Health Care Reform Bill 101: Who Will Pay for Reform?

Article excerpt

If the health care reform vote succeeds today, the $940 billion bill would be the biggest change to domestic policy in a generation. The rich and the health industry would pick up most of the tab.

For the United States, health care reform would come with a hefty co-pay.

As we've noted throughout this series on what's in the health care bill, the legislation, if the vote succeeds, would represent the most sweeping change in national domestic policy in a generation.

Among other things, it would provide or subsidize health coverage for 32 million currently uninsured people. That's more than one- tenth of the entire population of the US.

Change like that doesn't come cheap. More specifically, change like that would cost about $940 billion over its first 10 years, according to the Congressional Budget Office.

Add these two things together, throw in $40 billion worth of tax credits for small business, and you're pretty close to the bill's top line for expansion of health coverage.

So where's the cash to pay for this coming from? Remember, CBO says this bill will actually cut the deficit over 10 years. That means it has to raise a little more money than it will spend.

The answer is that the money will be provided by new taxes, fees on industries involved in health care, and cuts in projected spending growth for existing government health efforts, primarily Medicare.

Here are specifics on some of the biggest money raisers:

Higher Medicare taxes on rich people

If you are an individual making more than $200,000 a year, or a married couple making more than $250,000 a year, get ready to pay more for your Medicare if health care reform passes.

First of all, your Medicare Part A (that's hospital insurance) tax rate would be increased by 0.9 percent, to 2.35 percent. Second, the bill creates an entirely new tax of 3.8 percent on unearned income (dividends, interest, stuff like that) for people in those same income brackets.

The good news is that this would not take effect until Jan. 1, 2013. And it is a big money raiser, truth be told. The Joint Committee on Taxation estimates this would bring in $210 billion between 2013 and 2019.

New tax on expensive health insurance

They used to call this the "Cadillac tax," but it's been pared back enough so it might better be called the "Chevy with leather and A/C" tax. …