Over the weekend, the U.S. House of Representatives passed HR3962: the Affordable Health Care for America Act of 2009. The legislation is thousands of pages long, making it difficult for regular taxpayers to understand how the bill will affect them. To help all the readers of my blog, I have analyzed the bill and put together the following explanation of how it will be funded.
The Public Option
Although it was rumored that reform legislation would not include a public option, HR3962 does set the groundwork for a public option that will take full affect in 2013. Supporters of the legislation assert that it will target those who have been uninsured for several months or were denied because of pre-existing conditions. The Health Insurance Exchange will setup to offer four different plans (basic, enhanced, premium, and premium-plus), and will limit out of pocket spending to $5,000 for an individual and $10,000 for a family. This new program will not replace Medicare, which will still be available to those who qualify. Instead, the Health Insurance Exchange will aim to provide coverage to those caught in loopholes for insurance companies. Such as low waged workers employed by small businesses that cannot afford to provide benefits.
The new legislation is very expensive, and Congress has come up with a number of ways to pay for it. First of all, there will be a shared responsibility provision that basically forces taxpayers who cannot establish acceptable health care coverage to pay an additional 2.5% tax. There will be a hardship exception though, for taxpayers who cannot afford to pay the tax.
In addition to a penalty on taxpayers who cannot afford coverage, the government will also assess an 8% payroll tax on businesses that do not offer health insurance to their employees. However, it is widely expected that the penalty will be reduced to 5% when the Senate revises the bill.
One of the largest sources of funding for the reform bill is a new surtax on individuals making more than $500,000 per year, of couples making over $1 million. In the House’s bill, beginning in 2010 all taxpayers making a qualifying amount will be subject to a massive 5.4% tax increase.
In addition to adding heft tax increases, the bill also partially repeals tax indexing for inflation. This will result in more money for the Federal government as the years go by. According to the Joint Tax Committee the surcharge is only expected to generate $30.9 billion in 2011, but nearly $70 billion in 2019.
Passage into Law?
The present version of this bill is not likely to get passed into law. Despite President Obama’s optimistic stance, some Senators are already pronouncing the bill dead on arrival. Although there has been a lot of discussion about this health care reform bill, it could be months before even a highly amended version of it becomes law. The Senate is not going to vote on the bill until at least 2010, and since they are expected to make numerous modifications it will likely need to return to the House for another vote. It could be six months from now before a health care bill goes to President Obama’s desk for a signature.