19–006 

112TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 112–254 

MODIFICATION OF CALCULATION OF MODIFIED ADJUSTED GROSS INCOME FOR DETERMINING CERTAIN 

HEALTHCARE PROGRAM ELIGIBILITY 

OCTOBER 18, 2011.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. CAMP, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

together with 

DISSENTING VIEWS 

[To accompany H.R. 2576] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 2576) to amend the Internal Revenue Code of 1986 to 

modify the calculation of modified adjusted gross income for purposes of determining eligibility for certain healthcare-related programs, having considered the same, report favorably thereon without amendment and recommend that the bill do pass. 

CONTENTS 

Page 

I. SUMMARY AND BACKGROUND ............................................................... 2 

A. Purpose and Summary ..................................................................... 2 

B. Background and Need for Legislation ............................................. 2 

C. Legislative History ............................................................................ 3 

II. EXPLANATION OF THE BILL ................................................................... 3 

A. Modification of Calculation of Modified Adjusted Gross Income 

for Determining Eligibility for Certain Healthcare-Related Programs (sec. 1 of the bill and sec. 36B of the Code) ...................... 3 

III. VOTES OF THE COMMITTEE .................................................................... 8 

IV. BUDGET EFFECTS OF THE BILL ............................................................ 8 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF 

THE HOUSE .............................................................................................. 15 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED 16 

VII. DISSENTING VIEWS ................................................................................... 18 


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1Pub. L. No. 111–148 (March 23, 2010). 

2Pub. L. No. 111–152 (March 30, 2010). 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

The bill, H.R. 2576, reported by the Committee on Ways and 

Means, amends the Internal Revenue Code of 1986 to modify the 

calculation of modified adjusted gross income used in determining 

eligibility for certain healthcare-related programs under the Patient Protection and Affordable Care Act of 2010 (‘‘PPACA’’),1 as 

modified by the Health Care and Education Reconciliation Act of 

2010 (‘‘HCERA’’).2

Specifically, the bill revises the definition of modified adjusted 

gross income for purposes of eligibility for the premium assistance 

credit for health insurance purchased through an exchange—sometimes referred to as an exchange subsidy—to include the amount 

of Social Security benefits and tier 1 Railroad Retirement benefits 

that are not includible in gross income. This definition of modified 

adjusted gross income applies also for purposes of eligibility for reduced cost-sharing with respect to health insurance purchased 

through an exchange and for Medicaid for the nonelderly and the 

Children’s Health Insurance Program. 

B. BACKGROUND AND NEED FOR LEGISLATION

Among the numerous concerns about PPACA and HCERA that 

have been discovered since their enactment in 2010, are concerns 

about the definition of modified adjusted gross income used to determine eligibility for the exchange subsidies, Medicaid, and other 

health programs. Since enactment, press reports have revealed 

that the law’s definition of income excludes the non-taxable portion 

of Social Security benefits, significantly understating the financial 

resources available to certain households. Subsequently, Administration officials, including the Chief Actuary at the Centers for 

Medicare and Medicaid Services, have confirmed that millions of 

such households will be eligible for subsidized health insurance 

that, in many cases, was designed for those with fewer financial resources. In contrast, many other Federal means-tested programs 

define income, for purposes of determining income eligibility, to include the entire Social Security benefit, rather than just the taxable portion. 

As part of his recent debt reduction plan, President Obama proposed the same modification to the definition of income for meanstested health programs as is contained in H.R. 2576. While legislation (H.R. 2) to repeal PPACA and HCERA outright remains pending in the Senate, H.R. 2576 is a bipartisan proposal that Congress 

and the President can enact immediately in order to reduce the 

deficit and bring the definition of income for health programs into 

alignment with the measurement of income used to determine eligibility for other social welfare programs. 


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3 Individuals who are lawfully present in the United States but are not eligible for Medicaid 

because of their immigration status are treated as having a household income equal to 100 percent of FPL (and thus eligible for the premium assistance credit) as long as their household income does not actually exceed 100 percent of FPL. 4The definition of modified adjusted gross income used in section 36B is incorporated by reference for purposes of determining eligibility to participate in certain other healthcare-related 

programs, such as reduced cost-sharing (section 1402 of PPACA), Medicaid for the nonelderly 

(section 1902(e) of the Social Security Act (42 U.S.C. 1396a(e)) as modified by section 2002(a) 

of PPACA) and the Children’s Health Insurance Program (section 2102(b)(1)(B) of the Social Security Act (42 U.S.C. 1397bb(b)(1)(B)) as modified by section 2101(d) of PPACA). 

