Obamacare enrollment

This won't affect most people as they're either covered by an employer health plan or by Medicare. But it may affect some of their children and friends.

https://www.coveredca.com/
This is the California exchange site. The Spanish web portal isn't ready yet and I don't know if they plan to have any other language portal.

The federal web site, www.healthcare.gov, has had many problems on its first day. But there is plenty of time to sign up.

It's questionable whether healthy young folks should sign up purely from a financial point of view. The plan calls for young insureds to subsidize the elderlies. Their premium will therefore be high.

There are four different plans, all with the same coverage. The difference is the amount of monthly premium vs the amount of annual deductibles and co-pays. The Platinum plan has the highest premium but the lowest deductible and co-pay. So if one needs extensive medical care, s/he should sign up for the Platinum plan.

People making up to 400% of poverty level will get federal subsidies on a sliding scale. But if you make just $1 over that threshold, you will lose the entire subsidy. On a family plan, even if one family member is covered by an employer health plan, you will lost the federal subsidy as well. That's why some people have suggested Obamacare may discourage marriages and encourage divorces.
http://www.marketwatch.com/story/will-obamacare-hurt-job-creation-and-marriage-2013-09-27

To get the federal subsidy, one must sign up through the exchanges.

The administration has been touting employers could get up to 35% tax credit for providing their employees with health insurance, but that's a myth in most cases.
http://www.marketwatch.com/story/small-business-tax-credit-thanks-to-obamacare-2013-10-02

IRS Proposed Regulations on Obamacare

CCH Explanation:
http://www.cchgroup.com/wordpress/index.php/tax-headlines/federal-tax-headlines/irs-releases-proposed-regulations-answers-questions-on-net-investment-income-tax-and-additional-medicare-tax-nprm-reg-130507-11-nprm-reg-130074-11-notices/

New 3.8 Percent Tax on Investment Income
http://www.parkertaxpublishing.com/public/REG-130507-11.pdf

0.9 Percent Additional Medicare Tax
http://www.parkertaxpublishing.com/public/REG-130074-11.pdf

2.3% Excise Tax on Medical Device
http://www.irs.gov/pub/irs-drop/n-12-77.pdf

Rules Relating to Additional Medicare Tax
https://www.federalregister.gov/articles/2012/12/05/2012-29237/rules-relating-to-additional-medicare-tax

http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions

Disclosure of tax return information on eligibility requirements for health insurance affordability programs
http://www.irs.gov/pub/irs-drop/reg-119632-11.pdf

Additional Requirements for Charitable Hospitals
http://www.irs.gov/pub/irs-drop/reg-130266-11.pdf

Here is a link to the IRS web site on its various news releases and guidance on Obamacare:
http://www.irs.gov/uac/Affordable-Care-Act-of-2010:-News-Releases,-Multimedia-and-Legal-Guidance

Why the Health Care Tax Credit Eludes Many Small Businesses

http://www.cnbc.com/id/49178782
By: Robb Mandelbaum, The New York Times

The Agenda has now profiled three small businesses that are struggling in different ways with providing health insurance to employees. (Previous related stories: Small-Business Health Care Profiles) The companies are very different — they trade in very different parts of the economy, and couldn't be located much further apart geographically — but they do have one thing in common: Though all three have fewer than 25 employees, not one has qualified for the tax credit in the Affordable Care Act that was intended to help small businesses pay for health insurance. Indeed, the credit is one element of the controversial health law that has already fallen short of expectations.

Estimates of the number of businesses eligible to take the tax credit have ranged from 1.4 million to 4 million companies, but in May, the Government Accountability Office reported that only 170,300 firms actually claimed the credit in 2010. Of these, only a small fraction, 17 percent, were able to claim the whole credit.

For eligible companies, the credit effectively refunds 35 percent of health insurance expenses between 2010 and 2013.* After 2014, the credit increases to 50 percent and is available for any two consecutive years. The credit is fully available to companies with 10 or fewer full-time employees and average wages below $25,000. It phases out as the number of employees rises to 25 and wages grow to $50,000. In 2009, there were about 4.6 million companies with fewer than 10 employees, according to the Census Bureau, and 5.7 million with fewer than 100.

The credit was aimed squarely at the smallest companies, which rarely offer health insurance to employees. However, as we reported two weeks ago, it appears not to have persuaded very many to start offering insurance. The most recent study of employer health insurance from the Kaiser Family Foundation found that just half of all companies with fewer than 10 employees offered insurance, a share that has not moved much since 2005. 

So why has the credit fallen short of expectations? The G.A.O. concluded that the credit was too small to sway business owners. Moreover, it said, claiming the credit is a task so complicated as to discourage many companies from trying. Companies have to determine the number of hours each employee worked in the year, as well as compile information about their insurance premiums. "Small-business owners generally do not want to spend the time or money to gather the necessary information to calculate the credit, given that the credit will likely be insubstantial," the report said, citing conversations with tax preparers. "Tax preparers told us it could take their clients from two to eight hours or possibly longer to gather the necessary information to calculate the credit and that the tax preparers spent, in general, three to five hours calculating the credit."

The G.A.O. report hints at the complexity with this delicious example:

On its Web site, I.R.S. tried to reduce the burden on taxpayers by offering "3 Simple Steps" as a screening tool to help taxpayers determine whether they might be eligible for the credit. However, to calculate the actual dollars that can be claimed, the three steps become 15 calculations, 11 of which are based on seven worksheets, some of which request multiple columns of information.

It may be tempting to hold the Internal Revenue Service responsible for whatever burden accompanies the tax credit, but in this case, the complexity is written directly into the law. It turns out that legislators wrote the provision in a way that makes it appear more generous than it really is. Many businesses with both fewer than 25 employees and average wages below $50,000 are in fact unable to claim the credit.

Under the law, once such a business has calculated its potential credit, it is required to reduce the credit first to account for any excess employees over 10 and then separately reduce the potential credit to account for any excess average wages paid over $25,000. For many companies, the two reductions exceed the potential credit itself - meaning the business gets no credit.

That's what happened to Carrie Van Dyck, who along with her husband owns the Herbfarm Restaurant outside of Seattle. Excluding its owners, the Herbfarm, which we profiled in June, employed the equivalent of about 21 or 22 full-time staff members, who were paid an average wage of about $35,000 - a few thousand dollars over the credit's threshold for 21 employees. The result surprised Ms. Van Dyck, she said recently by e-mail, because "it would seem that we are a pretty typical small, mom-and-pop type business that this should apply to."

Of course, by making the credit less generous, the senators who wrote the law made it less expensive to the United States Treasury. Now it is apparent that credit will be even cheaper than planned: initially it was expected to cost the Treasury $2 billion in 2010; instead it cost the government only a quarter of that.

The law also excludes owners and owners' families from counting toward the credit, which can cut both ways. On the one hand, owners don't count as employees and their salaries are excluded from the annual wages, exclusions that could make some companies eligible for a bigger credit than they might otherwise have gotten. On the other hand, premiums paid for the owners' and their families' insurance aren't eligible for the credit, which for some companies, as You're The Boss commenter JAB recently noted, "greatly reduces the incentive to provide coverage for employees."

The White House has said that the number of businesses claiming the credit for 2011 has grown to at least 360,000, but that is still well below even the smallest estimate of eligible businesses. Some advocates for the law say that more businesses will take advantage of the credit in 2014, when it grows to 50 percent, especially if the new insurance exchanges make it easier and cheaper for small companies to offer insurance.

