[House Report 112-254]
[From the U.S. Government Publishing Office]
112th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 112-254
======================================================================
MODIFICATION OF CALCULATION OF MODIFIED ADJUSTED GROSS INCOME FOR
DETERMINING CERTAIN HEALTHCARE PROGRAM ELIGIBILITY
_______
October 18, 2011.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Camp, from the Committee on Ways and Means,
submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 2576]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 2576) to amend the Internal Revenue Code of 1986 to
modify the calculation of modified adjusted gross income for
purposes of determining eligibility for certain healthcare-
related programs, having considered the same, report favorably
thereon without amendment and recommend that the bill do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND...........................................2
A. Purpose and Summary................................. 2
B. Background and Need for Legislation................. 2
C. Legislative History................................. 3
II. EXPLANATION OF THE BILL.........................................3
A. Modification of Calculation of Modified Adjusted
Gross Income for Determining Eligibility for
Certain Healthcare-Related Programs (sec. 1 of the
bill and sec. 36B of the Code)..................... 3
III. VOTES OF THE COMMITTEE...........................................8
IV. BUDGET EFFECTS OF THE BILL.......................................8
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......15
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........16
VII. DISSENTING VIEWS................................................18
I. SUMMARY AND BACKGROUND
A. PURPOSE AND SUMMARY
The bill, H.R. 2576, reported by the Committee on Ways and
Means, amends the Internal Revenue Code of 1986 to modify the
calculation of modified adjusted gross income used in
determining eligibility for certain healthcare-related programs
under the Patient Protection and Affordable Care Act of 2010
(``PPACA''),\1\ as modified by the Health Care and Education
Reconciliation Act of 2010 (``HCERA'').\2\
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\1\Pub. L. No. 111-148 (March 23, 2010).
\2\Pub. L. No. 111-152 (March 30, 2010).
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Specifically, the bill revises the definition of modified
adjusted gross income for purposes of eligibility for the
premium assistance credit for health insurance purchased
through an exchange--sometimes referred to as an exchange
subsidy--to include the amount of Social Security benefits and
tier 1 Railroad Retirement benefits that are not includible in
gross income. This definition of modified adjusted gross income
applies also for purposes of eligibility for reduced cost-
sharing with respect to health insurance purchased through an
exchange and for Medicaid for the nonelderly and the Children's
Health Insurance Program.
B. BACKGROUND AND NEED FOR LEGISLATION
Among the numerous concerns about PPACA and HCERA that have
been discovered since their enactment in 2010, are concerns
about the definition of modified adjusted gross income used to
determine eligibility for the exchange subsidies, Medicaid, and
other health programs. Since enactment, press reports have
revealed that the law's definition of income excludes the non-
taxable portion of Social Security benefits, significantly
understating the financial resources available to certain
households. Subsequently, Administration officials, including
the Chief Actuary at the Centers for Medicare and Medicaid
Services, have confirmed that millions of such households will
be eligible for subsidized health insurance that, in many
cases, was designed for those with fewer financial resources.
In contrast, many other Federal means-tested programs define
income, for purposes of determining income eligibility, to
include the entire Social Security benefit, rather than just
the taxable portion.
As part of his recent debt reduction plan, President Obama
proposed the same modification to the definition of income for
means-tested health programs as is contained in H.R. 2576.
While legislation (H.R. 2) to repeal PPACA and HCERA outright
remains pending in the Senate, H.R. 2576 is a bipartisan
proposal that Congress and the President can enact immediately
in order to reduce the deficit and bring the definition of
income for health programs into alignment with the measurement
of income used to determine eligibility for other social
welfare programs.
C. LEGISLATIVE HISTORY
Background
H.R. 2576 was introduced on July 18, 2011, and was referred
to the Committee on Ways and Means.
Committee action
The Committee on Ways and Means marked up the bill on
October 13, 2011, and ordered the bill favorably reported.
II. EXPLANATION OF THE BILL
A. MODIFICATION OF CALCULATION OF MODIFIED ADJUSTED GROSS INCOME FOR
DETERMINING ELIGIBILITY FOR CERTAIN HEALTHCARE-RELATED PROGRAMS (SEC. 1
OF THE BILL AND SEC. 36B OF THE CODE)
Present Law
Premium assistance credit
For taxable years ending after December 31, 2013, section
36B provides a refundable tax credit (the ``premium assistance
credit'') for eligible individuals and families who purchase
health insurance through an exchange. The premium assistance
credit, which is refundable and payable in advance directly to
the insurer, subsidizes the purchase of certain health
insurance plans through an exchange.