C. LEGISLATIVE HISTORY

Background 

H.R. 2576 was introduced on July 18, 2011, and was referred to 

the Committee on Ways and Means. 

Committee action 

The Committee on Ways and Means marked up the bill on October 13, 2011, and ordered the bill favorably reported. 

II. EXPLANATION OF THE BILL 

A. MODIFICATION OF CALCULATION OF MODIFIED ADJUSTED GROSS IN- COME FOR DETERMINING ELIGIBILITY FOR CERTAIN HEALTHCARE- RELATED PROGRAMS (SEC. 1 OF THE BILL AND SEC. 36B OF THE

CODE)

Present Law 

Premium assistance credit 

For taxable years ending after December 31, 2013, section 36B 

provides a refundable tax credit (the ‘‘premium assistance credit’’) 

for eligible individuals and families who purchase health insurance 

through an exchange. The premium assistance credit, which is refundable and payable in advance directly to the insurer, subsidizes 

the purchase of certain health insurance plans through an exchange. 

The premium assistance credit is available for individuals (single 

or joint filers) with household incomes between 100 and 400 percent of the Federal poverty level (‘‘FPL’’) for the family size involved who do not receive health insurance through an employer or 

a spouse’s employer.3 Household income is defined as the sum of: 

(1) the taxpayer’s modified adjusted gross income, plus (2) the aggregate modified adjusted gross incomes of all other individuals 

taken into account in determining that taxpayer’s family size (but 

only if such individuals are required to file a tax return for the taxable year). Modified adjusted gross income is defined as adjusted 

gross income increased by: (1) any amount excluded by section 911 

(the exclusion from gross income for citizens or residents living 

abroad), plus (2) any tax-exempt interest received or accrued during the tax year.4 To be eligible for the premium assistance credit, 

taxpayers who are married (within the meaning of section 7703) 

must file a joint return. Individuals who are listed as dependents 

on a return are ineligible for the premium assistance credit. 

As described in Table 1 below, premium assistance credits are 

available on a sliding scale basis for individuals and families with 

household incomes between 100 and 400 percent of FPL to help offset the cost of private health insurance premiums. The premium 


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5 As described in section 1402 of PPACA. 

6 As defined in section 5000A(f). 

7The 9.5 percent amount is indexed for calendar years beginning after 2014 to reflect the excess of premium growth over income growth. 

assistance credit amount is determined based on the percentage of 

income the cost of premiums represents, rising from two percent of 

income for those at 100 percent of FPL for the family size involved 

to 9.5 percent of income for those at 400 percent of FPL for the 

family size involved. After 2014, the percentages of income are indexed to the excess of premium growth over income growth for the 

preceding calendar year. After 2018, if the aggregate amount of 

premium assistance credits and cost-sharing reductions 5 exceeds 

0.504 percent of the gross domestic product for that year, the percentage of income is also adjusted to reflect the excess (if any) of 

premium growth over the rate of growth in the consumer price 

index for the preceding calendar year. For purposes of calculating 

family size, individuals who are in the country illegally are not included. 

TABLE 1.—THE PREMIUM ASSISTANCE CREDIT PHASE-OUT 

Household income (expressed as a percent of FPL) Initial premium 

(percentage) 

Final premium 

(percentage) 

100% up to 133% .................................................................................................................. 2.0 2.0 

133% up to 150% .................................................................................................................. 3.0 4.0 

150% up to 200% .................................................................................................................. 4.0 6.3 

200% up to 250% .................................................................................................................. 6.3 8.05 

250% up to 300% .................................................................................................................. 8.05 9.5 

300% up to 400% .................................................................................................................. 9.5 9.5 

Minimum essential coverage and employer offer of health insurance coverage 

Generally, if an employee is offered minimum essential coverage 6 in the group market, including employer-provided health insurance coverage, the individual is ineligible for the premium assistance credit for health insurance purchased through an exchange. 

