#10: We’ve already paid for it. We might as well use it.
- From FY-14 through FY-20, 96.7% of the anticipated cost of Medicaid expansion will come from the federal government.1
- The Affordable Care Act (ACA) was enacted under Congressional rules that required new spending to be offset by spending cuts or tax increases.2
- The Congressional Budget Office determined that the enactment of the ACA and the accompanying reconciliation proposal would produce net deficit reduction of $138 billion over the 2010-2019 period.3 The offsets that produced net deficit reduction included tax increases and spending cuts that will affect Nebraskans.
Tax increases included in the health care law include 4:
- Broaden the Medicare Hospital Insurance tax base for taxpayers with income above $200,000 for a single taxpayer and $250,000 for married filing jointly.5
- Impose an annual fee on health insurance providers.6
- Impose an excise tax on health coverage that provides covers beyond a specified level – the so-called Cadillac plans.7
- Impose an annual fee on manufacturers and importers of branded drugs.8
- Impose a 2.3% excise tax on manufacturers and importers of certain medical devices.9
- Raise the medical expense deduction floor from 7.5% of AGI to 10% of AGI.10
- Limit health flex pending arrangements in cafeteria plans to $2,500.11
Most spending cuts will directly affect health care insurers and providers. These are the five ACA spending cuts that generate the largest amount of savings.
- Market basket update adjustments for certain Medicare providers.12
- Adjustments in payments to Medicare Advantage plans.13
- Payment adjustments for Home Health Care.14
- Temporary adjustment in calculation of Part B premium.15
- Medicare Disproportionate Share Hospital payments.16
Through these measures and others, Nebraska taxpayers and health care providers have prepaid the federal share of Medicaid expansion. The question to be answered is whether we participate in Medicaid expansion and bring an estimated $2.4 billion back to Nebraska. 17
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1 Fiscal Note for LB 577 dated February 28, 2013. http://www.nebraskalegislature.gov/FloorDocs/Current/PDF/FN/LB577_20130228-083515.pdf
2 A description of pay-go rules may be found at the Tax Policy Center website. http://www.taxpolicycenter.org/briefing-book/background/budget-process/paygo.cfm
3 Letter from CBO Director Douglas Elmendorf to Rep. Nancy Pelosi dated March 18, 2010. http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr4872_0.pdf
4 Tax increases listed above account for more than 96% of the value of new revenue provisions which are expected to total $409.2 billion from 2011 to 2020. The revenue and spending cut provisions will support all of the costs associated with implementation of the ACA including tax credits, closing the Part D donut hole and Medicaid expansion. A summary of the tax provisions may be found in a report prepared by the Joint Committee on Taxation dated March 20, 2010. https://www.jct.gov/publications.html?func=startdown&id=3672
5 The provision applies to both earned income and unearned income and is expected to raise $210.2 billion between 2012 and 2020. In 2011, there were 20,320 tax returns filed in Nebraska that had AGI in excess of $200,000. The total AGI listed on those returns was more than $9.7 billion. http://www.revenue.ne.gov/research/stat_2011/stat_2011_excel.html
6 The annual fee will first be levied in 2014. From 2014 – 2019, it is anticipated the $60.1 billion will be levied. The fee will be indexed to medical cost growth.
7 Beginning in 2018, a 40% excise tax will be levied on health coverage with value greater than $10,200 for a single plan or $27,500 for a family plan. It is expected to generate $32.0 billion in 2018 and 2019.
8 Beginning in 2011, an annual fee was imposed on drug manufacturers and importers of brand name drugs. The fee is expected to raise $27.0 billion between 2011 and 2019.
9 The excise tax on manufacturers of medical equipment began in 2013 and is expected to raise $20.0 billion from 2013 to 2019.
10 For tax year 2012 medical expense deductions were limited the amount of medical expense in excess of 7.5% of AGI. Beginning in 2013, the threshold will be raised to 10% of AGI resulting in increased tax collections of $15.2 billion between 2013 and 2019.
11 Prior to 2013, there were no limits on the amount of health flex spending that was deductible. Beginning in 2013, any amount in excess of $2,500 will be taxable. This is expected to raise $13.0 billion between 2013 and 2019.
12 Market basket updates are used to adjust Medicare reimbursement rates. The purpose of the market basket update is to reflect the increased cost of delivering a service. The ACA made adjustments to the formula to reflect increases in labor productivity. The changes began in 2010 and are expected to reduce Medicare expenditures by $156.6 billion between 2010 and 2019.
13 Medicare Payment Advisory Commission found that Medicare Advantage payments were projected to be 114% of the cost of care in Medicare. http://www.medpac.gov/documents/Mar09_EntireReport.pdf
14 Home health services were targeted for reimbursement reductions due to a finding by the Medicare Payment Advisory Commission that Medicare payment consistently exceeded costs by more than 15%. http://www.medpac.gov/documents/Mar09_EntireReport.pdf
15 The income threshold for increased premiums for higher income beneficiaries is indexed for inflation. The ACA provision would delay any inflation adjustments until 2019. There is an estimated savings of $25.0B from 2011 to 2019.
16 Disproportionate share hospital payments are made to hospitals that serve a high proportion of low-income patients. Savings are from Medicare ($22.1B from 2012 to 2019) and Medicaid ($14.0B)
17 The amount listed is the amount included in the LB 577 fiscal note. It is the estimated federal funding that Nebraska would receive between FY-14 and FY-20 if we participate in Medicaid expansion.