The premium assistance credit is available for individuals
(single or joint filers) with household incomes between 100 and
400 percent of the Federal poverty level (``FPL'') for the
family size involved who do not receive health insurance
through an employer or a spouse's employer.\3\ Household income
is defined as the sum of: (1) the taxpayer's modified adjusted
gross income, plus (2) the aggregate modified adjusted gross
incomes of all other individuals taken into account in
determining that taxpayer's family size (but only if such
individuals are required to file a tax return for the taxable
year). Modified adjusted gross income is defined as adjusted
gross income increased by: (1) any amount excluded by section
911 (the exclusion from gross income for citizens or residents
living abroad), plus (2) any tax-exempt interest received or
accrued during the tax year.\4\ To be eligible for the premium
assistance credit, taxpayers who are married (within the
meaning of section 7703) must file a joint return. Individuals
who are listed as dependents on a return are ineligible for the
premium assistance credit.
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\3\Individuals who are lawfully present in the United States but
are not eligible for Medicaid because of their immigration status are
treated as having a household income equal to 100 percent of FPL (and
thus eligible for the premium assistance credit) as long as their
household income does not actually exceed 100 percent of FPL.
\4\The definition of modified adjusted gross income used in section
36B is incorporated by reference for purposes of determining
eligibility to participate in certain other healthcare-related
programs, such as reduced cost-sharing (section 1402 of PPACA),
Medicaid for the nonelderly (section 1902(e) of the Social Security Act
(42 U.S.C. 1396a(e)) as modified by section 2002(a) of PPACA) and the
Children's Health Insurance Program (section 2102(b)(1)(B) of the
Social Security Act (42 U.S.C. 1397bb(b)(1)(B)) as modified by section
2101(d) of PPACA).
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As described in Table 1 below, premium assistance credits
are available on a sliding scale basis for individuals and
families with household incomes between 100 and 400 percent of
FPL to help offset the cost of private health insurance
premiums. The premium assistance credit amount is determined
based on the percentage of income the cost of premiums
represents, rising from two percent of income for those at 100
percent of FPL for the family size involved to 9.5 percent of
income for those at 400 percent of FPL for the family size
involved. After 2014, the percentages of income are indexed to
the excess of premium growth over income growth for the
preceding calendar year. After 2018, if the aggregate amount of
premium assistance credits and cost-sharing reductions\5\
exceeds 0.504 percent of the gross domestic product for that
year, the percentage of income is also adjusted to reflect the
excess (if any) of premium growth over the rate of growth in
the consumer price index for the preceding calendar year. For
purposes of calculating family size, individuals who are in the
country illegally are not included.
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\5\As described in section 1402 of PPACA.
TABLE 1.--THE PREMIUM ASSISTANCE CREDIT PHASE-OUT
------------------------------------------------------------------------
Household income (expressed as a Initial premium Final premium
percent of FPL) (percentage) (percentage)
------------------------------------------------------------------------
100% up to 133%....................... 2.0 2.0
133% up to 150%....................... 3.0 4.0
150% up to 200%....................... 4.0 6.3
200% up to 250%....................... 6.3 8.05
250% up to 300%....................... 8.05 9.5
300% up to 400%....................... 9.5 9.5
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Minimum essential coverage and employer offer of health insurance
coverage
Generally, if an employee is offered minimum essential
coverage\6\ in the group market, including employer-provided
health insurance coverage, the individual is ineligible for the
premium assistance credit for health insurance purchased
through an exchange.
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\6\As defined in section 5000A(f).
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If an employee is offered unaffordable coverage by his or
her employer or the plan's share of total allowed cost of
provided benefits is less than 60 percent of such costs, the
employee can be eligible for the premium assistance credit, but
only if the employee declines to enroll in the coverage and
satisfies the conditions for receiving a premium assistance
credit through an exchange. Unaffordable coverage is defined as
coverage with a premium required to be paid by the employee
that is more than 9.5 percent of the employee's household
income, based on self-only coverage.\7\
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\7\The 9.5 percent amount is indexed for calendar years beginning
after 2014 to reflect the excess of premium growth over income growth.
