Whether you make a living by selling life insurance and annuities, developing comprehensive financial plans for the affluent, or giving institutions investment advice, the U.S. Senate’s health finance policy fight is your fight, too.
The United States could generate about $19 trillion in gross domestic product this year and have $87 trillion in net wealth.
The country will spend about $3.5 trillion on health care. The federal government will allocate $1.2 trillion, or 29% of what it spends, for Medicare, Medicaid and other health care programs.
(Related: Senate Postpones Vote on Health Bill)
An advisor from another planet who looked at the numbers for the United States might think the country was an endowment set up to yield a steady stream of funding for health care programs.
The last big wave of efforts to change the U.S. health finance system ended in the late 1990s, when the country decided that letting primary care doctors control managed-care plan enrollees’ access to specialty care and hospital care was unacceptable.
During the current wave, players on the left, who thought of the government-run health care system in France as the ideal, squared off with players in the middle, who hoped a public or private entity could make the system work better by having health plans compete for consumers’ business through a carefully policed health insurance supermarket.
Now Republicans in Congress are coming to terms with what pioneers in the health insurance supermarket movement were saying 10 years ago: that running a successful health insurance supermarket is complicated, and that keeping relentless tides of health risk from pushing the good customers and the good insurers out is hard.
Democrats approved the current Affordable Care Act and its health insurance supermarket program, the public health insurance exchange system, in 2010. The Obama administration took a slow, aloof approach to implementing it. Republicans did what they could to strangle it. Now, the system is wobbling. The tides of health risk are pushing the good risks and the most generous insurers out.
Members of the House passed a major Affordable Care Act change bill, H.R. 1628, the American Health Care Act bill, by a 217-213 vote May 4. No one knew whether the House version of H.R. 1628 would pass until it passed.
Now, Senate Republicans are struggling to pass their own version of H.R. 1628, the Better Care Reconciliation Act bill.
Senate Majority Leader Mitch McConnell was hoping to get the BCRA bill through the Senate as early as Wednesday. Shortly before press time today, he said he was postponing the vote because Senate Republicans need more time to talk about the bill.
Here’s a look at three possible implications the BCRA fight might have for financial advisors, whatever the ultimate outcome of the fight might be.
(Image: Centers for Medicare and Medicaid Services)
1. The BCRA fight could decide the fate of two taxes that affect high-income taxpayers, and of the Internal Revenue Code.
The Affordable Care Act created two taxes that have turned out to be solid revenue generators for the federal government: the net investment tax and the 0.9% Medicare surtax.
Together, the taxes accounted for about 1.85% of the $1.45 trillion in individual income tax revenue that the Internal Revenue Service collected in 2015, according to IRS figures.
The net investment tax imposes a 3.8% tax on the investment earnings of households with modified adjusted gross income over a minimum level. The minimum level is $200,000 for individuals and $250,000 for couples.
The Medicare surtax imposes an extra 0.9% tax on wages, compensation and self-employment earnings over a minimum level. The minimum level is $200,000 for an individual and $250,000 for couples.
Both the Senate BCRA bill and the House American Health Care Act bill would eliminate the net investment tax for tax years starting after Dec. 31, 2016.