Friday, December 10, 2010

Health Reform Law Is Amended (A Tiny, Tiny Bit)

It’s not much of a change, but Congress has passed its first amendment to the Patient Protection and Affordable Act (ACA) since President Barack Obama signed it in March 2010.

Forget about the calls for wholesale repeal—even provisions Republicans and Democrats agreed should be changed remain in the law (more about that later). But on December 8 and 9, the Senate and the House of Representatives passed the Medicare and Medicaid Extenders Act of 2010, which in part extends current Medicare payment rates through Dec. 31, 2011. Under the current "sustainable growth rate" (SGR) formula, Medicare physician payment rates were scheduled to be reduced by 25% on January 1, 2011.

Congress has provided temporary relief (also known as the “doc fix”) from these Medicare reductions every year since 2003.

The estimated cost of the provision to extend Medicare payment rates until 2012 is $14.9 billion over ten years—here is where the health reform law comes into play. The cost of the extension will be paid for by a change in the refundable tax credit formula in the ACA.

Under IRC Sec. 36B as added by the ACA, certain taxpayers who purchase qualified health plans through state exchanges are entitled to a refundable income tax credit equal to the premium assistance credit amount, starting in 2014. The premium assistance credit applies to tax years ending after December 31, 2013.

Under the law, if an individual’s income turns out to be higher than the amount that was used to calculate the advanced premium tax credit, the individual must return part or all of the excess payment to the government. Originally, the amount repaid by the individual was limited to $250 for individuals and $400 for families for those at or below 400% of the Federal Poverty Level (FPL)

H.R. 4994 provision increases the existing limits of $250 and $400, and replaces the across-the-board structure with a scaled structure that starts with lower limits for those with lower incomes. For those with incomes less than 200% of FPL, the new limit would be $600.  For those with incomes of at least 450% but less than 500% of FPL, the limit on the payback would be $3,500.

Estimated savings from this minor change? More than $19 billion.

Oh, that provision that everyone wants changed? It went down in defeat late in November. There were at least two proposals to repeal Form 1099 reporting requirements for small businesses that were included in health reform. The Form 1099 requirements, signed into law as part of the PPACA, mandate that all businesses file a return for payments to vendors in excess of $600 beginning in 2012. The measure is estimated to raise some $19 billion over 10 years to help offset the cost of health care reform.

Small businesses strongly opposed the provision, claiming the excessive paperwork is too burdensome. President Obama had earlier signaled that he would support changes to the Form 1099 rules, and the provision had wide support among both Republicans Democrats.

The differences in the provision that got changed and the one that did not?  Money—the amendment to the doc fix is paid for by increasing fees to taxpayers—thus the change in health reform does not cost the federal government any money. The burdensome 1099 reporting repeal had no offsetting revenue and could not overcome that fiscal hurdle.

For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform and other recent developments in employee benefits, just click here.


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