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Reconciliation
If the premium assistance credit received through advance
payment exceeds the amount of premium assistance credit to
which the taxpayer is entitled for the taxable year, the
liability for the excess advance payment must be reflected on
the taxpayer's income tax return for the taxable year subject
to a limitation on the amount of such liability. For persons
with household income below 400 percent of FPL, the liability
for the excess payment for a taxable year is limited to a
specific dollar amount (the ``applicable dollar amount'') as
shown in Table 2 below (one-half of the applicable dollar
amount shown in Table 2 for unmarried individuals who are not
surviving spouses or filing as heads of households).\8\
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\8\Section 36B(f)(2)(i), as amended by section 4 of the
Comprehensive 1099 Taxpayer Protection and Repayment of Exchange
Subsidy Overpayments Act of 2011, Pub. L. No. 112-9 (April 14, 2011).
TABLE 2.--RECONCILIATION
------------------------------------------------------------------------
Applicable
Household income (expressed as a percent of FPL) dollar amount
------------------------------------------------------------------------
Less than 200%.......................................... $600
At least 200% but less than 300%........................ 1,500
At least 300% but less than 400%........................ 2,500
------------------------------------------------------------------------
If the premium assistance credit for a taxable year
received through advance payment is less than the amount of the
credit to which the taxpayer is entitled for the year, the
shortfall in the credit is also reflected on the taxpayer's tax
return for the year.
Income taxation of Social Security benefits
Social Security benefits
Section 86 provides rules for determining what amount, if
any, of a taxpayer's Social Security benefits are includible in
gross income. Social Security benefits that are not taxed under
section 86 are excluded from gross income. For purposes of
section 86, Social Security benefits generally include monthly
retirement benefits payable under title II of the Social
Security Act and tier 1 Railroad Retirement benefits. If a
taxpayer's Social Security benefits or Railroad Retirement
benefits are offset by worker's compensation benefits, then the
amount of the taxpayer's Social Security benefits is increased
by the amount of such offset.
Portion of Social Security benefits includible in gross
income
The amount of Social Security benefits includible in gross
income is determined under a two-tier system. Taxpayers
receiving Social Security benefits are not required to include
any portion of such benefits in gross income if their
provisional income does not exceed a first-tier threshold,
which is $25,000, in the case of unmarried individuals, or
$32,000, in the case of married individuals filing jointly.\9\
For purposes of these computations, a taxpayer's provisional
income is defined as adjusted gross income increased by certain
amounts, including, generally: (1) tax-exempt interest; (2)
excludable interest on educational savings bonds; (3) adoption
assistance payments; (4) certain deductible student loan
interest; (5) certain excludable foreign-source earned income;
(6) certain U.S. possession income; and (7) one-half of the
taxpayer's Social Security benefits. A second-tier threshold
for provisional income is $34,000, in the case of unmarried
individuals, or $44,000, in the case of married individuals
filing joint returns.\10\ These thresholds are not indexed for
inflation.
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\9\In the case of a married individual who files a separate return,
the first-tier threshold is generally zero. However, if the individual
lives apart from his or her spouse for the entire year, the first-tier
threshold is $25,000.
\10\In the case of a married individual who files a separate
return, the second-tier threshold is generally zero. However, if the
individual lives apart from his or her spouse for the entire year, the
second-tier threshold is $34,000.
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If the taxpayer's provisional income exceeds the first-tier
threshold but does not exceed the second-tier threshold, then
the amount required to be included in gross income is the
lesser of: (1) 50 percent of the taxpayer's Social Security
benefits, or (2) 50 percent of the excess of the taxpayer's
provisional income over the first-tier threshold.
If the amount of provisional income exceeds the second-tier
threshold, then the amount required to be included in gross
income is the lesser of: (1) 85 percent of the taxpayer's
Social Security benefits; or (2) the sum of (a) 85 percent of
the excess of the taxpayer's provisional income over the
second-tier threshold, plus (b) the smaller of (i) the amount
of benefits that would have been included in income if the 50-
percent inclusion rule (described in the previous paragraph)
were applied, or (ii) one-half of the difference between the
taxpayer's second-tier threshold and first-tier threshold.\11\
Tables 3 and 4 below summarize the income taxation of Social
Security benefits.
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\11\Special rules apply in some cases. In the case of nonresident
individuals who are not U.S. citizens, 85 percent of Social Security
benefits are includible in gross income and subject to the 30-percent
withholding tax (sec. 871(a)(3)). The taxation of Social Security
benefits may also be specified in income tax treaties between the
United States and other countries.
TABLE 3.--SUMMARY OF THE TAXATION OF SOCIAL SECURITY BENEFITS FOR UNMARRIED TAXPAYERS
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Provisional income level Amount included in gross income
----------------------------------------------------------------------------------------------------------------
$24,999 and below.................... 0%
----------------------------------------------------------------------------------------------------------------
First-tier inclusion is the lesser of . . .