If an employee is offered unaffordable coverage by his or her employer or the plan’s share of total allowed cost of provided benefits 

is less than 60 percent of such costs, the employee can be eligible 

for the premium assistance credit, but only if the employee declines 

to enroll in the coverage and satisfies the conditions for receiving 

a premium assistance credit through an exchange. Unaffordable 

coverage is defined as coverage with a premium required to be paid 

by the employee that is more than 9.5 percent of the employee’s 

household income, based on self-only coverage.7

Reconciliation 

If the premium assistance credit received through advance payment exceeds the amount of premium assistance credit to which 

the taxpayer is entitled for the taxable year, the liability for the excess advance payment must be reflected on the taxpayer’s income 

tax return for the taxable year subject to a limitation on the 

amount of such liability. For persons with household income below 

400 percent of FPL, the liability for the excess payment for a taxable year is limited to a specific dollar amount (the ‘‘applicable dolVerDate Mar 15 2010 21:44 Oct 20, 2011 Jkt 019006 PO 00000 Frm 00004 Fmt 6659 Sfmt 6602 E:\HR\OC\HR254.XXX HR254

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8Section 36B(f)(2)(i), as amended by section 4 of the Comprehensive 1099 Taxpayer Protection 

and Repayment of Exchange Subsidy Overpayments Act of 2011, Pub. L. No. 112–9 (April 14, 

2011). 9 In the case of a married individual who files a separate return, the first-tier threshold is 

generally zero. However, if the individual lives apart from his or her spouse for the entire year, 

the first-tier threshold is $25,000. 

lar amount’’) as shown in Table 2 below (one-half of the applicable 

dollar amount shown in Table 2 for unmarried individuals who are 

not surviving spouses or filing as heads of households).8

TABLE 2.—RECONCILIATION 

Household income (expressed as a percent of FPL) Applicable dollar 

amount 

Less than 200% ................................................................................................................................................... $600 

At least 200% but less than 300% .................................................................................................................... 1,500 

At least 300% but less than 400% .................................................................................................................... 2,500 

If the premium assistance credit for a taxable year received 

through advance payment is less than the amount of the credit to 

which the taxpayer is entitled for the year, the shortfall in the 

credit is also reflected on the taxpayer’s tax return for the year. 

Income taxation of Social Security benefits 

Social Security benefits 

Section 86 provides rules for determining what amount, if any, 

of a taxpayer’s Social Security benefits are includible in gross income. Social Security benefits that are not taxed under section 86 

are excluded from gross income. For purposes of section 86, Social 

Security benefits generally include monthly retirement benefits 

payable under title II of the Social Security Act and tier 1 Railroad 

Retirement benefits. If a taxpayer’s Social Security benefits or Railroad Retirement benefits are offset by worker’s compensation benefits, then the amount of the taxpayer’s Social Security benefits is 

increased by the amount of such offset. 

Portion of Social Security benefits includible in gross income 

The amount of Social Security benefits includible in gross income 

is determined under a two-tier system. Taxpayers receiving Social 

Security benefits are not required to include any portion of such 

benefits in gross income if their provisional income does not exceed 

a first-tier threshold, which is $25,000, in the case of unmarried individuals, or $32,000, in the case of married individuals filing jointly.9 For purposes of these computations, a taxpayer’s provisional income is defined as adjusted gross income increased by certain 

amounts, including, generally: (1) tax-exempt interest; (2) excludable interest on educational savings bonds; (3) adoption assistance 

payments; (4) certain deductible student loan interest; (5) certain 

excludable foreign-source earned income; (6) certain U.S. possession income; and (7) one-half of the taxpayer’s Social Security benefits. A second-tier threshold for provisional income is $34,000, in 

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10 In the case of a married individual who files a separate return, the second-tier threshold 

is generally zero. However, if the individual lives apart from his or her spouse for the entire 

year, the second-tier threshold is $34,000. 11Special rules apply in some cases. In the case of nonresident individuals who are not U.S. 

citizens, 85 percent of Social Security benefits are includible in gross income and subject to the 

30–percent withholding tax (sec. 871(a)(3)). The taxation of Social Security benefits may also be 

specified in income tax treaties between the United States and other countries. 

ried individuals filing joint returns.10 These thresholds are not indexed for inflation. 

If the taxpayer’s provisional income exceeds the first-tier threshold but does not exceed the second-tier threshold, then the amount 

required to be included in gross income is the lesser of: (1) 50 percent of the taxpayer’s Social Security benefits, or (2) 50 percent of 

the excess of the taxpayer’s provisional income over the first-tier 

threshold. 

