Tax hikes cast shadow over health bill

Senate Majority Leader Harry Reid, D-Nev., was trumpeting the fact that his health bill cost less than $900 billion and didn’t increase the deficit.

But Reid’s self-declared victory comes at the cost of big new taxes and significant cuts to Medicare.

A Congressional Budget Office analysis shows the bill, which expands health care to 31 million people and creates a government-run insurance program, would cost $849 billion over 10 years beginning in 2010 while trimming the deficit by $130 billion over the same period.

“These are real savings for America,” said Sen. Christopher Dodd, D-Conn., a chief architect of the plan.

But Republicans have been quick to point out who will pay for them.

“All of these taxes are going to hurt people,” Sen. John Barrasso, R-Wyo said.

Reid’s bill targets big earners with an additional Medicare payroll tax, but it would also tax anyone who declined to enroll in insurance coverage — at a rate of $95 for individuals in 2014, the proposed first year of the plan, up to $750 in 2016. For families who do not enroll, the annual penalty would be as high as $2,250.

The tax on the uninsured, which would raise $8 billion, is aimed at expanding the risk pool. But critics say the penalties are too low to make a difference.

“This proposal encourages people to wait until they are sick to purchase coverage, which will significantly drive up costs for those who are currently insured,” said Robert Zirkelbach, spokesman for America’s Health Insurance Plans, the main insurance industry lobby.

The Senate bill would raise an additional $149 billion by taxing so-called luxury insurance plans. Individual plans costing more than $8,500 and family plans valued higher than $23,000 would be hit with a 40 percent surcharge.

The threshold was raised slightly from an earlier Senate bill, leaving Reid short $51 billion. He more than made up for the loss with a half-percent Medicare payroll tax increase on individuals who earned more than $200,000 and families with incomes greater than $250,000. The new tax would raise $54 billion, according to the CBO.

Reid also included a 5 percent tax on elective cosmetic surgery, which would raise $6 billion.

Businesses that didn’t provide health coverage that met new requirements would chip in $28 billion in new taxes, according to the CBO.

Companies with more than 50 employees that didn’t offer health coverage would pay a fine of $750 multiplied by their total number of workers, even if only one employee fell into the government plan.

If a company provided health coverage but not up to the new federal standards, the employer would have to pay a fine of $3,000 for any worker on the government plan.

The CBO calculates that many employers would choose to pay the tax and dump employees into the government plan, which would result in additional tax revenue of $64 billion when workers were paid higher wages instead.

The bill would raise $156 billion by taxing insurers, medical device manufacturers and hospitals, an expense industry experts warn would likely be passed along to consumers.

sferrechio@washingtonexaminer.com

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