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$25,000 to $33,999................... (1) 50% of Social (2) 50% of provisional income exceeding $25,000.
Security benefit.
----------------------------------------------------------------------------------------------------------------
Second-tier inclusion is the lesser of . . .
--------------------------------------------------------------------------
(2) 85% of the amount of provisional income
exceeding $34,000 plus the lesser of . . .
-------------------------------------------------
$34,000 and above.................... (1) 85% of Social (2a) $4,500............ (2b) amount of Social
Security benefit. Security benefit that
would have been
included if the 50%
rule applied.
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TABLE 4.--SUMMARY OF THE TAXATION OF SOCIAL SECURITY BENEFITS FOR MARRIED TAXPAYERS
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Provisional income level Amount included in gross income
----------------------------------------------------------------------------------------------------------------
$31,999 and below.................... 0%
----------------------------------------------------------------------------------------------------------------
First-tier inclusion is the lesser of . . .
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$32,000 to $43,999................... (1) 50% of Social (2) 50% of provisional
Security benefit. income exceeding
$32,000.
----------------------------------------------------------------------------------------------------------------
Second-tier inclusion is the lesser of . . .
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(2) 85% of the amount
of provisional income
exceeding $44,000 plus
the lesser of . . .
$44,000 and above.................... (1) 85% of Social (2a) $6,000............ (2b) amount of Social
Security benefit. Security benefit that
would have been
included if the 50%
rule applied.
----------------------------------------------------------------------------------------------------------------
Reasons for Change
The Committee believes that the full amount of a taxpayer's
Social Security benefits should be taken into account in
determining eligibility for the premium assistance credit and
other benefits under Federally funded health programs,
regardless of the portion of Social Security benefits
includible in gross income. Taking the full amount of Social
Security benefits into account for these purposes provides
consistency with eligibility for other Federal needs-based
programs and furthers the goal of deficit reduction.
Explanation of Provision
The provision revises the definition of modified adjusted
gross income in section 36B to include the amount of the
taxpayer's Social Security benefits that are excluded from
gross income. Thus, for purposes of the premium assistance
credit, modified adjusted gross income is defined as adjusted
gross income increased by: (1) any amount excluded by section
911 (the exclusion from gross income for citizens or residents
living abroad), (2) any tax-exempt interest received or accrued
during the tax year, plus (3) the amount of Social Security
benefits excluded from gross income. Because the definition of
modified adjusted gross income used in section 36B is
incorporated by reference for purposes of determining
eligibility to participate in certain other healthcare-related
programs, such as reduced cost-sharing,\12\ Medicaid for the
nonelderly,\13\ and the Children's Health Insurance
Program,\14\ the revised definition applies to those programs
as well.
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\12\Section 1402 of PPACA.
\13\Section 1902(e) of the Social Security Act (42 U.S.C. 1396a(e))
as modified by section 2002(a) of PPACA.
\14\Section 2102(b)(1)(B) of the Social Security Act (42 U.S.C.
1397bb(b)(1)(B)) as modified by section 2101(d) of PPACA.
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Effective Date
The provision is effective on date of enactment. Code
section 36B, which the provision amends, however, is not
effective until taxable years ending after December 31, 2013.
Thus, the provision applies for taxable years ending after
December 31, 2013.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the vote of the Committee on Ways and Means in its
consideration of H.R. 2576, ``To amend the Internal Revenue
Code of 1986 to modify the calculation of modified adjusted
gross income for purposes of determining eligibility for
certain healthcare-related programs.''
The bill, H.R. 2576, was ordered favorably reported by a
rollcall vote of 23 yeas to 12 nays (with a quorum being
present). The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Camp....................... X ........ ......... Mr. Levin........ ........ X .........
Mr. Herger..................... X ........ ......... Mr. Rangel....... ........ X .........
Mr. Johnson.................... X ........ ......... Mr. Stark........ ........ X .........
Mr. Brady...................... X ........ ......... Mr. McDermott.... ........ X .........
Mr. Ryan....................... X ........ ......... Mr. Lewis........ ........ X .........
Mr. Nunes...................... X ........ ......... Mr. Neal......... ........ X .........
Mr. Tiberi..................... X ........ ......... Mr. Becerra...... ........ X .........
Mr. Davis...................... X ........ ......... Mr. Doggett...... ........ X .........
