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Renovating Health Care

Over the past few months, several readers have asked me to write something about the health care debate.  I tried my best to publicly stay out of the debate, while maintaining my private opinion.  Now, we’ve a new law and it is my obligation to try to let you know what renovation means to you .  We will stick to 2010.

As a taxpayer:

  • Deductions – Currently, to deduct medical expenses on your Federal 1040 form, your medical expenses must exceed 7.5% of your Adjusted Gross Income (AGI).  That will change to 10% of your AGI, thus raising the costs of not being insured and paying your costs out of pocket.  Yes, you can include the costs of medical insurance in the sum of health expenditure deductions.
  • Taxes – For the relatively affluent, taxes will increase.  For single taxpayers with AGIs greater than $200,000 and for married couples with AGIs greater than $250,000, they will pay a greater Medicare payroll tax of 0.9%, applied to income above the threshold.  These household will also pay an extra 3.8% tax on capital gains, dividends, royalties, rents, interest, and other unearned income.  Let’s do the math and assume a married couple with $300,000 in Adjusted Gross Income, with a full $50,000 in unearned income.  They will pay an additional $450 in Medicare taxes ($50,000*0.009) and an additional $1,900 in federal income taxes on their $50,000 in unearned income ($50,000*0.038).
  • Tanning services – There will be a 10% federal levy on indoor tanning services.  This levy does not begin until July, so there is plenty of time to get a jump on swimsuit season.

As an uninsured:

  • Medicaid will cover more people and Medicaid is being expanded to cover those with incomes up to 133% of the poverty level, or $29,327 for a family of four.  For those making more than that amount, they will be required to buy medical insurance, through one of the state-run insurance exchanges, with a premium cap ranging from 3% to 9.5% of income.
  • Individuals who earn more than $43,320 and couples that earn more than $58,280 will be required to pay full premiums for their medical insurance.
  • You cannot be denied medical insurance coverage for pre-existing conditions.
  • There will be no lifetime benefit cap, meaning that if you contract a dread disease and would exhaust your coverage at, say, $1,000,000, under your existing policy, that cap on benefits can no longer exist and your treatments would continue to be covered.
  • Insurance companies will be required to maintain coverage on dependents until the dependents are 26 years of age and children cannot be excluded due to preexisting conditions.

As an employer:

  • Tax credits will be available to those with 25, or fewer, employees to purchase insurance for their employees.

What can we say?  Not much.  As mother used to say, “The proof of the pudding is in the eating.” So, we really cannot judge the true value of the health care bill, until we’ve lived with it. Without doubt, there will be multiple changes in health care legislation and great debates about the effect this law will have on our citizenry and our economy.  There is even less doubt that the merits of this shift in domestic policy will be the focus of our upcoming fall elections.

Regardless of where you stand on this issue, you have to agree that financial success is worth very little without health and that being healthy makes it much more likely for you to earn an income, leading to financial success.   Our nation has decided to help those that want to work toward success, a chance to receive health care in support of their goal.  When the day comes, however, where financial success is available to those without merit, we will have said good-bye to our collective futures.  Remember, there is no such thing as a free lunch.