The Obama administration has proposed making more businesses eligible for the credit, in part by starting phase-outs at higher thresholds, and also by changing the way it is calculated so that every business within the limits, such as the Herbfarm Restaurant, can take some amount of credit.

But judging from the comments of Representative Sam Graves, chairman of the House Small Business Committee, the initiative is unlikely to pass a Republican-controlled House anytime soon. "This tax credit has already largely failed to attract small-business owners, and expanding it will not make the president's health care law affordable," the Missouri Republican said in a statement. "For small employers that do not offer health insurance, tax incentives are unlikely to cause many of them to choose a massive new expense they just cannot afford in the first place." It was Mr. Graves who sought the G.A.O. report.

Of course, a business denied a credit has not been made worse off by the 2010 health law. But the law surely has raised and dashed a lot of hopes, and these are the early days - the sweeping changes that are the law's hallmark don't come until 2014.

*There are, of course, many caveats here, but the main one is that the company has to pay at least half of the premium.

 

Two million more expected to pay penalty under Obamacare

http://money.cnn.com/2012/09/19/news/economy/healthcare-law-penalty/index.html
NEW YORK (CNNMoney) -- Congress' official scorekeeper said Wednesday that roughly two million more Americans will pay penalties under President Obama's health care law for lacking insurance than had previously been estimated.

Under the law, Americans must be insured starting in 2014 or pay a penalty assessed on their tax returns.

Shortly after the legislation passed in 2010, the Congressional Budget Office, working alongside the Joint Committee on Taxation, estimated that in 2016 roughly four million people a year would opt to pay the penalty instead of getting coverage. On Wednesday, the CBO and JCT revised that figure up to six million, citing legislation passed since 2010 as well as the weaker economic outlook.

The groups also pointed to the Supreme Court's decision earlier this year to make the health care law's expansion of Medicaid optional for states.

Of those people who opt for the penalty, 10% are projected to be below the federal poverty level for 2016, which the CBO and JCT estimate will stand at about $12,000 for an individual or $24,600 for a family of four.

In 2014, the penalty will be no more than $285 per family, or 1% of income, whichever is greater. In 2015, the cap rises to $975, or 2% of income. And by 2016, it reaches $2,085 per family, or 2.5% of income, whichever is greater.

The dollar amounts for a single adult would be $95, $325 and $695 during that same time period.

Roughly 30 million non-elderly Americans are projected to remain uninsured in 2016, though most will not be subject to the penalty tax. For instance, the penalty will be waived for people with very low incomes who don't have to file tax returns, those who are members of certain religious groups, or people who face insurance premiums that would exceed 8% of family income even after including employer contributions and federal subsidies.

Penalty payments collected in 2016 are expected to total $7 billion, about $3 billion more than previously estimated.

Medicaid for the middle class?

This is what happens when the law was written after lawmakers had passed it and the President has signed it.

http://news.yahoo.com/s/ap/20110621/ap_on_go_ca_st_pe/us_health_overhaul_glitch
By RICARDO ALONSO-ZALDIVAR, Associated Press

WASHINGTON – President Barack Obama's health care law would let several million middle-class people get nearly free insurance meant for the poor, a twist government number crunchers say they discovered only after the complex bill was signed.

The change would affect early retirees: A married couple could have an annual income of about $64,000 and still get Medicaid, said officials who make long-range cost estimates for the Health and Human Services department.

After initially downplaying any concern, the Obama administration said late Tuesday it would look for a fix.

Up to 3 million more people could qualify for Medicaid in 2014 as a result of the anomaly. That's because, in a major change from today, most of their Social Security benefits would no longer be counted as income for determining eligibility. It might be compared to allowing middle-class people to qualify for food stamps.

Medicare chief actuary Richard Foster says the situation keeps him up at night.

"I don't generally comment on the pros or cons of policy, but that just doesn't make sense," Foster said during a question-and-answer session at a recent professional society meeting.

"This is a situation that got no attention at all," added Foster. "And even now, as I raise the issue with various policymakers, people are not rushing to say ... we need to do something about this."

Administration officials said Tuesday they now see the problem. "We are concerned that, as a matter of law, some middle-income Americans may be receiving coverage through Medicaid, which is meant to serve only the neediest Americans," said Health and Human Services spokesman Richard Sorian. "We are exploring options to address this issue."

Administration officials and senior Democratic lawmakers initially defended the change, saying it wasn't a loophole but the result of a well-meaning effort to simplify the rules for deciding who would get help under the new health care law. Instead of a hodgepodge, there would be one national policy.

But Sen. Orrin Hatch of Utah, the ranking Republican on the Senate Finance Committee, called the situation "unacceptable" and said he intended to look into it.

Governors have been clamoring for relief from Medicaid costs, complaining that federal rules drive up spending and limit state options. The program is now one of the top issues in budget negotiations between the White House and Congress. Republicans want to roll back federal requirements that block states from limiting eligibility.

Medicaid is a safety net program that serves more than 50 million vulnerable Americans, from low-income children and pregnant women to Alzheimer's patients in nursing homes. It's designed as a federal-state partnership, with Washington paying close to 60 percent of the total cost.

Early retirees would be a new group for Medicaid. While retirees can now start collecting Social Security at age 62, they must wait another three years to get Medicare, unless they're disabled.

Some early retirees who worked all their lives may not want to join a program for the poor, but others might see it as a relatively painless way to satisfy the new law's requirement that most Americans carry health insurance starting in 2014. It would help tide them over until they qualify for Medicare.

The actuary's office said the early retirees eligible for Medicaid would be on top of an estimated 16 million to 20 million new people that Obama's law already brings into the program, by opening it to childless adults with incomes near the poverty level.

It's unclear how much it would cost to cover the retirees. Federal taxpayers will cover the entire initial cost of the expansion.

Republicans already see a problem.

Former Utah governor Mike Leavitt said bringing early retirees in will "just add fuel to the fire," bolstering the argument from Republican governors that some of Washington's rules don't make sense.

"The fact that this is being discovered now tells you, what else is baked into this law?" said Leavitt, who served as Health and Human Services secretary under President George H.W. Bush. "It clearly begins to reveal that the nature of the law was to put more and more people under eligibility for government insurance."

The Medicare actuary's office roughed out some examples to illustrate how the provision would work. A married couple retiring at 62 in 2014 and receiving the maximum Social Security benefit of $23,500 apiece could get $17,000 from other sources and still qualify for Medicaid with a total income of $64,000.

That $64,000 would put them at about four times the federal poverty level, which for a two-person household is $14,710 this year. The Medicaid expansion in the health care law was supposed to benefit childless adults with incomes up to 133 percent of the poverty level. A fudge factor built into the law bumps that up to 138 percent.

The actuary's office acknowledged its $64,000 example would represent an unusual case, but nonetheless the hypothetical couple would still qualify for Medicaid.

How Health Reform Punishes Work

By DANIEL P. KESSLER

The subsidies to buyers of 'qualifying' insurance policies will induce sharp reductions in the supply of labor.

Supporters of ObamaCare acknowledge it will have some unintended consequences. Yet surprisingly little attention has been focused on the law's most problematic provision: government subsidies to help individuals and families purchase health insurance.

This new entitlement—which the chief actuary of the Centers for Medicare and Medicaid Services estimates will cost more than $100 billion per year once it is fully implemented—will damage the country's long-term fiscal outlook. It also will introduce far-reaching negative effects on rewards to work and bizarre new inequities into American life.

The health law establishes insurance exchanges—regulated marketplaces in which individuals and small businesses can shop for coverage—and minimum standards for the insurance policies that can be offered. Because the policies will be so costly, there's a subsidy for buyers that phases out as family income rises. This sounds reasonable—but the subsidies required to make a "qualifying" insurance policy affordable are so large that their phaseout creates chaos.

