Healthcare Articles

May 28th, 2010

By Ryan J. Donmoyer

 The U.S. House approved legislation to extend unemployment insurance, restore some tax breaks and raise taxes on managers of buyout funds and other investment partnerships.

Lawmakers voted 215-204, largely along party lines, for the legislation costing about $112 billion. The Senate plans to consider the plan during the week of June 7 after lawmakers’ Memorial Day recess.

“It’s a good bill for jobs, it’s a good bill for closing tax loopholes, it’s a good bill for dissuading people from taking jobs overseas,” Majority Leader Steny Hoyer, a Maryland Democrat, said on the House floor before the vote.

The plan would continue funding for extended unemployment benefits through Nov. 30 and renew a variety of tax cuts for businesses and individuals. The House also voted 245-171 to give doctors a 19-month reprieve from scheduled cuts in their reimbursements from the Medicare program.

The plan is “one important step forward in getting American families the help they need,” President Barack Obama said in a statement. “I ask the Senate for its swift action on this package so I can sign it into law, and I urge Congress to move quickly on additional relief measures.”

Before the Senate acts next month, some jobless benefits will begin to expire May 31, at a time when the national unemployment rate remains near 10 percent. A record 45.9 percent of the jobless have been out of work for 27 weeks or more. When the payments lapsed earlier this year during a dispute over their extension, lawmakers made new benefits retroactive.

Buyout Firms

The legislation drops funds for extended health insurance subsidies for jobless workers while retaining dozens of tax breaks for businesses.

The Congressional Budget Office said the bill would add $54.2 billion to a deficit projected to reach $1.5 trillion this year.

To help cover its cost, the measure would raise tax rates on some income for managing partners at buyout firms, venture capital funds and real estate partnerships by about $17.7 billion over 10 years. It would also raise taxes by an estimated $14.5 billion on global operations of U.S.-based companies such as International Business Machines Corp.

Mark Heesen, president of the National Venture Capital Association, which has lobbied for an exemption from the tax increase on fund managers, said the House “failed to recognize the serious economic consequences of their actions.”

‘Unraveling’ Economic Model

“It is both ironic and disconcerting that legislators can profess commitment to creating jobs — and then discourage the type of long-term investment which has been a proven job creator for the last century,” Heesen said. “We are one step closer to unraveling an economic model that has made America the global center of entrepreneurship and innovation.”

Representative David Camp, a Michigan Republican, said those taxes shouldn’t be imposed permanently to pay for the extension of temporary policies.

“This bill has nothing to do with jobs,” Camp said. “Virtually every business group is opposed to this package,” he added, citing the U.S. Chamber of Commerce and the National Federation of Independent Businesses.

Democratic leaders secured the votes needed to pass the bill by scaling back a larger measure to appease fiscally conservative party members concerned about voting for deficit spending just months before November’s congressional elections.

Lawmakers dropped an extension of health-insurance subsidies for jobless workers as well as higher matching funds for state-run health programs such as Medicaid.

Tax Increase Delayed

Lawmakers delayed until Jan. 1, 2011, a proposed tax increase on profit shares paid to managers of buyout funds and other financial partnerships. Earlier, the increase was to be applied to income earned this year.

Texas Representative Henry Cuellar, a member of the fiscally conservative Blue Dog Coalition said the changes helped switch his vote from “no” to “yes.”

“The bigness issue and the deficit issue for me has been addressed to a much more acceptable level,” Cuellar said.

The legislation would provide subsidies for local infrastructure projects by extending the Build America Bonds program. It would also require retirement plan administrators to disclose more information about fees charged to 401(k) retirement accounts and give companies with underfunded pension funds more time to make those accounts solvent.

Carried Interest

Approval of the legislation would end a long battle over Democrats’ efforts to increase taxes on so-called carried interest paid to executives at private equity, venture capital and real estate firms. The House has voted three times in three years to raise the levy, only to see the measure stall in the Senate. Lawmakers said it has broader support this year amid pressure to avoid adding to the deficit.

Carried interest is the share of profit that fund managers are paid as part of their compensation. That share often qualifies for capital gains tax rates of 15 percent; the bill would eventually subject three-quarters of the income to ordinary tax rates of more than 40 percent.

The legislation would spend $23 billion to give doctors a 2.2 percent increase in Medicare reimbursement rates this year and a 1 percent rise next year. Physicians were facing a 21 percent cut in their payment rates this year and a 6 percent reduction next year.

Other provisions would make it harder for lawyers and other professionals to avoid Social Security and Medicare taxes by organizing what are known as S corporations. Oil companies would be another loser under the bill, which would increase to 34 cents from 8 cents a per-barrel tax to raise $12 billion.

May 4th, 2010

Congressional lawmakers later this month will begin discussing new proposals to delay a scheduled 21% cut in Medicare physician reimbursements and consider new ways to permanently fix the current payment formula, CQ HealthBeat reports.

Last month, Congress passed an extensions bill (HR 4851) that delayed the scheduled payment cuts until May 31. A second bill (HR 4213) that would delay the decision through September has been held up over legislative rules (Jenks, CQ HealthBeat, 5/3).

In addition, a bill passed by the House that would repeal the payment formula and increase payment rates has stalled in the Senate because of concerns over cost, CongressDaily reports (Cohn, CongressDaily, 5/3).

The current payment formula, known as the Sustainable Growth Rate formula, was approved in 1997 and originally intended to lower costs by annually resetting physician payment rates. However, Congress has repeatedly passed short-term fixes, offsetting the reductions to Medicare reimbursements (California Healthline, 11/20/09).

Senate and House Democratic leaders in recent days have expressed interest in a long-term fix to the formula, and aides in both chambers say that several options are under consideration, such as a five-year delay to the cuts or a shorter delay with higher payment rates.

House Democratic Congressional Campaign Committee Chair Chris Van Hollen (D-Md.) last week told the American Hospital Association that a five-year fix was a possibility and such a plan could be introduced soon.

Meanwhile, a Senate Democratic aide said that Senate Finance Committee Chair Max Baucus (D-Mont.) is committed to a long-term fix, and the House Ways and Means Committee still is considering a longer-term fix, even though it would require additional offsets (CongressDaily, 5/3).

The Congressional Budget Office on Friday released new estimates on the cost impact of adjusting the Medicare payment rates formula. According to CBO, delaying the 21% payment cut for five years and raising certain physician’s fees would cost $88.5 billion. A 10-year freeze on the rate cuts would cost $275.8 billion over the period, according to CBO.

AMA Remains Critical of Congress’ Efforts on Payment Fix
According to CongressDaily, the new CBO estimates “could be the final nail in the coffin” for the American Medical Association, which has been leading the effort to repeal the SGR.

AMA President James Rohack on Monday said costs will continue to rise if Congress continues to rely on short-term fixes to the formula.

Rohack on Monday said, “It’s time for Congress to put aside the short-term actions that have more than quadrupled the price of a solution for American taxpayers and fix the problem once and for all for seniors, military families and their physicians” (Cohn, CongressDaily, 5/4).