If the amount of provisional income exceeds the second-tier 

threshold, then the amount required to be included in gross income 

is the lesser of: (1) 85 percent of the taxpayer’s Social Security benefits; or (2) the sum of (a) 85 percent of the excess of the taxpayer’s 

provisional income over the second-tier threshold, plus (b) the 

smaller of (i) the amount of benefits that would have been included 

in income if the 50-percent inclusion rule (described in the previous 

paragraph) were applied, or (ii) one-half of the difference between 

the taxpayer’s second-tier threshold and first-tier threshold.11 Tables 3 and 4 below summarize the income taxation of Social Security benefits. 

TABLE 3.—SUMMARY OF THE TAXATION OF SOCIAL SECURITY BENEFITS FOR UNMARRIED 

TAXPAYERS 

Provisional income level Amount included in gross income 

$24,999 and below ............... 0% 

First-tier inclusion is the lesser of . . . 

$25,000 to $33,999 .............. (1) 50% of Social Security benefit.(2) 50% of provisional income exceeding $25,000. 

Second-tier inclusion is the lesser of . . . 

(2) 85% of the amount of provisional income exceeding $34,000 plus the lesser of . . . 

$34,000 and above ............... (1) 85% of Social Security benefit.(2a) $4,500 .................. (2b) amount of Social 

Security benefit that 

would have been included if the 50% 

rule applied. 

TABLE 4.—SUMMARY OF THE TAXATION OF SOCIAL SECURITY BENEFITS FOR MARRIED 

TAXPAYERS 

Provisional income level Amount included in gross income 

$31,999 and below ............... 0% 


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12Section 1402 of PPACA. 13Section 1902(e) of the Social Security Act (42 U.S.C. 1396a(e)) as modified by section 2002(a) 

of PPACA. 14Section 2102(b)(1)(B) of the Social Security Act (42 U.S.C. 1397bb(b)(1)(B)) as modified by 

section 2101(d) of PPACA. 

TABLE 4.—SUMMARY OF THE TAXATION OF SOCIAL SECURITY BENEFITS FOR MARRIED 

TAXPAYERS—Continued 

First-tier inclusion is the lesser of . . . 

$32,000 to $43,999 .............. (1) 50% of Social Security benefit.(2) 50% of provisional 

income exceeding 

$32,000.

Second-tier inclusion is the lesser of . . . 

(2) 85% of the amount 

of provisional income exceeding 

$44,000 plus the 

lesser of . . . 

$44,000 and above ............... (1) 85% of Social Security benefit.(2a) $6,000 .................. (2b) amount of Social 

Security benefit that 

would have been included if the 50% 

rule applied. 

Reasons for Change 

The Committee believes that the full amount of a taxpayer’s Social Security benefits should be taken into account in determining 

eligibility for the premium assistance credit and other benefits 

under Federally funded health programs, regardless of the portion 

of Social Security benefits includible in gross income. Taking the 

full amount of Social Security benefits into account for these purposes provides consistency with eligibility for other Federal needsbased programs and furthers the goal of deficit reduction. 

Explanation of Provision 

The provision revises the definition of modified adjusted gross income in section 36B to include the amount of the taxpayer’s Social 

Security benefits that are excluded from gross income. Thus, for 

purposes of the premium assistance credit, modified adjusted gross 

income is defined as adjusted gross income increased by: (1) any 

amount excluded by section 911 (the exclusion from gross income 

for citizens or residents living abroad), (2) any tax-exempt interest 

received or accrued during the tax year, plus (3) the amount of Social Security benefits excluded from gross income. Because the definition of modified adjusted gross income used in section 36B is incorporated by reference for purposes of determining eligibility to 

participate in certain other healthcare-related programs, such as 

reduced cost-sharing,12 Medicaid for the nonelderly,13 and the Children’s Health Insurance Program,14 the revised definition applies 

to those programs as well. 


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Effective Date 

The provision is effective on date of enactment. Code section 36B, 

which the provision amends, however, is not effective until taxable 

years ending after December 31, 2013. Thus, the provision applies 

for taxable years ending after December 31, 2013. 

III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its consideration of H.R. 2576, ‘‘To amend the Internal Revenue Code of 

1986 to modify the calculation of modified adjusted gross income 

for purposes of determining eligibility for certain healthcare-related 

programs.’’ 

The bill, H.R. 2576, was ordered favorably reported by a rollcall 

vote of 23 yeas to 12 nays (with a quorum being present). The vote 

was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Camp .............................. X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Herger ............................. X ........... ............. Mr. Rangel ........................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Stark .............................. ........... X .............