Starting in 2014, subsidies will be available to families with incomes between 134% and 400% of the federal poverty line. (Families earning less than 134% of poverty are eligible for Medicaid.) For example, a family of four headed by a 55-year-old earning $31,389 in 2014 dollars (134% of the federal poverty line) in a high-cost area will get a subsidy of $22,740. This will cover 96% of an insurance policy that the Kaiser Family Foundation predicts will cost $23,700. A similar family earning $93,699 (400% of poverty) gets a subsidy of $14,799. But a family earning $1 more—$93,700—gets no subsidy.

For more, read the entire editorial at http://online.wsj.com/article/SB10001424052748704628404576265692304582936.html

Expanded 1099 filing by Obamacare is repealed

http://www.journalofaccountancy.com/Web/20114071.htm

On Thursday, President Barack Obama signed into law the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (HR 4; 1099 Act), which repeals both the expanded Form 1099 information reporting requirements mandated by last year’s health care legislation and also the 1099 reporting requirements imposed on taxpayers who receive rental income enacted as part of last year’s Small Business Jobs Act (PL 111-240). The Senate approved the bill on April 5, and the House voted in favor of it on March 3.

In March 2010, the Patient Protection and Affordable Care Act (PL 111-148) (part of the health care reform legislation) expanded the 1099 reporting requirements to include all payments from businesses aggregating $600 or more in a calendar year to a single payee, including corporations (other than a payee that is a tax-exempt corporation), and to include payments made for property, starting with payments in 2012. The 1099 Act repeals the expansion to payees that include corporations by removing IRC § 6041(i). It repeals the expansion to cover payments for property by removing the language “amounts in consideration for property,” and “gross proceeds” from section 6041(a). The act also removes IRC § 6041(j), which granted the Treasury secretary authority to issue regulations under section 6041, including “rules to prevent duplicative reporting of transactions.” These changes are effective for payments made after Dec. 31, 2011 (when the new rules were to take effect), and they revert those portions of section 6041 to how they were before the Patient Protection and Affordable Care Act.

The Small Business Jobs Act enacted a requirement that individuals who receive rental income issue Forms 1099 to service providers for payments of $600 or more. It did this by specifying that “a person receiving rental income from real estate shall be considered to be engaged in a trade or business of renting property.” The 1099 Act strikes IRC § 6041(h) in its entirety, effective for payments made after Dec. 31, 2010 (the original effective date of section 6041(h)), placing individuals who receive rental income in the same position as if the expanded information reporting requirements had never been enacted.

As a result of the repeal, the 1099 reporting rules continue unchanged: Namely, under IRC § 6041(a), “All persons engaged in a trade or business and making payment in the course of such trade or business to another person” of $600 or more must report the amount and the name and address of the recipient to the IRS and to the recipient. The Code applies this requirement to payments of “rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income,” and the Treasury regulations add, “commissions, fees, and other forms of compensation for services rendered aggregating $600 or more” as well as interest (including original issue discount), royalties and pensions (Treas. Reg. § 1.6041-1(a)(1)(i)).

This required information must be reported each calendar year for payments made during that calendar year.

The AICPA had advocated strongly for repeal of both provisions and as one of the only organizations advocating against the rental property requirement was a driving force in its repeal. When the Senate passed the bill on April 5 and sent it to President Obama for his signature, AICPA President and CEO Barry Melancon described the repeal as “a victory for taxpayers.”

Increased Penalties Not Repealed

The 1099 Act did not repeal the increase in the information reporting penalties that were mandated by the Small Business Jobs Act. The first-tier penalty under IRC § 6721 for failure to timely file an information return was increased from $15 to $30, and the calendar-year maximum from $75,000 to $250,000. The second-tier penalty was increased from $30 to $60, and the calendar-year maximum from $150,000 to $500,000. The third-tier penalty was increased from $50 to $100, and the calendar-year maximum from $250,000 to $1,500,000. For small business filers, the calendar-year maximum increased from $25,000 to $75,000 for the first-tier penalty; from $50,000 to $200,000 for the second-tier penalty; and from $100,000 to $500,000 for the third-tier penalty. The minimum penalty for each failure due to intentional disregard increased from $100 to $250.

The increased penalties will be adjusted for inflation every five years.

The Small Business Jobs Act also similarly increased the penalties for failure to provide correct payee statements in addition to the information reporting penalties (IRC § 6722).

The increased penalty amounts were effective Jan. 1, 2011, and remain in effect after the repeal of the expanded 1099 reporting requirements.

Senate Passes 1099 Repeal Amendment

The Senate approved an amendment Wednesday to repeal the expanded 1099 information reporting requirements in the health care reform law. For more information, read http://www.accountingtoday.com/news/Senate-Passes-1099-Repeal-Amendment-57177-1.html

Senate Again Fails to Repeal 1099 Requirements

http://institute.accountingtoday.com/news/Senate-Again-Fails-Repeal-1099-Requirements-56475-1.html
Washington, D.C. (November 29, 2010)
By Michael Cohn

The Senate voted Monday evening on a competing pair of amendments to repeal the expanded 1099 information reporting requirements that were included in the health care reform bill, but failed for the second time this fall to roll back the controversial requirements.

The provision, which was included in the health care reform bill, would require companies to report on any purchases of goods or services of over $600 from a single vendor during the calendar year to the Internal Revenue Service on a Form 1099-MISC. The dueling amendments, from Senate Finance Committee Chairman Max Baucus, D-Mont., and Sen. Mike Johanns, R-Neb., mainly differed in how they would be paid. They were attached to a larger food safety bill, which overcame a procedural hurdle to move forward by a vote of 69-26, shortly before the vote on the amendments.

“There are two big differences between our two amendments,” said Baucus. “First, my alternative is especially friendly to small businesses. It takes extra measures to permit the IRS to waive certain duplicative reporting requirements for small businesses that use credit cards to pay their bills. Second, our two versions differ about paying for the change. The alternative offered by my colleague from Nebraska would give the unelected director of OMB [the Office of Management and Budget] unprecedented authority to slash spending, all on his own. The Johanns alternative would thus abdicate Congress’s responsibility over the budget. For these reasons, I urge my colleagues to oppose the Johanns amendment and support my alternative.”

Johanns contended that the Baucus amendment would add $19 billion to the federal deficit and drive up the overall cost of the health care bill.

He noted that his own amendment would direct the Office of Management and Budget to identify $39 billion in unspent and unobligated accounts to replace the revenue that might have been generated by the 1099 paperwork mandate, representing only about 5 percent of the total funds in unspent and unobligated accounts and giving the administration discretion to ensure the funds do not affect ongoing and necessary programs.

“Every small business out there is asking the question, ‘Why is the cost of this health care bill falling on my back?’” said Johanns. “You can’t go anyplace in this country without people asking, ‘What is this about the 1099 requirement?’ They are concerned they are going to spend on accountants for compliance with this requirement. They are asking, ‘Why are you picking on us?’ Why would you add $19 billion to the federal deficit, and that’s what the Baucus amendment does. You simply won’t find better offsets than the ones mine has. My phone is ringing off the hook, and we can’t go along with these offsets. The Baucus amendment simply does not pay for these offsets. In the end, it hampers the next generation. It adds to the national debt.”

Sen. Tom Harkin, D-Iowa, one of the lead sponsors of the food safety bill, the FDA Food Safety and Modernization Act, recommended that neither amendment should be approved.