Mr. Reichert................... X ........ ......... Mr. Thompson..... ........ X .........
Mr. Boustany................... X ........ ......... Mr. Larson....... ........ ........ .........
Mr. Roskam..................... X ........ ......... Mr. Blumenauer... ........ X .........
Mr. Gerlach.................... X ........ ......... Mr. Kind......... X ........ .........
Mr. Price...................... X ........ ......... Mr. Pascrell..... ........ X .........
Mr. Buchanan................... X ........ ......... Ms. Berkley...... ........ X .........
Mr. Smith...................... X ........ ......... Mr. Crowley...... ........ X .........
Mr. Schock..................... X ........ .........
Ms. Jenkins.................... X ........ .........
Mr. Paulsen.................... X ........ .........
Mr. Marchant................... X ........ .........
Mr. Berg....................... X ........ .........
Ms. Black...................... X ........ .........
Mr. Reed....................... X ........ .........
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IV. BUDGET EFFECTS OF THE BILL
A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the revenue provisions
of the bill, H.R. 2576, as reported.
The bill, as reported, is estimated to have the following
effects on budget receipts for fiscal years 2012-2021:
B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX EXPENDITURES BUDGET
AUTHORITY
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority. The
Committee states further that the bill involves no new or
increased tax expenditures.
C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.
U.S. Congress,
Congressional Budget Office
Washington, DC, October 14, 2011.
Hon. Dave Camp,
Chairman, Committee on Ways and Means, House of Representatives,
Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2576, a bill to
modify the calculation of modified adjusted gross income for
purposes of determining eligibility for certain health-care-
related programs.
If you would like further details about this estimate, we
would be pleased to provide them. The CBO staff contact is
Sarah Anders.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 2576--A bill to amend the Internal Revenue Code of 1986 to modify
the calculation of modified adjusted gross income for purposes
of determining eligibility for certain healthcare-related
programs
Summary: H.R. 2576 would require all Social Security and
Tier 1 Railroad Retirement benefits to be included as part of
modified adjusted gross income (MAGI) for purposes of
determining eligibility for certain Medicaid applicants and
subsidies for health insurance purchased through the new health
insurance exchanges to be established under the Patient
Protection and Affordable Care Act (PPACA, Public Law 111-148).
Under PPACA, the nontaxable portion of those benefits will be
excluded from MAGI for such eligibility determinations.
CBO and the staff of the Joint Committee on Taxation (JCT)
estimate that enacting the legislation would reduce deficits by
almost $3 billion over the 2012-2016 period and by about $13
billion over the 2012-2021 period. Pay-as-you-go procedures
apply because enacting the legislation would affect direct
spending and revenues. Implementing H.R. 2576 would not have
any significant impact on spending subject to appropriation.
JCT has determined that the bill contains no private-sector
or intergovernmental mandates as defined in the Unfunded
Mandates Reform Act (UMRA).
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 2576 is shown in the following table.
The costs of this legislation fall within budget function 550
(health).
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By fiscal year, in billions of dollars--
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-2016 2012-2021
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CHANGES IN DIRECT SPENDING
Medicaid:
Estimated Budget Authority.................. 0 0 -1.4 -2.5 -4.0 -4.5 -4.7 -5.0 -5.2 -5.6 -7.9 -32.9
Estimated Outlays............................... 0 0 -1.4 -2.5 -4.0 -4.5 -4.7 -5.0 -5.2 -5.6 -7.9 -32.9
Exchange Subsidies:
Estimated Budget Authority.................. 0 0 0.2 0.9 1.3 1.5 1.6 1.6 1.8 1.8 2.4 10.8
Estimated Outlays........................... 0 0 0.2 0.9 1.3 1.5 1.6 1.6 1.8 1.8 2.4 10.8
Other:
Estimated Budget Authority.................. 0 0 0.1 0.1 0.1 * * 0.1 0.1 * 0.2 0.4
Estimated Outlays........................... 0 0 0.1 0.1 0.1 * * 0.1 0.1 * 0.2 0.4
Total Direct Spending Effects:
Estimated Budget Authority.................. 0 0 -1.1 -1.5 -2.6 -2.9 -3.1 -3.4 -3.3 -3.8 -5.2 -21.7
Estimated Outlays............................... 0 0 -1.1 -1.5 -2.6 -2.9 -3.1 -3.4 -3.3 -3.8 -5.2 -21.7
CHANGES IN REVENUES
Estimated Revenues.............................. 0 0 -0.4 -1.0 -1.2 -1.0 -1.1 -1.2 -1.5 -1.3 -2.6 -8.7
On-Budget................................... 0 0 -0.2 -0.8 -1.0 -0.9 -0.9 -1.0 -1.2 -1.1 -2.0 -7.1
Off-Budgeta................................. 0 0 -0.2 -0.2 -0.2 -0.1 -0.2 -0.2 -0.3 -0.2 -0.6 -1.6
NET INCREASE OR DECREASE (-) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND RECEIPTS
Impact on Deficits.............................. 0 0 -0.7 -0.5 -1.5 -1.8 -2.0 -2.2 -1.8 -2.6 -2.6 -13.0
On-Budget................................... 0 0 -0.9 -0.7 -1.7 -2.0 -2.2 -2.4 -2.1 -2.7 -3.3 -14.6
Off-Budgeta................................. 0 0 0.2 0.2 0.2 0.1 0.2 0.2 0.3 0.2 0.6 1.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Numbers may not sum to totals because of rounding.
