The Senate appears poised to support H.R. 4, the House version of legislation repealing the much-criticized 1099 reporting provision through a vote likely to occur this week.
This development comes shortly after Senate Majority Leader Harry Reid, D-Nev., indicated he would support the House version of the legislation even though a number of House Democrats and consumer groups call the pay-for provision a major tax increase on the middle class.
The White House also voiced opposition to the House pay-for provision, although it did not threaten a veto.
The Senate version calls for paying for the $21.9 billion increase in the deficit through repeal of the provision by giving the Office of Management and Budget the ability to take away nearly $44 billion of discretionary budget authority–except from the Departments of Defense, Veterans Affairs and Social Security–to offset the loss from the 1099 repeal.
The House version, by contrast, would pay for the repeal by making consumers repay all of their insurance subsidies under the health care law once their income rises beyond 400% of the federal poverty line. House Democrats call that a tax increase on the middle class, and the administration agreed in a policy statement disclosed before the House vote.
The House pay-for is aimed at eliminating a $21.9 billion deficit over 10 years, projected to occur because of the end of the proposed reporting requirements.
The revised legislation also repeals an additional Form 1099 information reporting requirement, imposed on owners of rental real estate.
Health Care for America Now said in a letter to Senate Democrats that the House bill will create “unintended consequences” for the middle class.
It would do so, HCAN said, by changing the premium credit repayment schedule.
Under current law, families are already required to repay premium credit overpayments up to a reasonable cap at the end of the year.
The House bill increases the amount families are required to pay and removes the repayment cap for families with incomes over 400% of the federal poverty line.
“The protection against a repayment ‘cliff’ for families with incomes between 400% and 500% of the federal poverty level was put into place in a nearly unanimous vote of the House and Senate in December,” the letter said. “H.R.4 removes this agreed-upon protection,” the letter said.
In a statement, House Republicans called Democrats hypocritical because they supported the same pay-for during the December debate on how to stop a 21% cut in payments to doctors under Medicare.
In comments during the March 3 floor debate on the House bill Rep. David Camp, R-Mich., chairman of the House Ways and Means Committee, said that according to the non-partisan Joint Committee on Taxation, “under the better enforcement rules of H.R. 4, there will be some people who decide not to buy coverage through the health insurance exchange because it’s no longer as attractive to accept a taxpayer-funded subsidy that they are not eligible for, now that they would be required to pay a larger share, or in some cases all of it back under H.R. 4.
“For example, under current law, a household making $105,000 might think it’s worth understating its income–or at least not updating their income information–in order to receive a $12,000 exchange subsidy because it would only have to pay back $3,000 if it got caught,” Mr. Camp said.
“But the household is less likely to do so under H.R. 4 because it would have to pay back the entire subsidy, given that it wasn’t eligible for it in the first place,” Mr. Camp concluded.
The Democrats disagreed with the interpretation by the Republicans.
The Democratic statement, from Rep. Sander Levin, D-Mich., ranking minority member of the House Ways and Means Committee, said the healthcare reform bill implemented a graduated income approach that protects those with lower incomes and eliminated the cliff that caused people to face massive tax increases if their income rose to more than 400% of poverty.
By contrast, the Republican plan takes $25 billion additional dollars from middle class families by making the “true-up” policy less responsible and removing protections from excessive tax increases for middle-class families.