“If the Baucus or Johanns amendment is adopted, it will kill the bill,” he said. “There’s no doubt about it. Revenue measures have to originate in the House. I hope this body will reject any extraneous amendments.”

The Johanns amendment received 61 votes in support and 35 votes in opposition, but failed to reach the two-thirds margin needed. The Baucus amendment received 44 votes in support and 53 in opposition and thus did not pass either.

The Senate failed to pass a repeal of the 1099 reporting requirements in September after Democrats and Republicans introduced competing amendments to the Small Business Jobs Act (see Senate Fails to Repeal 1099 Requirements).

After his amendment was defeated, Baucus vowed to continue fighting to repeal the expanded 1099 requirements. Although the requirements had not yet gone into effect, he noted, many small business owners expressed concerns the requirements would create an onerous paperwork burden.

“Small business owners voiced legitimate concerns that these requirements would be burdensome, and the Senate should act in response to those concerns," Baucus said in a statement. "I am disappointed that we weren’t able to repeal these requirements today, but I intend to keep working until we do. Our bill will allow small business owners to direct their focus onto job creation and growth rather than on paperwork. We will keep up our fight on behalf of small businesses so they can continue their critical work to create jobs and help the economy recover.”

Senate pushing to repeal reviled IRS rule

It would be a darned shame if Congress fails to repeal this provision in the Health care bill.

http://money.cnn.com/2010/11/29/smallbusiness/1099_repeal/index.htm
By Charles Riley, staff reporterNovember 29, 2010: 2:40 PM ET

NEW YORK (CNNMoney.com) -- Lawmakers will get a chance Monday to undo a piece of health care reform that businesses big and small say will cost jobs.

The Senate is set to consider whether to repeal the new requirement that businesses notify the Internal Revenue Service of purchases over $600.

The provision was adopted in March as part of the massive health care reform law.

Starting in 2012, businesses will be required to issue 1099 tax forms not only to contracted workers (as they already do) but also to any individual or corporation from which they buy more than $600 in goods or services in a year.

The measure is expected to raise about $17 billion over 10 years by increasing tax compliance, but small business owners have argued the measure would increase paperwork, and drive up costs.

Republicans have led the charge to repeal the provision, but they have been joined by some key Democrats including Sen. Max Baucus, the Finance Committee chairman who introduced one of two amendments that would eliminate the new requirements.

Even President Obama no longer defends the provision.

Earlier this month, one day after after suffering a "shellacking" in the congressional election, Obama announced that he would support repealing the measure in the spirit of helping the business community.

Republican Sen. Mike Johanns of Nebraska authored the second amendment.

The Washington Punch List
"Senators will have a clear choice between a fiscally responsible end to the 1099 mandate or one that tacks on billions more to the health care law's already bloated price tag and adds to our national debt," Johanns said in a statement.

But the move faces an uphill battle, at least for now. Neither amendment up for consideration on Monday is expected to get the 67-vote supermajority required for passage, according to multiple aides on both sides of the aisle.

In September, both a Republican-backed proposal to repeal tax requirements and a Democratic plan to amend it failed to pass the necessary procedural votes to move it forward.

-CNN's Ted Barrett contributed to this report. To top of page

Reporting of Health Coverage Costs on W-2 Deferred

http://www.webcpa.com/news/IRS-Defers-Requirement-Reporting-Health-Coverage-Costs-55956-1.html
Washington, D.C. (October 12, 2010)
By WebCPA Staff

The Internal Revenue Service has released a draft Form W-2 for 2011, which employers use to report wages and employee tax withholding.

The IRS also announced Tuesday that it will defer the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan, making that reporting by employers optional in 2011.

The draft Form W-2 includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan. The Treasury Department and the IRS have determined that this relief is necessary to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with the new reporting requirement. The IRS will be publishing guidance on the new requirement later this year.

Although reporting the cost of coverage will be optional with respect to 2011, the IRS said it continues to stress that the amounts reportable are not taxable. Included in the Affordable Care Act passed by Congress in March, the new reporting requirement is intended to be informational only, and to provide employees with greater transparency into overall health care costs.

1099 Reporting Changes Provoke Opposition

The IRS has a problem if this 1099-MISC filing requirement under the Health Care Reform Act is not repealed because there is another requirement for credit card companies to report all charged sales to the IRS for each merchant. This will double up all credit card/PayPal type sales. The IRS commissioner recently announced that the IRS would use its power to exempt purchases using credit cards from 1099-MISC reporting. However, if businesses don't report credit card purchases on 1099-MISC, they would have the added burden to segregate cash purchases from credit card purchases. Most small businesses don't have that kind of capability. The result is all credit card sales to businesses will be reported twice.

If this filing requirement is repealed, then the cost of the health care reform will be bigger on paper, as the Obama administration claims this filing requirement would generate tax revenues.

http://www.webcpa.com/news/1099-Reporting-Changes-Provoke-Opposition-55300-1.html
By Roger Russell, Senior Editor, Accounting Today

My guess is that there’s at least a 50-50 chance that the new Form 1099 reporting mandate will be repealed or modified before they go into effect. On almost anyone’s benefit-burden scale, the burdens far outweigh the benefits.

While they don’t go into effect until 2012, they have created a firestorm of concern and criticism, and have been a frequent topic on editorial pages and Sunday talk shows. The requirements, included in the health care legislation passed in March, will require the tracking of payments for goods in addition to services, and for payments to corporations as well as individuals. All businesses, tax-exempt organizations, and federal, state and local government entities will be required to issue Forms 1099 to vendors

The AICPA was among the numerous organization responding to the requirements, saying it would be especially burdensome and costly for small businesses to compile the data and prepare the Form 1099-MISC return, and calling for outright repeal of the measure.

Moreover, the AICPA said, information provided by the forms will not be particularly helpful in collecting any unpaid taxes because it will be difficult to reconcile payments reported on the forms with the income reported by the vendor.

“This expansion of information reporting may prove to be so burdensome to small businesses that we believe it will significantly contribute to the hurdles to growth and formation that businesses face,” the AICPA stated. “When businesses start tax compliance planning for 2012, Section 9006 [of the Patient Protection and Affordable Care Act, the health care legislation that introduced the mandate] will impose a significant increase in costs on business with respect to the accumulation of relevant information and the preparation and mailing of Forms1099-MISC.”

In addition, many corporations operate on a fiscal year basis rather than on a calendar year, the Institute noted. “Receipt of Forms 1099-MISC by these fiscal year corporations would not provide useful information as the corporations would be receiving calendar year information, triggering a burdensome income reconciliation procedure for the taxpayer that would be necessary to interpret the data,” said the AICPA.

“We strongly support repeal of the requirement,” AICPA senior technical manager Benson Goldstein told me.

At the same time, he said, the Institute will participate in offering suggestions to the IRS to implement the legislation in a more reasonable manner.

“We will take the opportunity to offer comments to the IRS,” he said. “Our commenting is not to hedge our bets. It’s just that we are taking the opportunity that the IRS is offering because we don’t know how the legislative calendar will work out. But our strongly held view is that the better way is repeal.”

This week, the U. S. Chamber of Commerce sent its own letter to Congress calling for repeal. The letter included 1,100 signatures from local chambers of commerce, associations, and businesses of all sizes. The letter pointed out that the requirement would increase accounting costs, and expose businesses to costly and unjustified audits.

Moreover, it said the mandate could alter marketplace behavior to the detriment of small businesses and startups. Customers might consolidate their purchases by using several large vendors with broad geographic presence and more diverse product lines instead of a number of small vendors.

The logic of the requirement falls apart when you consider how the information will be used. For example, even if Home Depot received 1099s from all of its business customers, would the information be of any value? And if the information has no value, it shouldn’t be required.

