ways and Means, and Education and Labor in the House; Health, Education, Labor and Pensions (HELP) and Finance in the Senate) will take primary responsibility for vetting health reform legislation through dozens of hearings and markups (a markup being the process by which bills are amended -- marked up -- in committee), a number of other committees ranging from the Budget Committee to the Small Business Committee will themselves hold hearings inviting experts to publicly evaluate every aspect of competing reform proposals.


• In July 2009, House Democrats introduce the America's Affordable Health Choices Act of 2009 (HR 3200).


• In August 2009, Sen. Ted Kennedy of Massachusetts dies and is replaced by seat 'caretaker' Democrat Paul G. Kirk until a special election can be held.


• In October 2009, an amended version of the House bill is introduced as HR 3962, the Affordable Health Care for America Act; it passes the House on November 7, 2009 by a vote of 220 to 215, with Rep. Joseph Cao as the lone Republican supporting.


• In December 2009, Senate Democrats take up a shell House bill^[2] (HR 3590) and replace its contents with their own bill vetted by the Senate  committees. On Christmas Eve 2009, the Senate passes the healthcare law by a vote of 60-39. This bill, the Affordable Care Act, at 906 pages, is the law known popularly as "Obamacare."


• In January 2010, Republican Scott Brown wins the special election against Massachusetts Attorney General Martha Coakley to replace Kennedy, denying Democrats a 60th Senate vote needed to overcome a filibuster.


• On March 21, 2010, the House takes up the Senate healthcare bill, HR 3590, and passes it without amendment by a vote of 219 to 212, sending it to Pres. Obama, who signs it into law on March 23.


• On March 21, within an hour of passing the Senate's health reform bill and sending it to the president, the House takes up a package of "fixes" negotiated by the House, Senate, and White House (HR 4872, the Health Care and Education Reconciliation Act); also included in the package is a change to federal student loan assistance. This package of fixes, at 55 pages, cannot be filibustered in the Senate so long as every provision has a direct impact on the federal budget, as strictly enforced by Senate parliamentarians.


• On March 25, the Senate passes the 55-page package of fixes (HR 4872) with two changes  (striking provisions deemed by the parls to not have a significant enough budgetary impact to meet the standard for reconciliation) by a vote of 56-43, and sends the modified version to the House, which passes it the same day and sends it to Pres. Obama, who signs it into law on March 30.

This timeline is important for two reasons: popular political mythology (often lazily repeated in the press) holds that "Obamacare" was 1- rushed through Congress with little opportunity for input and 2- rammed through the Senate through an egregious and unprecedented abuse of the reconciliation process. Neither charge is true. More than a year lapsed between when congressional committees began holding public hearings on healthcare reform and when the president signed the bill into law. Furthermore, most of the ideas discussed and ultimately included in the law had been "on the table," often in the form of introduced legislation with bipartisan support, for at least a decade beforehand and had appeared in both Hillary Clinton and Barack Obama's detailed 2008 campaign proposals. Secondly, only the 55-page package of fixes was enacted using reconciliation. The 906-page law known as "Obamacare" passed the Senate with 60 votes.  Unlike the Bush tax cuts of 2003, which were pushed through using reconciliation with Vice President Dick Cheney having to cast the tie-breaking vote, the key provisions of Obamacare, including the individual mandate, were passed by a Senate supermajority under regular order.  In the end, neither charge may matter that much post 2012 election, but both were used as a way to deligitimize the law duly passed by the U.S. Congress, signed into law by the president, and ultimately upheld by the Supreme Court, making a review of the facts worthwhile.