Mr. Brady .............................. X ........... ............. Mr. McDermott ..................... ........... X .............

Mr. Ryan ............................... X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Becerra .......................... ........... X .............

Mr. Davis .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Boustany ......................... X ........... ............. Mr. Larson ............................ ........... ........... .............

Mr. Roskam ........................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Gerlach ........................... X ........... ............. Mr. Kind ............................... X ........... .............

Mr. Price ............................... X ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Buchanan ....................... X ........... ............. Ms. Berkley ........................... ........... X .............

Mr. Smith .............................. X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Schock ............................ X ........... .............

Ms. Jenkins ........................... X ........... .............

Mr. Paulsen ........................... X ........... .............

Mr. Marchant ........................ X ........... .............

Mr. Berg ................................ X ........... .............

Ms. Black .............................. X ........... .............

Mr. Reed ............................... X ........... .............

IV. BUDGET EFFECTS OF THE BILL 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the revenue provisions of the 

bill, H.R. 2576, as reported. 

The bill, as reported, is estimated to have the following effects 

on budget receipts for fiscal years 2012–2021: 


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B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the bill involves no new or increased budget authority. The Committee states 

further that the bill involves no new or increased tax expenditures. 

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, the following statement by CBO is provided. 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE

Washington, DC, October 14, 2011. 

Hon. DAVE CAMP, 

Chairman, Committee on Ways and Means, House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 2576, a bill to modify the 

calculation of modified adjusted gross income for purposes of determining eligibility for certain health-care-related programs. 

If you would like further details about this estimate, we would 

be pleased to provide them. The CBO staff contact is Sarah Anders. 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

H.R. 2576—A bill to amend the Internal Revenue Code of 1986 to 

modify the calculation of modified adjusted gross income for 

purposes of determining eligibility for certain healthcare-related 

programs 

Summary: H.R. 2576 would require all Social Security and Tier 

1 Railroad Retirement benefits to be included as part of modified 

adjusted gross income (MAGI) for purposes of determining eligibility for certain Medicaid applicants and subsidies for health insurance purchased through the new health insurance exchanges to 

be established under the Patient Protection and Affordable Care 

Act (PPACA, Public Law 111–148). Under PPACA, the nontaxable 

portion of those benefits will be excluded from MAGI for such eligibility determinations. 

CBO and the staff of the Joint Committee on Taxation (JCT) estimate that enacting the legislation would reduce deficits by almost 

$3 billion over the 2012–2016 period and by about $13 billion over 

the 2012–2021 period. Pay-as-you-go procedures apply because enacting the legislation would affect direct spending and revenues. 

Implementing H.R. 2576 would not have any significant impact on 

spending subject to appropriation. 

JCT has determined that the bill contains no private-sector or 

intergovernmental mandates as defined in the Unfunded Mandates 

Reform Act (UMRA). 

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 2576 is shown in the following table. The costs 

of this legislation fall within budget function 550 (health). 


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By fiscal year, in billions of dollars— 

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012– 

2016 2012–2021 

CHANGES IN DIRECT SPENDING 

Medicaid: 

Estimated Budget 

Authority ......... 0 0 ¥1.4 ¥2.5 ¥4.0 ¥4.5 ¥4.7 ¥5.0 ¥5.2 ¥5.6 ¥7.9 ¥32.9 

Estimated Outlays ....... 0 0 ¥1.4 ¥2.5 ¥4.0 ¥4.5 ¥4.7 ¥5.0 ¥5.2 ¥5.6 ¥7.9 ¥32.9 

Exchange Subsidies: 

Estimated Budget 

Authority ......... 0 0 0.2 0.9 1.3 1.5 1.6 1.6 1.8 1.8 2.4 10.8 

Estimated Outlays 0 0 0.2 0.9 1.3 1.5 1.6 1.6 1.8 1.8 2.4 10.8 

Other: 

Estimated Budget 

Authority ......... 0 0 0.1 0.1 0.1 * * 0.1 0.1 * 0.2 0.4 

Estimated Outlays 0 0 0.1 0.1 0.1 * * 0.1 0.1 * 0.2 0.4 

Total Direct Spending 

Effects: 