How the New Wealth Taxes Will Hit You

http://finance.yahoo.com/taxes/article/109773/How-the-new-wealth-taxes-will-hit-you
by Laura Sanders
Monday, June 14, 2010

provided by The Wall Street Journal

The health-care bill that Congress passed in March contained two surprising new taxes to help pay for the changes: an extra 0.9% levy on wages for couples earning more than $250,000 ($200,000 for singles) and a new 3.8% tax on investment income on those same people (technically, people with "adjusted gross incomes" above those amounts).

Each tax signals a radical change in policy. For workers, the extra 0.9% levy puts a progressive element in what used to be a totally flat tax. The 3.8% tax on investment income also knocks down a longstanding wall by applying a "payroll" tax to unearned income. Until now, FICA taxes for Social Security and Medicare have applied only to wages, not investment income.

While many details remain unclear and the Internal Revenue Service hasn't issued any guidance, here are preliminary answers to the most important questions taxpayers are asking.

These taxes take effect in 2013, two elections away. Might they be repealed first?

Not likely. "Congress would have to undo the health reform, and budget constraints would still be there," says Clint Stretch of Deloitte Tax. "Even if Republicans take control of Congress, President Obama holds the veto pen until Jan. 20, 2013."

How does the 0.9% tax work?

If Joe and Mary each earn $175,000, their total employment income is $350,000. Currently they owe 1.45% -- $5,075 -- of regular Medicare tax, and their employers owe a matching amount. In 2013, the couple will owe an extra 0.9% -- $900 -- on their wages above $250,000, which is $100,000. Their employers pay nothing extra.

What about the 3.8% tax on net investment income?

This levy is keyed to "modified adjusted gross income," with a threshold of $250,000 for couples and $200,000 for singles. (This is simply adjusted gross income for nearly everybody except expatriates, who must add back certain exclusions.) The tax is a flat 3.8% on investment income above the threshold.

How would this work?

Example 1: John and Jane, a married couple, have $400,000 of AGI -- $200,000 of wages plus $200,000 of investment income. Because they have $150,000 of investment income above the $250,000 threshold, they would owe an extra $5,700.

Example 2: Anne, a single filer, earns $40,000 but has an investment windfall of $190,000, for total income of $230,000. Because she has investment income of $30,000 above her $200,000 threshold, she would owe $1,140 of additional tax.

Example 3: Retirees Mary and Bill have no wages but they do have a taxable IRA payout of $90,000, plus investment income of $150,000, for a total of $240,000. They don't owe the new tax, because they have no investment income above the $250,000 threshold.

What is investment income?

Interest, except municipal-bond interest; dividends; rents; royalties; and capital gains on the sales of financial instruments like stocks and bonds. The taxable portion of insurance annuity payouts also counts, unless it is from a company pension. So do gains from financial trading, as well as passive income from rents and businesses you don't participate in. All are subject to the 3.8% tax on amounts above the $250,000 or $200,000 threshold, as described above.

Not taxed: Distributions from regular and Roth IRAs and other retirement accounts, including pensions and Social Security, and annuities that are part of a retirement plan. Life-insurance proceeds, muni-bond interest and veterans' benefits don't count, nor does income from a business you participate in, such as a Subchapter S or partnership.

Could the 3.8% tax apply to gains on the sale of a home?

Yes, if there is a taxable gain above the $500,000 ($250,000, single) exclusion for gains on the sale of your residence.

Example: Fred and Fran, who bought their home in a New York suburb for $50,000 in 1972, sell it in 2013 for $1 million. After subtracting the $50,000 cost and $500,000 exclusion, they have investment income of $450,000. If they also have a taxable IRA payout of $70,000 and a pension of $30,000, they would owe the tax of $11,400 on $300,000.

What happens if a taxpayer who owes the new tax on investments also has a large itemized deduction -- say, medical expenses or a theft loss?

Even if taxable income is zero because of deductions, he or she could still owe the 3.8% tax. Example: Myra is a single filer with investment income of $100,000 and wages of $200,000. But during the same year she loses $300,000 in a Ponzi scheme. She pays no income tax, but she still owes the new Medicare tax of $3,800 on her net investment income, says Sharon Kreider, a tax expert in Sunnyvale, Calif.

Does the 3.8% tax affect trusts and estates?

Yes, and it can hit them hard. The tax is levied on investment income as low as $12,000 that isn't paid out to beneficiaries. Some believe the tax may also hit children's unearned income subject to the "kiddie tax" if the parents owe it themselves.

What professions are able to avoid this tax?

Ms. Kreider and others see a sweet spot for real-estate professionals. The law deems their rents to be "active" income, so they wouldn't be subject to the investment tax. Often they don't owe self-employment taxes on that rental income, either.

What steps do experts recommend to minimize these taxes, other than taking capital gains before 2013 or buying municipal bonds?

• Examine both your regular and investment income: the higher your regular AGI, the more likely that your investment income will be subject to the new tax. So while Social Security and pensions don't count as investment income, they raise AGI. This makes Roth IRA conversions even more attractive for many. "Roth withdrawals don't raise AGI and aren't investment income," says Vern Hoven, a tax expert in Gig Harbor, Wash.

• Reconsider a defined-benefit pension if you're eligible -- say, you're in a small business or have consulting income, says Mark Nash of PricewaterhouseCoopers. Pension payouts don't count as investment income, and the older a taxpayer is, the more he can contribute.

• Taxpayers selling assets should consider installment sales, says Ms. Kreider, if spreading out the income would minimize the new tax.

• For some, life insurance may become more attractive. Because life-insurance proceeds at death aren't subject to this tax, a taxpayer could buy a policy, borrow from it and settle up at death, avoiding income tax on investment gains within the policy. But Mr. Nash cautions that the savings must outweigh the fees and other disadvantages such policies may have.

Write to Laura Saunders at laura.saunders@wsj.com

Health plan will deepen federal budget deficit

Video on Federal taxes fall short of spending:
http://money.cnn.com/video/news/2010/04/13/n_iousa_federal_deficit_2010_1.4_trillion.cnnmoney/

Congressional Budget Office estimates predict the health care overhaul will likely cost about $115 billion more in discretionary spending over ten years than the original cost projections.
http://www.politico.com/news/stories/0510/37081.html

The Congressional Budget Office expects the federal agencies to spend $10 billion to $20 billion over 10 years on administrative costs to implement the overhaul. The CBO expects Congress to spend an additional $105 billion over 10 years to fund discretionary programs in the overhaul.

The CBO estimated in March that the gross cost of the overhaul would be $940 billion over 10 years. The net cost was estimated at $788 billion over 10 years. But the group cautioned that it couldn’t make an estimate of the discretionary costs without more time and information.

The figures represent estimates as to how Congress will decide to spend money. The CBO cautions that lawmakers could decide to spend less. They would still have to respect the administration’s nonsecurity discretionary spending freeze.

The Department of Health and Human Services is expected to need $5 billion to $10 billion to implement changes in Medicare, Medicaid, the Children’s Health Insurance Program and insurance industry reforms, according to CBO estimates.

The nonpartisan CBO expects the Internal Revenue Service to spend another $5 billion to $10 billion on implementing the rules regarding premiums and cost-sharing credits.

An administration official cautioned that Congress doesn't always spend all that it is authorized to and that lawmakers would have to make other cuts to make up for any new spending they approve to stay within the budget and avoid adding to the deficit.

