Tax Lawyer's Blog

The Tax Foundation issued the following News Release this weekend breaking down how the nearly $1 trillion healthcare bill will be financed:

The $938 billion health care reform legislation finalized by Congress yesterday is financed primarily through net cuts to Medicare and an increased Medicare tax on high-income taxpayers, according to the Tax Foundation.

The Medicare spending cuts would save $416.5 billion, or about 39 percent of the bill’s 10-year cost. The increased Medicare taxes on high-income people — including an additional 0.9% Medicare Hospital Insurance Tax on earned income exceeding $200,000 for single taxpayers ($250,000 for married couples) and an “Unearned Income Medicare Contribution” of 3.8% on investment income for taxpayers with adjusted gross incomes (AGI) in excess of $200,000 for single filers ($250,000 for married filers) — would raise $210 billion, or about 19 percent of the legislation’s cost.

Other financing provisions of the bill include fees on insurers and medical providers ($107 billion, or about 10 percent of the bill’s cost); penalty payments by employers who do not provide health insurance and individuals who don’t purchase it ($69 billion, or about 6 percent); other net spending cuts, including education reform ($52 billion, or about 5 percent); net cuts to Medicaid, excluding coverage provisions ($45 billion, or about 4 percent); an excise tax on so-called “Cadillac” health plans ($32 billion, or about 3 percent); and other revenue provisions ($149 billion, or about 14 percent). The excise tax on high-valued health plans does not go into effect until 2018, which is why it comprises such a small portion of the legislation’s funding.

Here’s a graph depicting a breakdown of the financing:

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