* = less than $50 million.
a. All off-budget effects would come from changes in revenues. (The payroll taxes for Social Security are classified as ``off-budget.'')
Basis of Estimate: Under current law, eligibility for
subsidies to purchase insurance through health insurance
exchanges and for Medicaid beginning in 2014 will be determined
using a definition of MAGI that excludes the nontaxable portion
of a family's Social Security benefit. H.R. 2576 would expand
the definition of MAGI to include all Social Security benefits
provided under Title II of the Social Security Act--which
include old-age benefits, disability benefits, spousal
benefits, child benefits, survivor benefits, and parental
benefits--as well as Tier 1 Railroad Retirement benefits.
Impact on Insurance Coverage
CBO and JCT estimate that H.R. 2576 would, relative to
current law, reduce Medicaid enrollment, increase the number of
people who purchase health insurance through the health
insurance exchanges, and slightly increase the number of people
with employer-based coverage and the number who are uninsured.
Medicaid. CBO and JCT estimate that adding nontaxable
Social Security income to the MAGI definition would reduce
Medicaid enrollment, beginning in 2014, by between 500,000 and
one million people depending on the year. Those losing Medicaid
coverage include some retirees between the ages of 62 and 64 as
well as some people receiving survivor benefits, disability
benefits, and other Social Security benefits. Those losing
Medicaid coverage would be expected to enroll in qualified
health plans offered in health insurance exchanges, obtain
employment-based insurance, or become uninsured.
Health Insurance Exchanges. H.R. 2576 would have two
different effects on the number of people who purchase
insurance through health insurance exchanges. First, CBO and
JCT estimate that many of the individuals who lose Medicaid
coverage would become eligible for premium assistance credits
and cost-sharing subsidies in the exchanges. The number of
people purchasing insurance through the exchanges would
increase as a result. Second, we estimate that some people who
were previously eligible for exchange subsidies would lose
eligibility under the expanded MAGI definition that H.R. 2576
would establish, which would reduce the number of people
purchasing insurance through the exchanges. CBO and JCT
estimate that those coverage effects would, on net, result in
an increase in enrollment in health exchanges of roughly one-
half million people in any given year over the 2014-2021
period.
Other Coverage. CBO and JCT estimate that H.R. 2576 would
increase the number of people enrolled in employer-based
insurance as well as the number of uninsured by less than
500,000 in all years beginning in 2014.
Impact on Federal Spending and Revenues
Enacting H.R. 2576 would reduce direct spending by an
estimated $5.2 billion over the 2012-2016 period and $21.7
billion over the 2012-2021 period. Further, H.R. 2576 would
reduce revenues by approximately $2.6 billion over the 2012-
2016 period and $8.7 billion over the 2012-2021 period. Of that
revenue reduction, an estimated $7.1 billion would be a change
in on-budget revenues for the 2012-2021 period and the
remaining $1.6 billion would be a change in off-budget (Social
Security) revenues.
Direct Spending. CBO estimates that Medicaid spending would
decrease by $7.9 billion over the 2012-2016 period and $32.9
billion over the 2012-2021 period. Those savings would be
partially offset by net increases in subsidies for health
insurance purchased through the exchanges. Under the expanded
MAGI definition, some individuals would receive less-generous
exchange subsidies and others would lose eligibility for
subsidies completely, resulting in savings. However, such
savings would be more than offset by an increase in subsidy
costs associated with other individuals who lose Medicaid
eligibility under H.R. 2576, but become eligible for and choose
to take up exchange subsidies. On net, CBO estimates the outlay
portion of the increased payments for premium and cost-sharing
subsidies would be $2.4 billion over the 2012-2016 period and
$10.8 billion over the 2012-2021 period.\1\
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\1\Subsidies for health insurance premiums are structured as
refundable tax credits; the portions of such credits that exceed
taxpayers' liabilities are classified as outlays, while the portions
that reduce tax payments are reflected in the budget as reductions in
revenues.