Footnotes for Obamacare Timeline
[1] Read Paul Starr’s indispensable article on Republican tactics in 1992 and compare it to what we saw in 2009-2010. Note that Starr wrote his article in 2007, while President George W. Bush was still in office:

All the elements of the conservative coalition, from the anti-taxers to the social conservatives, mobilized against the Clinton health plan and against the Clintons personally, while liberals were ambivalent and Democrats in Congress were divided. Newt Gingrich, Grover Norquist, Bill Kristol, and other figures in the conservative movement saw health reform as an ideological threat because if it succeeded, it might renew New Deal beliefs in the efficacy of government, whereas a defeat of the health plan could set liberalism back for years. Tom DeLay pressed business organizations such as the U.S. Chambers of Commerce, which had been edging toward a deal, to reverse course. Soon Republicans were backpedaling from their own health-reform proposals. The Republican Senate minority leader, Bob Dole, withdrew his first bill and substituted a more limited one and then withdrew that one, too. It was not just the Clinton plan that was stymied; every effort in Congress to find a compromise failed. While George Mitchell, the Senate majority leader, was drawing up a compromise plan in the summer of 1994, Kristol wrote a memo to Republicans advising, "Sight unseen reject it." Near the end, Sen. Bob Packwood told his Republican colleagues that after killing health-care reform, they had to make sure their fingerprints weren't on the corpse. As I wrote in my postmortem in these pages, "The Republicans enjoyed a double triumph, killing reform and then watching jurors find the president guilty. It was the political equivalent of the perfect crime."

[2] Under the Constitution, legislation raising revenue must originate in the House. To avoid a "blue slip" hang up, in which the House refuses to consider Senate-passed legislation that it deems violates the House's prerogative, the Senate frequently takes revenue measures passed by the House, strips out everything, and inserts its own legislation.

A Rundown on the Personal Taxes in Obamacare

(Minus the Scaremongering)

I pulled this list together after a relative wrote me in tears about the "massive tax hikes" she'd been told to expect as a result of Obamacare. It is a comprehensive list of every tax change that individuals and families can expect to see as a result of the new healthcare law.

1—The individual mandate. People who can afford insurance and choose to forgo it will have to pay a penalty tax to prevent them from free-riding on the system. (By free-riding I mean, they can afford insurance, but don't get it, then get sick and get free care at the emergency room paid for by taxpayers.) Because the new law requires everyone to get coverage, it provides assistance to help them do so. It's more efficient for taxpayers to help families who can't afford coverage to get assistance in buying it, so that they pitch in for part of it, than to pay for their much more expensive care in the ER.

Experts believe that very few people nationwide will end up paying the penalty because most people already get health insurance and those who can't afford it (even with assistance) will be exempt from the mandate. Nationwide, roughly 1% of people are expected to be affected—mostly young people who find that paying the penalty is cheaper than paying for health insurance they don't think they'll need. The penalty acts like insurance for the rest of us in case those young people do end up in the ER and we have to pay for them. (Keep in mind that the law also allows young people up to age 26 to remain on their parents' insurance if their own employer doesn't provide insurance.)

If you are interested in knowing whether your family is eligible for help paying for health insurance or could be subject to the penalty if you forgo insurance, this calculator from the Kaiser Foundation is really helpful. 

For example, if the Smiths (a family of four) earn $90,000 in income in 2014 and have access to affordable healthcare through an employer and choose not to get it, they'll have to pay the penalty. (Health insurance is deemed “affordable” when out-of-pocket costs, not counting employer contributions, for private health insurance are less than 8 percent of a household’s taxable income.  For penalties, see U.S. News and World Report's July 2012 article, "How the Health Insurance Mandate Penalty Will Work.")

If the Smiths' employer provides healthcare coverage that is not affordable, or if their employer does not provide coverage, the Smiths would get an annual credit starting in 2014 of $2,149 from the government to help buy insurance. If their income is $50,000, they'd get a credit of $3,385. The lower your income, the more assistance you get to ensure that the mandate is not an impossible burden. The income cut-off for financial assistance is roughly $92,000 for a family of four.  

