Tuesday, January 1, 2013

NAELA Report on Senate "Fiscal Cliff" Legislation

The Senate “Fiscal Cliff” Legislation


The Senate passed a compromise bill, the American Taxpayer Relief Act of 2012, to avert the fiscal cliff at about 2 a.m. January by an overwhelming 89-8 vote. The deal was brokered by Vice President Biden and Minority Leader Mitch McConnell. The House has not voted on the bill and there are reports that the Republicans are overwhelmingly opposed to the deal (in part because it does not cut enough spending) and will need to amend the bill in order to secure the necessary votes. If the bill is amended and sent back to the Senate, it may loose support from the Democrats in the Senate and the White House.

The bill addresses many of the outstanding fiscal cliff concerns, including the
Bush era tax rates, estate and gift tax rates, Medicare reimbursement, and the sequester, among numerous other issues. In addition, federal unemployment benefits would be extended for a year without a budget offset elsewhere.

The bill will extend current tax rates for individuals earning less than $400,000 and couples earning less than $450,000. Tax rates will revert to the Clinton-era rate of 39.6% from 35% for those making more than $400,000.

The estate tax exemption will remain the same as 2012 at $5.12 million per person (and will be indexed for inflation). Effective January 1, 2013, the top estate tax rate will increase from 35% to 40%. These rates and exemption levels are permanently extended. Portability is also extended and the gift tax exemption will remain at $5 million as well.

The payroll tax holiday will not be extended for another year. Since 2011, the payroll tax rate, which funds Social Security, was 4.2%. The payroll tax rate will now revert to the pre-2010 level of 6.2%.

The bill addressed sequestration and delayed the automatic spending cuts by two months until March 1, 2013. The cost of continuing current spending levels will be paid equally through tax revenue increases and later spending cuts (half of those $12 billion in cuts will come from defense and half of those cuts from nondefense spending). The bill reduces the total amount of the sequester by $24 billion over nine years.

There is a one year “doc fix” included in the bill. This “doc fix” prevents the scheduled 27% reimbursement cuts to Medicare physicians. The “doc fix” will not be paid through cuts to the Affordable Care Act or to beneficiaries.

Also included in the bill, and of particular interest to NAELA members, are the repeal of the CLASS Act and the establishment of a Commission on Long-Term Care. It is reported that President Obama agreed to repeal the CLASS program in exchange for Republicans agreeing to raise the tax rates on the wealthiest Americans.

NAELA’s public policy team is closely monitoring the creation of a Commission on Long-Term Care. The Commission will “develop a plan for the establishment, implementation, and financing of a comprehensive, coordinated, and high-quality system that ensures the availability of long-term services and supports.” The Commission will investigate the interaction between Medicare, Medicaid, and private long-term care insurance. The Commission should account for demographic changes and trends in order to improve the delivery system for long-term services and supports. The Commission will consist of 15 members with the President, Senate majority leader, Senate minority leader, Speaker of the House, and House minority leader each appointing 3 members. Members will represent the interests of consumers, older adults, family caregivers, health care workforce, private long-term care insurance, State insurance departments, and State Medicaid agencies.