Estimated Budget 

Authority ......... 0 0 ¥1.1 ¥1.5 ¥2.6 ¥2.9 ¥3.1 ¥3.4 ¥3.3 ¥3.8 ¥5.2 ¥21.7 

Estimated Outlays ....... 0 0 ¥1.1 ¥1.5 ¥2.6 ¥2.9 ¥3.1 ¥3.4 ¥3.3 ¥3.8 ¥5.2 ¥21.7 

CHANGES IN REVENUES 

Estimated Revenues .... 0 0 ¥0.4 ¥1.0 ¥1.2 ¥1.0 ¥1.1 ¥1.2 ¥1.5 ¥1.3 ¥2.6 ¥8.7 

On-Budget ........... 0 0 ¥0.2 ¥0.8 ¥1.0 ¥0.9 ¥0.9 ¥1.0 ¥1.2 ¥1.1 ¥2.0 ¥7.1 

Off-Budgeta ......... 0 0 ¥0.2 ¥0.2 ¥0.2 ¥0.1 ¥0.2 ¥0.2 ¥0.3 ¥0.2 ¥0.6 ¥1.6 

NET INCREASE OR DECREASE (¥) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND RECEIPTS 

Impact on Deficits ....... 0 0 ¥0.7 ¥0.5 ¥1.5 ¥1.8 ¥2.0 ¥2.2 ¥1.8 ¥2.6 ¥2.6 ¥13.0 

On-Budget ........... 0 0 ¥0.9 ¥0.7 ¥1.7 ¥2.0 ¥2.2 ¥2.4 ¥2.1 ¥2.7 ¥3.3 ¥14.6 

Off-Budgeta ......... 0 0 0.2 0.2 0.2 0.1 0.2 0.2 0.3 0.2 0.6 1.6 

Notes: Numbers may not sum to totals because of rounding. 

* = less than $50 million. 

a. All off-budget effects would come from changes in revenues. (The payroll taxes for Social Security are classified as ‘‘off-budget.’’) 

Basis of Estimate: Under current law, eligibility for subsidies to 

purchase insurance through health insurance exchanges and for 

Medicaid beginning in 2014 will be determined using a definition 

of MAGI that excludes the nontaxable portion of a family’s Social 

Security benefit. H.R. 2576 would expand the definition of MAGI 

to include all Social Security benefits provided under Title II of the 

Social Security Act—which include old-age benefits, disability benefits, spousal benefits, child benefits, survivor benefits, and parental 

benefits—as well as Tier 1 Railroad Retirement benefits. 

Impact on Insurance Coverage 

CBO and JCT estimate that H.R. 2576 would, relative to current 

law, reduce Medicaid enrollment, increase the number of people 

who purchase health insurance through the health insurance exchanges, and slightly increase the number of people with employerbased coverage and the number who are uninsured. 

Medicaid. CBO and JCT estimate that adding nontaxable Social 

Security income to the MAGI definition would reduce Medicaid enrollment, beginning in 2014, by between 500,000 and one million 

people depending on the year. Those losing Medicaid coverage include some retirees between the ages of 62 and 64 as well as some 

people receiving survivor benefits, disability benefits, and other Social Security benefits. Those losing Medicaid coverage would be expected to enroll in qualified health plans offered in health insurance exchanges, obtain employment-based insurance, or become uninsured. 


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1Subsidies for health insurance premiums are structured as refundable tax credits; the portions of such credits that exceed taxpayers’ liabilities are classified as outlays, while the portions 

that reduce tax payments are reflected in the budget as reductions in revenues. 

Health Insurance Exchanges. H.R. 2576 would have two different 

effects on the number of people who purchase insurance through 

health insurance exchanges. First, CBO and JCT estimate that 

many of the individuals who lose Medicaid coverage would become 

eligible for premium assistance credits and cost-sharing subsidies 

in the exchanges. The number of people purchasing insurance 

through the exchanges would increase as a result. Second, we estimate that some people who were previously eligible for exchange 

subsidies would lose eligibility under the expanded MAGI definition that H.R. 2576 would establish, which would reduce the number of people purchasing insurance through the exchanges. CBO 

and JCT estimate that those coverage effects would, on net, result 

in an increase in enrollment in health exchanges of roughly onehalf million people in any given year over the 2014–2021 period. 

Other Coverage. CBO and JCT estimate that H.R. 2576 would 

increase the number of people enrolled in employer-based insurance as well as the number of uninsured by less than 500,000 in 

all years beginning in 2014. 

