In case you’re wondering where the money will come from, as the new health bill slowly kicks in, the San Francisco Chronicle‘s Kathleen Pender had an excellent overview in her recent Business Report, excerpted below:
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.
A few of the other provisions and the amounts of revenue they will raise include:
— Higher Medicare tax on earned income: Ten-year revenue estimate: $86.8 billion.
— Medicare tax on investment income: Revenue estimate: $123.4 billion.
— Applying the two Medicare taxes
— Reining in flex accounts: Ten-year revenue estimate: $13 billion.
— No more OTC drugs: 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. Revenue estimate: $15.2 billion over 10 years.
— Penalizing the uninsured
As people everywhere begin to see benefits, and opponents of the bill ramp up arguments over its costs, understanding this complex cost-benefit ratio might turn out to be critical. Pender’s overview — outlined here in brief and easily readable in full — is a giant step forward.