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House Passes Health Package

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Members of the House want – repeat, want – federal and state agencies to include Social Security benefits income when determining whether individuals are eligible for the new federal health insurance tax credit.

One bill that would make that change, H.R. 674, passed Thursday by a 405-16 vote.

A second bill that would make the same change, H.R. 2576, passed just 47 minutes earlier with a 262-157 vote.

H.R. 674 was introduced by Reps. Wally Herger, R-Calif., and Earl Blumenauer, D-Ore.

H.R. 674 would change the tax credit eligibility formula, and it also would eliminate a rule that could require the government impose a 3% withholding requirement on some payments that government entities make to vendors.

H.R. 2576, introduced by Rep. Diane Black, R-Tenn., would simply change the tax credit eligibility formula.

The proposed tax credit change could affect implementation of part of the Patient Protection and Affordable Care Act of 2010 (PPACA).

If PPACA takes effect on schedule and works as drafters expect, it is supposed to create a “refundable tax credit” that will help individuals with incomes from 133% to 400% of the federal poverty level buy health insurance through a new system of health insurance exchanges.

PPACA requires the government to use “modified adjust gross income” (MAGI) in tax credit and Medicaid eligibility calculations. MAGI excludes Social Security benefits.

Analysts at the congressional Joint Committee on Taxation say putting Social Security benefits in the calculation would save $702 million in 2014, when the tax credit program is supposed to start to take effect, and about $13 billion from 2014 to 2021.

President Obama put a similar tax credit eligibility provision in a budget proposal.

Black noted in a statement that many federal public assistance programs already take Social Security benefits into account when making eligibility decisions.

The current PPACA income definition “would allow some middle class Americans to qualify for Medicaid—a program meant to help those most in need,” Black said. “With the MAGI policy set to take effect in 2014, there is time to prevent these improper payments before taxpayer dollars are spent.”

The American Medical Association, Chicago, has expressed strong support for H.R. 674 because of the 3% withholding tax repeal provision in that bill.

Congress enacted the 3% withholding requirement in 2006, because of concerns that some government contractors were failing to pay enough income taxes. The requirement is now set to take effect Jan. 1, 2012.

Dr. Peter Carmel, the AMA president, said in a statement that applying the 3% withholding rule to doctors who treat Medicare patients would be untenable.

Medicare already pays 20% less the doctors really need to cover the cost of treating Medicare plan enrollees, and the government is set to impose a 30% Medicare reimbursement cut Jan. 1, 2012, Carmel said.

“The AMA is pleased that the House passed H.R. 674 and repealed the 3% withholding provision, and we urge the Senate to pass this legislation quickly,” Carmel said.

Most observers expect Congress to proceed as it has in the past and pass a measure temporarily postponing Medicare provider reimbursement cuts.

Congress could do more to stabilize Medicare by coming up with a long-term Medicare physician payment strategy, Carmel said.