Impact on Federal Spending and Revenues 

Enacting H.R. 2576 would reduce direct spending by an estimated $5.2 billion over the 2012–2016 period and $21.7 billion over 

the 2012–2021 period. Further, H.R. 2576 would reduce revenues 

by approximately $2.6 billion over the 2012–2016 period and $8.7 

billion over the 2012–2021 period. Of that revenue reduction, an estimated $7.1 billion would be a change in on-budget revenues for 

the 2012–2021 period and the remaining $1.6 billion would be a 

change in off-budget (Social Security) revenues. 

Direct Spending. CBO estimates that Medicaid spending would 

decrease by $7.9 billion over the 2012–2016 period and $32.9 billion over the 2012–2021 period. Those savings would be partially 

offset by net increases in subsidies for health insurance purchased 

through the exchanges. Under the expanded MAGI definition, some 

individuals would receive less-generous exchange subsidies and 

others would lose eligibility for subsidies completely, resulting in 

savings. However, such savings would be more than offset by an increase in subsidy costs associated with other individuals who lose 

Medicaid eligibility under H.R. 2576, but become eligible for and 

choose to take up exchange subsidies. On net, CBO estimates the 

outlay portion of the increased payments for premium and costsharing subsidies would be $2.4 billion over the 2012–2016 period 

and $10.8 billion over the 2012–2021 period.1

Revenues. Two effects largely account for the estimated $8.7 billion revenue reduction that would result from enacting H.R. 2576. 

The revenue portion of the increase in premium and cost-sharing 

subsidies represents a little less than half of the revenue reduction. 

The majority of the remaining revenue loss would stem from 

changes in the size and composition of the population with employment-based insurance, which would alter the mix of compensation 

provided to workers between taxable wages and salaries and nontaxable health insurance benefits. 


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Pay-As-You-Go considerations: The Statutory Pay-As-You-Go Act 

of 2010 establishes budget-reporting and enforcement procedures 

for legislation affecting direct spending or revenues. The net 

changes in outlays and revenues that are subject to those pay-asyou-go procedures are shown in the following table. Only on-budget 

changes to outlays or revenues are subject to pay-as-you-go procedures. 

Intergovernmental and private-sector impact: JCT reviews provisions in legislation that amend the tax code to determine if those 

provisions contain intergovernmental or private-sector mandates as 

defined in UMRA. JCT has determined that the bill contains no 

private-sector or intergovernmental mandates as defined in UMRA. 


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CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 2576, AS ORDERED REPORTED BY THE COMMITTEE ON WAYS AND MEANS ON OCTOBER 13, 2011

By fiscal year, in millions of dollars— 

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012–2016 2012–2021 

NET INCREASE OR DECREASE (¥) IN THE ON-BUDGET DEFICIT 

Statutory Pay-As-You-Go Impact ...................................... 0 0 ¥888 ¥694 ¥1,679 ¥1,955 ¥2,197 ¥2,376 ¥2,088 ¥2,706 ¥3,261 ¥14,584 

Memorandum: 

Changes in Outlays ................................................. 0 0 ¥1,120 ¥1,467 ¥2,644 ¥2,868 ¥3,087 ¥3,372 ¥3,333 ¥3,805 ¥5,232 ¥21,698 

Changes in Revenues .............................................. 0 0 ¥232 ¥773 ¥966 ¥913 ¥891 ¥995 ¥1,245 ¥1,099 ¥1,971 ¥7,114 

Note: Numbers may not sum to totals because of rounding. 


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Previous CBO estimate: On July 22, 2011, CBO transmitted a 

cost estimate for S. 1376, as introduced in the United States Senate on July 18, 2011. The legislative language modifying the MAGI 

definition in H.R. 2576 is similar to the legislative language of S. 

1376 and would have the same budgetary effects over the 2012– 

2016 and 2012–2021 periods. 

Estimate prepared by: Alexandra Minicozzi, Sarah Anders, Robert Stewart, and Kirstin Nelson. 

Estimate approved by: Holly Harvey, Deputy Assistant Director 

for Budget Analysis. 

D. MACROECONOMIC IMPACT ANALYSIS

In compliance with clause 3(h)(2) of rule XIII of the Rules of the 

House of Representatives, the following statement is made by the 

Joint Committee on Taxation with respect to the provisions of the 

bill amending the Internal Revenue Code of 1986: the effects of the 

bill on economic activity are so small as to be incalculable within 

the context of a model of the aggregate economy. 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives (relating to oversight findings), the Committee advises that it was a result of the Committee’s review of the 

provisions of H.R. 2576 that the Committee concluded that it is appropriate to report the bill favorably to the House of Representatives with the recommendation that the bill do pass. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the bill contains no measure that authorizes funding, so no statement of general performance goals and objectives for which any measure authorizing funding is required. 

