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PPACA: Ways and Means Eyes Health Tax Credit Errors

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The House Ways and Means Committee today fine-tuned a proposal that could affect how the government implements the Patient Protection and Affordable Care Act (PPACA) health insurance purchase tax subsidy provision.

The committee went over, or “marked up,” the proposal during a look at Ways and Means budget reconciliation recommendations.

The Supreme Court is considering the constitutionality of PPACA, lower courts are hearing more attacks on the constitutionality of the act, and Republicans in Congress are pushing for repeal.

If the act survives, takes effect on schedule and works as drafters expect, it will create a new system of refundable income tax credits that individuals will be able to use to buy health insurance. PPACA also calls for the creation of temporary health insurance tax breaks for small employers.

Only individuals with incomes under 400% of the federal poverty level would qualify for the tax credit, and the government would provide the credit while the tax year was still under way, to help people pay for health coverage.

Republicans and Democrats have noted that managers of the tax credit program could end up giving some taxpayers bigger health insurance purchase tax credit subsidies than they were supposed to get.

The tax credit overpayment proposal calls for the government to credit recipients to repay all excess subsidies; current law would limit the amount of excess tax credits that moderate-income taxpayers would have to pay back.

That proposal and others gained easy approval from the Ways and Means Committee today.

Ways and Means Chairman Dave Camp, R-Mich., said at the start of the markup that U.S. Health and Human Services (HHS) Secretary Kathleen Sebelius has supported the idea of requiring the return of excess credits.

Requiring recipients to return excess credits could cut the federal budget deficit by about $44 billion over 10 years, Camp said.

“A Democrat-controlled House and Democrat-controlled Senate first used this offset in 2010 to pay for a temporary Medicare ‘doc fix,’” Camp said. “This Congress also endorsed this policy as part of the 1099 repeal legislation that became law early last year.”

Although some Democrats have expressed support for the idea of reducing or eliminating taxpayers’ ability to keep excess health insurance tax credit payments, Rep. Sander Levin, D-Mich., the highest ranking Democrat on Ways and Means, today said he opposes the measure.

Levin said forcing taxpayers who earn more than expected or undergo major life changes to pay back excess health purchase tax credits in full would penalize them “for work and economic advancement, death or divorce.”


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