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Revenues. Two effects largely account for the estimated
$8.7 billion revenue reduction that would result from enacting
H.R. 2576. The revenue portion of the increase in premium and
cost-sharing subsidies represents a little less than half of
the revenue reduction. The majority of the remaining revenue
loss would stem from changes in the size and composition of the
population with employment-based insurance, which would alter
the mix of compensation provided to workers between taxable
wages and salaries and nontaxable health insurance benefits.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays and revenues that are
subject to those pay-as-you-go procedures are shown in the
following table. Only on-budget changes to outlays or revenues
are subject to pay-as-you-go procedures.
Intergovernmental and private-sector impact: JCT reviews
provisions in legislation that amend the tax code to determine
if those provisions contain intergovernmental or private-sector
mandates as defined in UMRA. JCT has determined that the bill
contains no private-sector or intergovernmental mandates as
defined in UMRA.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 2576, AS ORDERED REPORTED BY THE COMMITTEE ON WAYS AND MEANS ON OCTOBER 13, 2011
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By fiscal year, in millions of dollars--
-------------------------------------------------------------------------------------------------------------------------------------------------
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-2016 2012-2021
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NET INCREASE OR DECREASE (-) IN THE ON-BUDGET DEFICIT
Statutory Pay-As-You-Go Impact................ 0 0 -888 -694 -1,679 -1,955 -2,197 -2,376 -2,088 -2,706 -3,261 -14,584
Memorandum:
Changes in Outlays........................ 0 0 -1,120 -1,467 -2,644 -2,868 -3,087 -3,372 -3,333 -3,805 -5,232 -21,698
Changes in Revenues....................... 0 0 -232 -773 -966 -913 -891 -995 -1,245 -1,099 -1,971 -7,114
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Note: Numbers may not sum to totals because of rounding.
Previous CBO estimate: On July 22, 2011, CBO transmitted a
cost estimate for S. 1376, as introduced in the United States
Senate on July 18, 2011. The legislative language modifying the
MAGI definition in H.R. 2576 is similar to the legislative
language of S. 1376 and would have the same budgetary effects
over the 2012-2016 and 2012-2021 periods.
Estimate prepared by: Alexandra Minicozzi, Sarah Anders,
Robert Stewart, and Kirstin Nelson.
Estimate approved by: Holly Harvey, Deputy Assistant
Director for Budget Analysis.
D. MACROECONOMIC IMPACT ANALYSIS
In compliance with clause 3(h)(2) of rule XIII of the Rules
of the House of Representatives, the following statement is
made by the Joint Committee on Taxation with respect to the
provisions of the bill amending the Internal Revenue Code of
1986: the effects of the bill on economic activity are so small
as to be incalculable within the context of a model of the
aggregate economy.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives (relating to oversight findings),
the Committee advises that it was a result of the Committee's
review of the provisions of H.R. 2576 that the Committee
concluded that it is appropriate to report the bill favorably
to the House of Representatives with the recommendation that
the bill do pass.
B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizing funding is required.
C. INFORMATION RELATING TO UNFUNDED MANDATES
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the revenue provisions of
the bill do not contain Federal mandates on the private sector.
The Committee has determined that the revenue provisions of the
bill do not impose a Federal intergovernmental mandate on
State, local, or tribal governments.
D. APPLICABILITY OF HOUSE RULE XXI 5(B)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.'' The Committee has
carefully reviewed the provisions of the bill, and states that
the provisions of the bill do not involve any Federal income
tax rate increases within the meaning of the rule.
E. TAX COMPLEXITY ANALYSIS
Section 4022(b) of the Internal Revenue Service Reform and
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the
staff of the Joint Committee on Taxation (in consultation with
the Internal Revenue Service and the Treasury Department) to
provide a tax complexity analysis. The complexity analysis is
required for all legislation reported by the Senate Committee
on Finance, the House Committee on Ways and Means, or any
committee of conference if the legislation includes a provision
that directly or indirectly amends the Internal Revenue Code
and has widespread applicability to individuals or small
businesses.
Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, the staff of the Joint Committee on
Taxation has determined that a complexity analysis is not
required under section 4022(b) of the IRS Reform Act because
the bill contains no provisions that amend the Code and that
have ``widespread applicability'' to individuals or small
businesses, within the meaning of the rule.
F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND LIMITED TARIFF
BENEFITS
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter A--Determination of Tax Liability
* * * * * * *
PART IV--CREDITS AGAINST TAX
* * * * * * *
Subpart C--Refundable Credits
* * * * * * *
SEC. 36B. REFUNDABLE CREDIT FOR COVERAGE UNDER A QUALIFIED HEALTH
PLAN.
(a) * * *
* * * * * * *
(d) Terms Relating to Income and Families.--For purposes of
this section--
(1) * * *
(2) Household income.--
(A) * * *
(B) Modified adjusted gross income.--The term
``modified adjusted gross income'' means
adjusted gross income increased by--
(i) any amount excluded from gross
income under section 911, [and]
(ii) any amount of interest received
or accrued by the taxpayer during the
taxable year which is exempt from
tax[.], and
(iii) any amount of social security
benefits of the taxpayer excluded from
gross income under section 86.
* * * * * * *
VII. DISSENTING VIEWS
We are concerned about the impact of H.R. 2576 on retirees
and people with severe disabilities. The fundamental goal of
the Affordable Care Act is to provide secure, stable, and
comprehensive health insurance coverage to all Americans,
including retirees who are not yet eligible for Medicare
coverage and persons with severe disabilities. Indeed, as a
result of the health insurance reforms and tax credits in the
Affordable Care Act, the Congressional Budget Office estimates
that over 30 million more Americans will be covered by quality,
comprehensive health insurance as compared to the number of
Americans covered today. According to a Congressional Budget
Office estimate of a similar Senate bill (S. 1376), H.R. 2576
will result in up to 500,000 Americans losing coverage
altogether, with many more having to pay more for their health
insurance coverage. We are concerned because this reduction in
coverage and increase in costs, worth $13 billion, is borne
entirely by retirees, persons with severe disabilities, and
their families.
Commentators have suggested that the definition of modified
adjusted gross income in the Affordable Care Act that excludes
nontaxable Social Security benefits is a ``glitch,'' with some
suggesting that this would add hundreds of billions of dollars
to the cost of the Act beyond the original estimate. This is
not true. As Mr. Barthold, the Chief of Staff of the Joint
Committee on Taxation, noted during the markup of H.R. 2576,
the exclusion of nontaxable Social Security benefits is typical
when applying income limitations to tax benefits. Mr. Barthold
also stated that the staffs of the Joint Committee on Taxation
and the Congressional Budget Office were aware of the exclusion
of nontaxable Social Security benefits from the definition of
modified adjusted gross income and the estimates fully
accounted for this exclusion.
In defending H.R. 2576 during the markup, the majority uses
an example that relies on an extreme and implausible fact
pattern when arguing that families with income of approximately
$60,000 per year will qualify for Medicaid. The example assumes
a couple receiving the maximum amount of Social Security
benefits because they have each earned the maximum amount of
creditable wages every year during their working careers
(``maximum earner couples''). Presently, this means earning a
salary of at least $106,800 each, or over $210,000 for the
couple. But the majority's example also assumes that this high-
income couple has relatively modest sources of income outside
of Social Security benefits--only about $20,000 per year,
despite lengthy careers earning top salaries that would place
the couple in the top 5 percent of income earners.
This fact pattern is highly improbable. A more realistic
fact pattern is presented by the average Social Security
benefits and median non-Social Security income of pre-age 65
Social Security recipients. The average Social Security benefit
for a low or middle income worker retiring at age 62 today
ranges from $8,300 to $13,700, and the median non-Social
Security income of current beneficiaries ranges from $9,000 to
$16,500 per year (depending on the age cohort of the
recipients). These facts present a far different picture of who
will be affected by H.R. 2576. The truth is that the bill will
impose higher costs on low and moderate income retirees and
persons with severe disabilities by either shifting them out of
Medicaid coverage or requiring that they contribute
significantly more of their income for health insurance
coverage through reduced tax credits. These struggling
retirees, persons with severe disabilities, and their families
who lose coverage will be earning far less than $60,000 plus
per year.
Sander M. Levin.
Charles B. Rangel.
Pete Stark.
Jim McDermott.
John Lewis.
Xavier Becerra.
Joe Crowley.