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PPACA: Income Formula Change Might Save Billions

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Including Social Security benefits when deciding whether families qualify for health insurance purchase subsidies could save the government about $13 billion from 2014 through 2021, budget analysts say.

The analysts, staff members at the congressional Joint Committee on Taxation (JCT), considered that idea when they reviewed H.R. 2576.

The House Ways and Means Committee could mark up the bill, which was introduced by Rep. Diane Black, R-Tenn., as early as Thursday.

The bill will would tinker with implementation of the Patient Protection and Affordable Care Act of 2010 (PPACA).

If PPACA takes effect as written and works as drafters expect, the act will create a “premium assistance credit” – a refundable income tax credit – that will function as a subsidy that moderate-income taxpayers can use to buy health coverage through a new health insurance distribution exchange system.

The tax credit will be available to individuals and families with incomes ranging from 100% to 400% of the federal poverty level.

PPACA now calls for the government to use “modified adjust gross income” (MAGI) when determining whether taxpayers are eligible for the premium assistance tax credit.

Today, MAGI equals ordinary adjusted gross income (AGI), plus any tax-exempt interest received or accrued during the tax year, plus any amounts that citizens or permanent residents exempt from taxable income because they have been living abroad for part of the year.

Ordinary AGI excludes Social Security for unmarried individuals with less than $25,000 in gross income and couples with less than $32,000 in gross income.

H.R. 2576 would change MAGI – the figure used in the premium tax credit eligibility formula — to include any Social Security benefits that a taxpayer receives that are excluded from ordinary taxable gross income, JCT analysts say.

JCT analysts estimate the change would save $702 million in 2014, when the tax credit program is supposed to start to take effect, and about $2.5 billion in 2021, the last year included in the analysis.


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