Health Care This Year Comes with New Taxes
Under the Affordable Care Act (ACA), Medicaid, the health program for the poor, will be expanded, enabling 32 million more people to have health insurance. The law will also subsidize the cost of medical coverage for families of four earning up to 4 times the Federal Poverty Level. This means that families with incomes up to $92,200 will get help purchasing health insurance. In order to fund the down payment on this massive effort, five new taxes, totaling quarter of a trillion dollars, will take effect this year starting January 1.
Every one of us will be affected by at least one of these taxes. Incredibly, three of these specifically targets sick people. Previously, people whose annual medical expenses totaled 7.5% of their income could deduct from their taxes all health care costs over that amount. Now, their costs must reach 10% of income before they can take deductions and lower the cost of their medical expenditures.
Sick or injured patients requiring a new medical device or in need of a treatment or test involving new medical equipment, as defined by Section 201(h) of the Federal Food Drug and Cosmetic Act (FFDCA), will most likely pay more for it to cover a new 2.3% sales tax on medical devices. Under the law, instruments, machines, implanted devices and the parts and accessories used in diagnosis, cure and treatment of various conditions will be subject to a 2.3% sales tax to be paid by the manufacturer for each unit sold regardless of whether the company is profitable or not.
Another tax affecting sick people limits the amount people can put into their Flexible Savings Accounts (FSAs) to $2500 annually. 35 million people use FSAs to save tax free dollars for medical expenses not covered by their employer’s benefit plans. Up until now, they could save up to $5000 to cover out-of-pocket health care needs, co-pays, deductibles, orthodontia, and costly health care situations such as the care and education of special needs children.
Let’s think about this: Lower tax deductions for sick people. Higher costs for people using medical equipment. Higher out-of-pocket costs to cover health care needs. Why are we making health care more affordable for some people by making it less affordable for others?
Here’s another tax that begins this year. This one applies to individuals and married couples earning $200,000/$250,000. Both employer and employee must pay an extra .9% Medicare payroll tax on amounts earned above the $200,000/ $250,000 threshold. An added problem is that, unless they work for the same company, a married couple must be responsible for computing and submitting this portion of their payroll tax themselves, something never required before.
The last 2013 tax is one that has been heating up the email rumor mills for the last 2 1/2 years. The email purports that hidden in the ACA is a new 3.8% tax on all home sales. Well, not quite. There is a new 3.8% tax in the health reform bill; but it only applies to those with an adjusted gross income of $200,000 ($250,000 for married couples). They will be subject to a new 3.8% Medicare payroll tax on ‘unearned’ income such as stock sales, rent, dividends, royalties, and, yes, real estate sales.
Of course, these new taxes won’t come close to paying for the ACA. There are other taxes, fees, program cuts, and penalties as well as the $761cut to Medicare. But the biggest toll being paid for this bill is the huge increase in insurance rates we’ll all have to pay. Free preventive medical services and birth control, required health insurance coverage for adult children on their parents policies, and higher limits on annual medical expenses have already raised rates. Next year, health insurance will be covering much more. None of this comes free.