2—Families making more than $250,000 per year. There are two new moderate tax increases on families making more than $250,000 a year / individuals making more than $200,000. The first is a 0.9% increase in payroll taxes. The second is a 3.8% tax increase (or "surcharge") on capital gains and dividends. (Both the payroll tax and investment tax increases go toward paying the Medicare Trust Fund.)  For example, the Youngs earn a combined salary of $205,000 with a $60,000 profit on their investments, for a total adjusted gross income (AGI) of $265,000. They would pay the 3.8% tax on $15,000 (the amount of their investment income that puts them over the $250,000 threshold). If the Youngs have an AGI of $350,000, they would pay the 3.8% tax on $60,000 (the entire amount of their net investment income).

A—Home exemptions. Chain emails have described the capital gains surcharge as a sales tax on all real estate sales. It's not. The new tax only affects gain (profit) from the sale of an asset, not the sales price, and for your home, it only affects profit over $500,000 for a married couple ($250,000 for an individual).  If your family makes more than $250,000 in a year AND you sell your house for a profit of more than $500,000, you pay an additional 3.8% tax on the profit over $500,000. (The Jones make $250,000. They bought a house at $400,000 and sold it at $700,000. Their profit was $300,000. They pay NO additional tax. If they sold at $1 million and made a profit of $600,000, they'd pay the increased tax on $100,000, aka the part of their profit that exceeds $500,000.)  Politifact and other fact-checking sites have thoroughly debunked the real estate sales tax claim. 

3—High-cost insurance plans. If your employer provides a very generous, high cost health insurance plan (premiums are greater than $27,500 per family per year), your employer will have to pay a tax starting in 2018 which could trickle down to employees. (For comparison, the average plan per family costs less than half that at $13,375.) This is expected to affect relatively few people, in part because companies are expected to switch to lower-cost plans.^[1]

4—Sales tax on indoor tanning salon trips. It's 10%. (Outdoor tanning is still free.)

5—Changes to medical itemizations and tax-free savings accounts. There were some changes to what you can deduct if you itemize your medical expenses on your taxes or how you can use a tax-free savings account. For instance, on your 2012 taxes, you can claim an itemized deduction for medical expenses paid for you, your spouse, and your dependents, to the extent that your out-of-pocket expenses exceed 7.5% of your adjusted gross income. Starting in 2013, that threshold is 10% of AGI. Similarly, the amount of pre-tax dollars that you can contribute to an employer's healthcare flexible spending account (FSA) plan is capped at $2,500 and you can no longer buy over-the-counter medicines with tax-free Health Savings Account (HSA) dollars. (These kinds of changes will affect relatively few people—for example, only .01% of people nationwide have an HSA. But if that's you, it's worth taking a more detailed look at these kinds of changes.)

And that's it for personal tax changes. There are other corporate tax code changes, some of which could be indirectly passed on to families as costs and some which will save families through lower premiums. The most significant personal tax change will be faced by the 2% of families making more than $250,000 a year, if they have net investment profit. But for the vast majority of Americans, there is nothing likely to significantly change the taxes they pay every year, and certainly nothing to panic about.

Footnotes for Obamacare Taxes

[1] The idea behind this, the so-called "Cadillac tax," is to address the perverse incentive in the tax code for employers to reward employees with better and better healthcare benefits instead of higher wages. Because of the payroll tax, both an employee’s and an employer’s taxes grow with salary increases, but because of the tax exclusion for employer provided health insurance, their health benefits do not. This is believed to help contribute to skyrocketing health care costs as people with better and better coverage demand care they may not really need (like expensive but unnecessary tests or hospital stays). By taxing high cost plans, policymakers may help level the tax incentive playing field for wages versus benefits.

Of concern to critics is that the tax threshold is pegged to inflation, but not to healthcare costs, which currently grow faster than inflation. If cost control measures in the ACA work as intended, few people should be hit by this tax, even in out years. If cost control measures do not work as intended, more people will hit this ceiling and Congress may well end up adjusting it just as Congress currently "patches" the alternative minimum tax (AMT) to prevent it from hitting middle class families. This is something to watch, but not something most people need to panic about now, if ever.