• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Foundry Quiz: What Medical Innovations Does The Senate Health Bill Tax?

    It is a well known economic policy rule that if you want less of something you tax it, and if you want more of something you subsidize it. Policymakers frequently follow this rule to influence behavior. This is why there are “sin taxes” on things like alcohol and cigarettes, and also why “cap and trade” taxes carbon. This is why there are subsidies for education and for “green” technologies. If taxes and subsidies make any sense at all, they make sense when used to tax “bad” things and subsidize “good” things.

    Given this basic rule, can you guess which of these are being subsidized and which taxed in the Reid Health Bill currently in the Senate?

    1. Innovative Medical Companies
    2. Medical Devices, such as prosthetic limbs, wheelchairs and pacemakers
    3. Over-the-counter medicines
    4. Privately funded medical care – including private health insurance plans, private medical expenses paid out-of-pocket, and employer-provided care

    (answers below the fold)

    All of these are being taxed.

    Innovative Medicine Companies: (Page 2010/Sec. 9008): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

    Medical Devices Like Prosthetic Limbs, Wheelchairs, and Pacemakers: (Page 2020/Sec. 9009): $2 billion annual tax on the industry imposed relative to shares of sales made that year. (Exempts items retailing for less than $100).

    Over-the-counter medicines: (Page 1997/Sec. 9003): Outlaws use of pre-tax dollars (HSA, FSA, or HRA) for over the counter medicines, except insulin – essentially imposing a new tax on them.

    Privately Provided Medical Care:

    • Private Medical Expenses: (Page 2034/Sec. 9013): Increase of the minimum medical expenses required before being able to take a deduction (the “haircut” for the Medical Itemized Deduction) from 7.5% to 10% of AGI (waived for taxpayer 65 and older in 2013-2016 only).
    • Prescription Drugs for Retirees: (Page 2034/Sec. 9012): Elimination of tax deduction for employer-provided prescription drug coverage for retirees.
    • FSA Cap: (Page 1999/Sec. 9005/$14.6 bil): Imposes cap on FSAs of $2500 (now unlimited). Hence there will be a new tax on medical expenses above this cap. This will most hurt families of special-needs children, who tend to use outsized FSA deferrals.
    • Health Insurance Premiums: (Page 2026/Sec. 9010): $6.7 billion annual tax on the industry imposed relative to health insurance premiums collected that year.
    • Comprehensive Health Insurance Plans: (Page 1979/Sec. 9001): Starting in 2013, new 40 percent excise tax on “Cadillac” health insurance plans ($8500 single/$23,000 family), affecting those with high medical expenses as well as those in high-cost areas.

    Given the choice to tax these areas, it only seems reasonable to assume that Obama wants to see less private medical care. Although he has frequently said that he wants to “promote competition” in the health care industry, he has also occasionally admitted that the advantage the government programs must have over the private sector will likely lead to the reverse. Indeed, taxing them in addition is the way to squeeze them out.

    Posted in Obamacare [slideshow_deploy]

    22 Responses to Foundry Quiz: What Medical Innovations Does The Senate Health Bill Tax?

    1. Phyllis Scrivano, Te says:

      They are going to ruin our healthcare system. It is about controlling 1/6 of our economy. The recommendations for mamograms and pap smears is just their way of getting us used to a lower standard of care and it will just keep getting worse.

    2. jjw says:

      This health care bill is about government control of the population and less about health care. I cannot believe that so many people in this country want this bill to pass. They do not have a clue about what this bill will do to them and I mean do to them. We do have an education problem because we sure have to many people who cannot read and think for themselves.

    3. Bobbie Jay says:

      He left out "GOVERNMENT" when he said he wants to "promote the health care industry." The words Obama doesn't say, is his real DANGER. Listen closely, as his statements are broad. He doesn't specify. Like "hope" and "change." Hope for somebody and unnecessary, UGLY change for MOST. Like when he says "jobs." Nobody asks if he's talking about government or private sector "jobs." Everybody sits back and assumes, while government grows without limit! Where the only "hiring" signs are in GOVERNMENT, while they soak the private sector dry, coming up with new ways daily, while getting income they do not earn, stealing from the private sector businesses and taxpayers…


    4. Bobbie Jay says:

      Correction 2ND line: the words Obama doesn't say is OUR REAL DANGER!

    5. Bill Bugg, Monrovia, says:

      The Obama socialists MUST not be able to pass the Obamahealthcare into law!

      We ALL must stand up in very large numbers by holding town hall meetings, writing editorials and marching in the streets (peacefully). Every state capitol and the U.S. capitol must be surraunded by protesters.

      If we do not "flip" both houses of Congress in 2010 I am afraid more damage will be done to America than we could ever rectify to bring our Country back to all of the freedoms we used to enjoy and the free-enterprise system that made America the strongest economic power ever.