"The Affordable Care Act will reduce the deficit by more than $100 billion in the first decade, and that will not change unless Congress acts to change it," said Kenneth Baer, an OMB spokesman. "If these authorizations are funded, they must be offset somewhere else in the discretionary budget. The president has called for a non-security discretionary spending freeze, and he will enforce that with his veto pen."

The legislation says that the agencies would receive the funding to implement the programs through the appropriations process.

“The law establishes a number of new programs and activities, as well as authorizing new funding for existing programs,” CBO director Douglas W. Elmendorf said in the letter. “By their nature, however, all such potential effects on discretionary spending are subject to future appropriation actions, which could result in greater or smaller costs than the sums authorized by the legislation.”

Nickel and dimed by Obama's microtaxes

http://money.cnn.com/2010/05/14/news/economy/obama_taxes.fortune/index.htm
By Nina Easton, senior editor at large

(Fortune) -- Woven throughout President Barack Obama's health care reform act are a variety of new taxes on high earners: a 3.8% tax on interest and dividends, a 0.9% increase in the Medicare payroll tax, a $2,500 cap on pretax contributions to flexible savings accounts. Then there are new taxes on the most expensive health insurance plans and on sales of medical equipment like bedpans and catheters. The President's proposed budget is laden with assorted other goodies, including a limit on deductions for mortgage interest and charitable contributions, and a capital gains hike.

It's easy to get lost in the maze of new levies. Which is really the point, at least as a political strategy. Call it nickel-and-diming by a President who seems to instinctively understand the electoral dangers of imposing a single broad new levy -- even on people he defines as high income. (Manhattan families earning just over $250,000 -- not exactly a killing in New York City -- that means you.) Even his plan to raise the top two individual income tax rates is marketed as a rollback of unfair tax cuts under President Bush. Some of us would call it a hike.

Not long ago House Democrats were pushing a more overt "millionaire's tax." At least the intention was clear. Instead, the White House is pursuing a drip, drip, drip of microtaxes on the nearly 3.5 million households Obama considers wealthy enough to fund his government plans. And, oh, how those nickels and dimes add up. "We estimate that the health reform law will take an additional $52,000 on average from the top 1%" of earners, concluded the nonpartisan Tax Foundation. Households affected by the expiration of the Bush tax cuts -- along with other tax hikes in his budget -- will pay an additional $17,925 on average. Citizens, especially the so-called wealthy, aren't going to be happy about the onslaught of new tariffs.

A huge segment of the country has always felt overtaxed. In 1938, when taxes were roughly 17% of income, a Fortune survey found that nearly half of all Americans thought they paid too much relative to what they got in return. That number was remarkably similar -- 46% -- when Gallup asked the question last year, as taxes were eating up roughly 30% of our paychecks. We can presume, moreover, that those who actually pay federal income taxes -- a record 36% do not -- will be especially irked by politicians who want them to send more of their hard-earned money to Washington.

In recent years Democrats have enjoyed a reputation as the most trusted party on tax questions. That is now changing, with Republicans gaining the upper hand in the latest NBC News/Wall Street Journal poll. Obama's tax hikes fuel the mood shift. But the White House's ambitious spending also plays a role: Americans think half their money is wasted by government.

This is a dangerous political environment for President Obama as he faces his next big economic challenge: what to do about a national debt scheduled to balloon to 77% of GDP in the next decade. It's hard to microtax your way out of that one, and it's far from clear that this administration has the stomach for massive cuts to entitlement programs. He can keep squeezing revenue out of the rich, but the top 1% of earners already pay more in federal income taxes than the bottom 95% combined.

That, of course, is why some politicians are floating the idea of a value added tax (VAT) -- an embedded sales tax that hides all those nickels and dimes along the production chain. It's a big revenue raiser that offers the illusion that people won't really notice a little tax here, a little tax there.

But all that loose change adds up to hundreds and thousands of dollars. Upper-income earners are stirring tax revolts this election year, despite White House efforts to suggest that its collection of taxes won't be quite so painful. If Democrats pursue a VAT that adds to the tax burden of average Americans, the middle class will sit up and take notice too. And that adds up to a big headache for Democrats -- in 2010, 2012, and beyond.

Changes to Medicare Advantage

http://online.wsj.com/article/SB127336164057988979.html
By ANNE TERGESEN

Our recent column about the impact of new health-care legislation on Medicare prompted many readers to ask about the specific effects on Medicare Advantage programs, which currently cover about a quarter of Medicare recipients.

With Medicare, individuals must choose one of two paths: original fee-for-service Medicare, or a federally subsidized private Medicare Advantage plan, which typically operates like a health-maintenance or preferred-provider organization.

Over the next 10 years, the new health-care law will divert some $132 billion from Medicare Advantage, according to a recent report by George Washington University's Department of Health Policy. This has sparked concern that these plans may reduce benefits, raise premiums, or both.

But the impact is likely to vary from plan to plan. Medicare currently pays Medicare Advantage plans an average of 13% more than the cost of covering the same beneficiaries under traditional fee-for-service Medicare. After the cost cuts are fully implemented, Medicare Advantage plans will still receive slightly more -- about 1% extra overall, according to George Washington University.

But depending on whether Medicare costs in your county are high or low, your plan could receive anywhere from 5% less to 15% more than the average cost of original Medicare in your area. (Plans in low-cost areas are generally rewarded with reimbursements that are more generous relative to local Medicare costs.)

The spending cuts will phase in over time. This year, no cuts will be made. In 2011, payments will be frozen at current levels. Starting in 2012, the cuts will phase in over two to six years, says Paul Precht, director for policy and communications of the nonprofit Medicare Rights Center. Plans slated for the steepest reductions will experience the longest transition times, he adds.

Under the new system, Medicare Advantage plans that perform well on certain quality measures will receive modest bonuses -- to be used, in part, to provide extra benefits. To see how your plan measures up, go to medicare.gov and look up the quality ratings published by the Centers for Medicare & Medicaid Services, Medicare's administrator. Search under "Find & Compare Health Plans." (Plans receiving 3.5 to 5 stars will be rewarded.)

Starting in 2011, Medicare Advantage plans also must cap at $6,700 recipients' maximum annual out-of-pocket expenditures for services covered under Medicare. (Some PPOs will be able to impose a higher $10,000 annual limit for both in- and out-of-network services.) Currently, about one-third of Medicare Advantage plans don't have such caps.

Advantage plans will be barred from charging higher copayments or coinsurance rates for certain services, including chemotherapy, than patients would pay under original Medicare.

Also starting in 2011, Medicare Advantage participants who want to switch to another Advantage plan will have to do so in Medicare's six-week annual election period from Nov. 15 to Dec. 31. Previously, participants also were permitted to make a switch between Jan. 1 and March 31 of the following year.

Write to Anne Tergesen at anne.tergesen@wsj.com
__________
A Wall Street Journal reader commented as follows:
This is a good overview of what the future holds for Medicare Advantage. The question that readers should ask for their own personal situation; is it better to stick with the traditional Medicare Supplemental Insurance plan vs. a Medicare Advantage plan. Given the looming premiums increases in Medicare Advantage, the Medicare supplement may be the better choice in many areas. Of course specific premiums and benefits will be the determining factor. For information on both follow the links to www.mysenioradvisorsgroup.com for specific plan information in your area.
__________
To understand Medicare Supplemental Insurance, see http://www.medicare.gov/publications/pubs/pdf/02110.pdf

Health care law's massive, hidden tax change

http://money.cnn.com/2010/05/05/smallbusiness/1099_health_care_tax_change/index.htm
By Neil deMause, contributing writerMay 5, 2010: 11:00 PM ET

NEW YORK (CNNMoney.com) -- An all-but-overlooked provision of the health reform law is threatening to swamp U.S. businesses with a flood of new tax paperwork.

