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Health Care Reform and Coming Changes.

July 28, 2010
TAXES

HEALTH CARE REFORM: 13 TAX CHANGES ON THE WAY

1. A new 10% excise tax on indoor tanning services on services provided after June 30, 2010.

2. The new law gives small firms tax credits as incentives to provide coverage, starting this tax year (the credit disappears in 2015).

3. A requirement that businesses include the value of the health care benefits they provide to employees on W-2s, beginning with W-2s for 2011.

4. Elimination of a deduction employers now take for providing Medicare Part D prescription drug coverage to their retirees to the extent that the federal government subsidizes the coverage.

5. Doubling the penalty for nonqualified distributions from health savings accounts, to 20%, beginning in 2011.

6. A limit on the amount that employees can contribute to health care flexible spending accounts to $2,500 a year, but the cap won’t take effect until 2013.

7. A ban on using funds from flexible spending accounts, health reimbursement arrangements or health savings accounts for the cost of over-the-counter medications, starting in 2011.

8. Starting in 2013, for the first time ever, the Medicare tax of 0.9 percent will apply to investment income of high earners. It will also apply to wages in excess of $200,000 for single taxpayers and over $250,000 for married couples.

9. A hike in the 7.5% floor on itemized deductions for medical expenses to 10%, beginning in 2013.

10. A new 40% excise tax, beginning in 2018, on high-cost health plans, levied on the portion that exceeds $10,200 annually for individuals and $27,500 for families.

11. A new tax on individuals who don’t obtain adequate health coverage by 2014 — this is often referred to as the individual mandate.

12. Providing a refundable tax credit, once the individual mandate takes effect in 2014, to help those who qualify to purchase coverage.

13. A nondeductible fee charged to businesses with 50 or more employees if the firms fail to offer adequate coverage.

Source: Joan Pryde, Health Care Reform: 13 Tax Changes on the Way, Kiplinger.com, April 5, 2010.

http://www.kiplinger.com/businessresource/forecast/archive/health-care-reform-tax-hikes-on-the-way.html

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HEALTH CARE

SHORT-TERM INSURANCE BUYERS DRIVE UP COST IN MASSACHUSETTS

[Policy Snapshots Editor’s note: The following is a consequence of “pre-existing conditions” being mandated to be covered by insurance policies – a component of the national health care reform bill that has been in place in Massachusetts since 2006. If a person must be covered by a health insurance policy regardless of their health status when the policy is purchased, there is little financial incentive to purchase coverage before getting sick or keeping it after being healed.]

According to a report from the Massachusetts Division of Insurance, the number of people who appear to be gaming the state’s health insurance system by purchasing coverage only when they are sick quadrupled from 2006 to 2008.

The number of people engaging in this phenomenon — purchasing coverage only when they are sick and then dumping their coverage within six months — jumped from 3,508 in 2006, when the law was passed, to 17,177 in 2008, the most recent year for which data are available.

The result is that insured residents of Massachusetts wind up paying more for health care, according to the report.

Source: Boston Globe, Short-term insurance buyers drive up cost in Massachusetts, Kay Lazar, June 30, 2010.

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STATE SPENDING

STATE GOVERNMENT AGENCIES IN MISSISSIPPI TO SPEND $19 BILLION THIS YEAR

Vital Signs Radio Commentary
by Forest Thigpen

The state budget for this fiscal year, which began July 1, is about $19 billion. That’s 31 percent more than was appropriated four years ago. The number you’ll hear about most is 4 or 5 billion, but that’s only what’s known as the General Fund. There’s another $5 billion that comes from gasoline taxes, fees, and other funds collected in the state. Then there’s about $9 billion that will come from the federal government for programs operated by the state.

That $19 billion divides to about $25,000 per Mississippi family of four.

To show just how fast the state is spending your money, we at the Mississippi Center for Public Policy created a Mississippi Spend-O-Meter. If you think the meter at the gas pump goes faster than your eye can see, wait till you see this! It is a rapidly moving meter that reveals a current spending rate of $605 per second. That’s $2.2 million per hour, $39 million per day, and $367 million per week.

You can see the Spend-O-Meter on our website, mspolicy.org.

Source: Mississippi Center for Public Policy, Spend-O-Meter page, Vital Signs Commentary, July 13, 2010

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EDUCATION

EDUCATION STANDARDS: THE NEXT FEDERAL TAKEOVER

The Obama Administration’s push for national education standards is a federal overreach into yet another sector of American life, according to the Heritage Foundation. Banking, auto manufacturing, health care, and now education will be guided more by Washington’s priorities than by the needs of the American people. The result will be standardizing mediocrity in American classrooms, as rigor and content of national standards would tend toward the average among states, undercutting states with higher quality standards.

Heritage says a better plan for raising academic achievement would be to empower parents to hold schools accountable by allowing them to choose schools that best meet the needs of their children and by increasing school transparency, giving parents clear reporting data and the ability to act on it.

Source: Education Standards: The Next Federal Takeover, The Heritage Foundation, FactSheet #65, June 25, 2010.

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REGULATION

THE FDA’S IMPRUDENT CAUTION

Drug research and development (R&D) expenditures increased by more than 50 percent between 2004 and 2008, to $65.2 billion. Despite that increase, which has created powerful new drug technologies, drug approval rates by the FDA have been dismal, says a researcher with the Hoover Institution. The 18 new medicines approved in 2007 represent the lowest figure in a quarter century, and the 2008 and 2009 tallies of 24 and 25, respectively, represent scant improvement. Current trends in regulatory policies and requirements will cause further deterioration in drug R&D and approvals.

Additional legal and regulatory requirements will only further increase the time and costs of drug development, diminish competition, and make fewer new products available. Congress has granted FDA new powers to place new restrictions on the prescribing, distributing, selling, and advertising drugs. At the same time, regulators have imposed new criteria that go beyond the demonstration of safety and efficacy – which is required by statute – in order to obtain even those limited approvals.

Source: Henry Miller The FDA’s Imprudent Caution, Policy Review No. 161, June 1, 2010, Hoover Institution.

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