    6. Joe Ruffino, New Yor says:

      It seems to me that if our elected representatives do not act as we the people desire, if the Supreme Court is powerless to stop the unconstitutional raping our our country, then the only action short of armed revolution is the refusal in mass to stop paying taxes. The cannot put 200 or 300 million people in jail.

    7. Tom Padamonsky, Okin says:

      I guess we'd better start learning how to speak Chinese. We will become the Chinese of the new world order which Obama promotes.

    8. Jeanne Stotler, wood says:

      You can do as I did, I e-mailed both my congressman and senators and told them that if they did not listen to the people we would work to make sre they LOST their jobs, I reminded them that they are employees of "We the People" not the other way around.

    9. Jim DeVries, Muskego says:

      If liberals want a 'health insurance option to compete with private insurance companies' why aren't they content to simply create this magic beast themselves, as private citizens. Surely, if all of the insurance companies are driven by greed and make excessive profits, then 'Utopian, Nice, Insurance Company Of Reid/Nancy' (UNICORN) could serve all of the needs of America's indigent and still turn a profit, without burdening the taxpayers or requiring legislation.

    10. Al, The Villages, Fl says:

      This practise of tax or subsidize has resulted in a tax code that is so ridden with special requirements that it needs to be thrown out. What this nation needs is a fair tax. No more income tax, no more bouts with the IRS, no more threats by secular groups against those they don't agree with using the tax code, no more hidden taxes in any and all bills.

    11. Pingback: Turkey Day Blog Buffet – Blog Watch

    12. mindy from chattanoo says:

      I was wondering…we are forced by the federal government to join medicare at 65…if we talk with our doctors and hospitals and work out costs directly with them…can seniors choose to work directly with their doctors and get out of the government plans?

    13. D.E.Packard says:

      Government health care is a necessary and key element to the implementation of a Totalitarian Marxist society… which is precisely the type of "change" the liberals "hope" for. If implemented it will yield an unprecedented power to government at the expense of individual liberty.

    14. Tim Az says:

      Maybe we should mail tampons to our representatives in DC and to their homes. So they can no longher hide from the reality of their actions. Mail to their home would be quite personal.

    15. Norma Link, Lakewood says:

      I have 4 sons. 3 of them are struggling and 2 have lost their businesses due to the government engineered recession. The 4th son is an engineer working for a medical equipment company. Now they want to take away his job too. Ths is way too much for me.

      One of my Senators says he will vote for the healthcare bill even if he loses his job. If they pass it, we wll have to elect people who will repeal it!

    16. Grace Stanley, Chesa says:

      This healthcare bill is a sham. We must fight it and not let it pass. They will destroy our system.

    17. Pingback: Taxes On Medical Care…Can You Believe It « Unicoipolitics’s Weblog

    18. Sandy in CT says:

      Our Senators and Congressmen do not care what We the People want. Perfect example of that mentality is all the letters and phone calls to them prior to the Health Care Bill vote. Each time I received nice pat answers to my emails that did not address anything that I said to them. It seems they are not concerned because Obama's thugs will see to it they get elected anyway. They will do it either legally or illegally, it matters not to them as has been demonstrated time and time again with this administration. Each travesty I say "they can't do that can they?" and yet they do. When will it stop?

    19. Grayfox88 says:

      Senator Bennet of Colorado apparently did not want the job when he was appointed by Gov. Ritter. He definitely does not listen to constituents. I too have received the same drivel when I have written to him. But what is he to do with his $3 million war chest for the next election? ( see opencongress.org to see where and how much his money is coming from) Mark Udall has done the same thing. He has to go. But at least he cared enough to run for the election. Bennet is just like a spoiled kid who does just as his daddy tells him to.

    20. Rochelle, Colorado says:

      Dear Mindy from Chattanooga- The individual freedom of seniors to pay cash for services from their doctors or hospital or to bargain with them will not be allowed in this legislation. Even now, it is not allowed under Medicare. Some practitioners may take funds, "under the table". This is at risk of loosing their Medicare Provider status. The new bill will probably outlaw the practice!

    21. Rochelle, Colorado says:

      We in Colorado have much to do to deny Senator Bennett of his seat in 2010. Senator Udall will be harder to unseat given his district. I can only hope there are enough dissatisfied voters there. We have witnessed an overwhelming surge of money into the liberal coffers in our state in recent years. We will need strong approaches to combat this in 2010 and 2012. I pray our Republican leadership plans for the "smoke and mirrors" that liberal money will buy. If they just sit back on the conservative backlash that is occurring, we will not be adequately represented in the Congress

    22. Jerry from Chicago says:

      If there was ever a doubt why there are so few entrepreneurs and some many on welfare, you have no further to look than the tax structure in the U.S.

      Hard work, dedication and success — tax the hell out of it. Indolence, stupidity and failure — subsidize the hell out of it.

      Now there is a winning formula, if you are a liberal.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.