Section 9006 of the health care bill -- just a few lines buried in the 2,409-page document -- mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year.

Right now, the IRS Form 1099 is used to document income for individual workers other than wages and salaries. Freelancers receive them each year from their clients, and businesses issue them to the independent contractors they hire.

But under the new rules, if a freelance designer buys a new iMac from the Apple Store, they'll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases.

The bill makes two key changes to how 1099s are used. First, it expands their scope by using them to track payments not only for services but also for tangible goods. Plus, it requires that 1099s be issued not just to individuals, but also to corporations.

Taken together, the two seemingly small changes will require millions of additional forms to be sent out.

"It's a pretty heavy administrative burden," particularly for small businesses without large in-house accounting staffs, says Bill Rys, tax counsel for the National Federation of Independent Businesses.

Eliminating the goods exemption could launch an avalanche of paperwork, he says: "If you cater a lunch for other businesses every Wednesday, say, that's a lot of information to keep track of throughout the year."
The paper trail

Why did these tax code revisions get included in a health-care reform bill? Welcome to Washington. The idea seems to be that using 1099 forms to capture unreported income will generate more government revenue and help offset the cost of the health bill.

A Democratic aide for the Senate Finance Committee, which authored the changes, defended the move.

"Information reporting improves tax compliance without raising taxes on small businesses," the aide said. "Health care reform includes more than $35 billion in tax cuts for small businesses ... indicating that during these tough economic times, Congress is delivering the tax breaks small businesses need to thrive."

The new rules could drastically alter the tax-reporting landscape by spotlighting payments that previously went unreported. Freelancers and other independent operators typically write off stacks of business expenses; having to issue tax paperwork documenting each of them could cut down on fraudulent deductions.

More significantly, the 1099 trail would expose payments to small operators that might now be going unreported. If you buy a computer for your business from a major chain retailer, the seller almost certainly documents the revenue. But if you buy it from Tim's Computer Shack down the street, Tim might not report and pay taxes on his income from the sale.

The IRS estimates that the federal government loses more than $300 billion each year in tax revenue on income that goes unreported. Using 1099s to document millions of transactions that now go untracked is one way to begin to close the gap.

While all but unnoticed at the time -- a Pennsylvania business group issued the first warning last October as the idea emerged in draft Senate legislation -- the 1099 rule changes began sparking attention in the blogosphere in the last week. The libertarian Cato Institute called it a "costly, anti-business nightmare"; Rep. Dan Lungren, R-Calif., introduced legislation last week that would repeal the new 1099 requirements.

The notion of mailing a tax form to Costco or Staples each year to document purchases may seem absurd to small business owners, but that's not the worst of it, tax experts say.

Marianne Couch, a principal with the Cokala Tax Group in Michigan and former chair of a citizen advisory group to the IRS on small business and self-employed tax issues, thinks the bigger headache will be data collection: gathering names and taxpayer identification numbers for every payee and vendor that you do business with.

But she also sees a silver lining in the new law.

Her firm already recommends collecting tax data on all vendors, since the IRS requires that you have it on hand at the time of the transaction, not just at tax-filing time. And eliminating the corporate and goods exemptions at least means that businesses will no longer have to pour over every transaction to determine if it needs a 1099. The new rule is simpler: If it crosses the $600 threshold, it's in.

"There are probably going to be some hiccups along the way, because systems will need to be redesigned," says Couch. "But overall I believe it will make compliance on the payor end a lot more streamlined and easier."

In any case, the final impact of the law won't be known until the IRS issues its regulations on the new law, which aren't expected to arrive until sometime next year. The IRS has not yet commented on when it will release regulations or schedule public hearings, and an agency spokesman was unsure when it will do so. The new requirements kick in January 1, 2012.

Nearly 4M people could pay without health coverage

Also see http://news.yahoo.com/s/ap/20100423/ap_on_bi_ge/us_health_care_law_costs
WASHINGTON (AP) – Government economic forecasters say President Barack Obama's health care overhaul will increase the nation's health care tab instead of bringing costs down. The report by economic experts at the Health and Human Services Department, released late Thursday, says the health care remake will achieve Obama's aim of expanding coverage.

But the report says that the law falls short of the president's twin goal of controlling runaway costs. And it warns that Medicare cuts may be unrealistic and unsustainable.

The first comprehensive look at the health care law by neutral experts amounts to a mixed report card for Obama's top priority during his first year in office.

http://news.yahoo.com/s/ap/20100423/ap_on_bi_ge/us_health_care_law_costs
...the analysis also found that the law falls short of the president's twin goal of controlling runaway costs, raising projected spending by about 1 percent over 10 years. That increase could get bigger, since Medicare cuts in the law may be unrealistic and unsustainable, the report warned.

It's a worrisome assessment for Democrats.

In particular, concerns about Medicare could become a major political liability in the midterm elections. The report projected that Medicare cuts could drive about 15 percent of hospitals and other institutional providers into the red, "possibly jeopardizing access" to care for seniors.

The report's most sober assessments concerned Medicare.

In addition to flagging provider cuts as potentially unsustainable, the report projected that reductions in payments to private Medicare Advantage plans would trigger an exodus from the popular alternative. Enrollment would plummet by about 50 percent. Seniors leaving the private plans would still have health insurance under traditional Medicare, but many might face higher out-of-pocket costs.

In another flashing yellow light, the report warned that a new voluntary long-term care insurance program created under the law faces "a very serious risk" of insolvency.

http://money.cnn.com/galleries/2010/news/1004/gallery.dont_want_health_insurance/index.html
But we don't want health insurance!
Legislators say that health care reform will insure as many people as possible, but not everyone wants insurance. We talk to six people who plan to pay the penalty instead of buying a policy.

http://money.cnn.com/galleries/2010/news/1004/gallery.doctors_react_to_health_care_legislation/index.html
Doctors: A tough job just got tougher
What does the health care legislation mean to those providing care? CNNMoney.com asked physicians to weigh in.

http://news.yahoo.com/s/ap/20100422/ap_on_bi_ge/us_health_care_taxes
By STEPHEN OHLEMACHER Stephen Ohlemacher

WASHINGTON (AP) – Nearly 4 million Americans — the vast majority of them middle class — will have to pay a penalty if they don't get insurance when President Barack Obama's health care overhaul law kicks in, according to congressional estimates released Thursday.

The penalties will average a little more than $1,000 apiece in 2016, the Congressional Budget Office said in a report.

Most of the people paying the fine will be middle class as Obama's comprehensive law is phased in over the next few years. In his 2008 campaign for the White House, Obama pledged not to raise taxes on individuals making less than $200,000 a year and couples making less than $250,000.

Republicans have criticized the requirement that Americans get coverage, even though the idea was originally proposed by the GOP in the 1990s and is part of the Massachusetts health care plan signed into law in 2006 by then Gov. Mitt Romney, a Republican. Attorneys general in more than a dozen states are working to challenge it in federal court as unconstitutional.

"The individual mandate tax will fall hardest on Americans who can least afford to pay it, many of whom were promised subsidies by the Democrats and who the president has promised would not pay higher taxes," said Rep. Dave Camp of Michigan, the top Republican on the tax-writing House Ways and Means Committee.

Sen. Chuck Grassley of Iowa, the top Republican on the Senate Finance Committee, said while Obama and congressional Democrats celebrate the benefits of the law, they have an obligation to acknowledge the flip side. "There's a price for not participating, and people will pay it," Grassley said.

Democrats argue that the requirement and the penalties are a necessary part of a massive overhaul designed to expand coverage to millions who now lack it. They point out that getting more Americans, especially young and healthy people, in the insurance pool will reduce costs for others and could lower premiums.

"The new law will make health insurance affordable for everyone and CBO's analysis confirms that the vast majority of uninsured Americans will find health care affordable and choose to participate," said White House spokesman Nick Papas.

Americans who don't get qualified health insurance will be required to pay penalties starting in 2014, unless they are exempt because of low income, religious beliefs, or because they are members of American Indian tribes. The penalties will be fully phased in by 2016.

About 21 million nonelderly residents will be uninsured in 2016, according to projections by the CBO and the Joint Committee on Taxation. Most of those people will be exempt from the penalties.

Under the new law, the penalties will be phased in starting in 2014. By 2016, those who must get insurance but don't will be fined $695 or 2.5 percent of their household income, whichever is greater.

After 2016, the penalties will be increased by annual cost-of-living adjustments. People will not be required to get coverage if the cheapest plan available costs more than 8 percent of their income.

The penalties will be collected by the Internal Revenue Service through tax returns. However, the IRS will not have the authority to bring criminal charges or file liens against those who don't pay.

About 3 million of those required to pay fines in 2016 will have incomes below $59,000 for individuals and $120,000 for families of four, according to the CBO projections. The other 900,000 people who must pay the fine will have higher incomes.

The government will collect about $4 billion a year in fines from 2017 through 2019, according to the report.

How health reforms will change taxes

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/04/04/BURB1CP07Q.DTL
Kathleen Pender
Individuals earning more than $200,000 and couples making more than $250,000 will pay for a good chunk of health care reform through higher Medicare taxes on their earnings and a new Medicare tax on investment income such as dividends, interest and capital gains.

The Medicare tax increases start in 2013. The $200,000 and $250,000 thresholds are not indexed for inflation, so they eventually could reach into the middle class.

The two new Medicare taxes are estimated to raise about $210 billion over 10 years, which accounts for 48 percent of the new tax revenue associated with the act, according to accounting firm Deloitte.

Other parts of the two health care bills signed into law last month will affect people at all income levels. Starting next year, for example, people can no longer use their flexible spending accounts to buy over-the-counter drugs.

Here's a closer look at these and other provisions affecting individual taxpayers, and how much revenue they are expected to raise over 10 years.

-- Higher Medicare tax on earned income: Today, employees pay 1.45 percent of their wages for Medicare tax. The employer pays an additional 1.45 percent of employee wages. Self-employed people pay the employer and the employee's share, or 2.9 percent, of their self-employment income.

Unlike Social Security tax, which does not apply after a certain level of annual income, Medicare tax applies to an unlimited amount of income.

Starting in 2013, employees and the self-employed will pay an additional 0.9 percent in Medicare tax on employment income that exceeds $200,000 per year for single people and $250,000 for couples filing jointly.

Impact: A single person with $250,000 in earnings or a couple with $300,000 would each pay 0.9 percent on $50,000 in earnings, or $450.

If a husband and wife each earns $150,000, their employers won't withhold the additional Medicare tax, but the couple will have to pay it when they file their tax return.

The tax increase does not raise the employer's share of the Medicare tax.

Ten-year revenue estimate: $86.8 billion.

-- Medicare tax on investment income: Today, Medicare tax applies only to income from employment.

Starting in 2013, high-income people will also pay a 3.8 percent Medicare tax on most types of investment income over a certain threshold, including interest, dividends, capital gains, rental income, annuities and royalties. The new tax will not apply to retirement-plan distributions or tax-exempt interest from municipal securities.

The tax is applied to the lesser of the taxpayer's net investment income or the amount of modified adjusted gross income that exceeds $200,000 for singles and $250,000 for couples.

For example, a single man with $220,000 in adjusted gross income and $40,000 in investment income would pay 3.8 percent on $20,000 (the amount over $200,000) or $760, according to publishing firm CCH.

Revenue estimate: $123.4 billion.

-- Applying the two Medicare taxes: The 0.9 percent tax on earned income and the 3.8 percent tax on investment income will be applied separately. Deloitte gives some examples:

A single woman has $190,000 in wages, $30,000 in investment income and adjusted gross income of $210,000. She would owe no additional tax on her wages but would pay 3.8 percent tax on $10,000, the amount of income that exceeds $200,000.

A man has $300,000 in wages, $60,000 in investment income and $350,000 of adjusted gross income. He would pay the extra 0.9 percent tax on $100,000 and 3.8 percent on $60,000.

-- Reining in flex accounts: Beginning in 2013, employees can not put more than $2,500 per year into a cafeteria plan flexible spending account for health care. These accounts, offered by many employers, let employees set aside part of their salary before taxes to pay for medical expenses. Today there is no federal limit, but many employers set limits ranging from $2,500 to $7,500 annually.

The $2,500 limit is indexed to inflation.

Ten-year revenue estimate: $13 billion.

-- No more OTC drugs: Starting next year, employees will no longer be able to use money from their flexible spending accounts to pay for over-the-counter drugs. They will still be able to use them for prescription drugs and insulin. This new rule also applies to health savings accounts and Archer medical savings accounts, which are other ways to save pre-tax money for health care expenses. Estimated revenue: $5 billion.

-- Bigger penalty: People who take money out of a health savings account or Archer medical savings account and don't use it for qualified medical expenses will pay a 20 percent penalty on the amount starting next year. Today, the penalty is 10 percent for HSAs and 15 percent for MSAs.

Estimated revenue: $1.4 billion.

-- Higher hurdle for medical deduction: Today, people who itemize deductions can write off unreimbursed medical expenses that exceed 7.5 percent of their adjusted gross income. This threshold rises to 10 percent of adjusted gross income starting in 2013 for most people and in 2017 for everyone else.

From 2013 through 2016, if a person or the person's spouse is at least 65 at the end of the year, the threshold remains at 7.5 percent.

Revenue estimate: $15.2 billion over 10 years.

-- Penalizing the uninsured: Starting in 2014, most Americans not eligible for Medicare, Medicaid or other government health care must buy a minimum level of coverage or pay a tax penalty.

The annual penalty is a flat dollar amount or a percentage of income, whichever is greater. The flat amount for an adult starts at $95 in 2014 and increases to $695 by 2016. After that, it is indexed to inflation. The penalty for a minor dependent is half the adult amount.

The percent of income starts at 1 percent in 2014, rising to 2.5 percent in 2016 and thereafter. A family's total penalty generally can not exceed three times the adult flat amount.

-- Subsidies for health coverage: Starting in 2014, lower-income people can get a tax credit to help pay for health care. The credit will be on a sliding scale for people whose income falls between 100 and 400 percent of the poverty line. The Internal Revenue Service will determine eligibility.

Net Worth runs Tuesdays, Thursdays and Sundays. E-mail Kathleen Pender at kpender@sfchronicle.com.

This article appeared on page E - 1 of the San Francisco Chronicle

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/04/04/BURB1CP07Q.DTL#ixzz0kGuDE4GE

Health insurance premium will go up for young and old

Kaiser Family Foundation has produced a summary of the new health care law at http://www.kff.org/healthreform/upload/8061.pdf

Meanwhile, various actuaries have projected health insurance premium for young Americans will go up by 15 to 17% on average when the mandate kicks in in 2014, see http://www.courierpostonline.com/article/20100330/NEWS01/3300324/Health-insurance-costs-to-increase-for-young.

Seniors who have Medicare Advantage supplement policies will see their premiums go up substantially as well.