C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104–4). 

The Committee has determined that the revenue provisions of 

the bill do not contain Federal mandates on the private sector. The 

Committee has determined that the revenue provisions of the bill 

do not impose a Federal intergovernmental mandate on State, 

local, or tribal governments. 

D. APPLICABILITY OF HOUSE RULE XXI 5(b) 

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not 

be considered as passed or agreed to unless so determined by a 

vote of not less than three-fifths of the Members voting, a quorum 

being present.’’ The Committee has carefully reviewed the provisions of the bill, and states that the provisions of the bill do not 


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involve any Federal income tax rate increases within the meaning 

of the rule. 

E. TAX COMPLEXITY ANALYSIS

Section 4022(b) of the Internal Revenue Service Reform and Restructuring Act of 1998 (the ‘‘IRS Reform Act’’) requires the staff 

of the Joint Committee on Taxation (in consultation with the Internal Revenue Service and the Treasury Department) to provide a 

tax complexity analysis. The complexity analysis is required for all 

legislation reported by the Senate Committee on Finance, the 

House Committee on Ways and Means, or any committee of conference if the legislation includes a provision that directly or indirectly amends the Internal Revenue Code and has widespread applicability to individuals or small businesses. 

Pursuant to clause 3(h)(1) of rule XIII of the Rules of the House 

of Representatives, the staff of the Joint Committee on Taxation 

has determined that a complexity analysis is not required under 

section 4022(b) of the IRS Reform Act because the bill contains no 

provisions that amend the Code and that have ‘‘widespread applicability’’ to individuals or small businesses, within the meaning of 

the rule. 

F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND LIMITED

TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill, and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS 

REPORTED 

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

INTERNAL REVENUE CODE OF 1986 

Subtitle A—Income Taxes 

* * * * * * * 

CHAPTER 1—NORMAL TAXES AND SURTAXES 

* * * * * * * 

Subchapter A—Determination of Tax Liability 

* * * * * * * 


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PART IV—CREDITS AGAINST TAX 

* * * * * * * 

Subpart C—Refundable Credits 

* * * * * * * 

SEC. 36B. REFUNDABLE CREDIT FOR COVERAGE UNDER A QUALIFIED HEALTH PLAN. 

(a) * * * 

* * * * * * * 

(d) TERMS RELATING TO INCOME AND FAMILIES.—For purposes of 

this section— 

(1) * * * 

(2) HOUSEHOLD INCOME.— 

(A) * * * 

(B) MODIFIED ADJUSTED GROSS INCOME.—The term 

‘‘modified adjusted gross income’’ means adjusted gross income increased by— 

(i) any amount excluded from gross income under 

section 911, øand¿ 

(ii) any amount of interest received or accrued by 

the taxpayer during the taxable year which is exempt 

from taxø.¿, and 

(iii) any amount of social security benefits of the taxpayer excluded from gross income under section 86. 

* * * * * * * 


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VII. DISSENTING VIEWS 

We are concerned about the impact of H.R. 2576 on retirees and 

people with severe disabilities. The fundamental goal of the Affordable Care Act is to provide secure, stable, and comprehensive 

health insurance coverage to all Americans, including retirees who 

are not yet eligible for Medicare coverage and persons with severe 

disabilities. Indeed, as a result of the health insurance reforms and 

tax credits in the Affordable Care Act, the Congressional Budget 

Office estimates that over 30 million more Americans will be covered by quality, comprehensive health insurance as compared to 

the number of Americans covered today. According to a Congressional Budget Office estimate of a similar Senate bill (S. 1376), 

H.R. 2576 will result in up to 500,000 Americans losing coverage 

altogether, with many more having to pay more for their health insurance coverage. We are concerned because this reduction in coverage and increase in costs, worth $13 billion, is borne entirely by 

retirees, persons with severe disabilities, and their families. 

Commentators have suggested that the definition of modified adjusted gross income in the Affordable Care Act that excludes nontaxable Social Security benefits is a ‘‘glitch,’’ with some suggesting 

that this would add hundreds of billions of dollars to the cost of the 

Act beyond the original estimate. This is not true. As Mr. Barthold, 

the Chief of Staff of the Joint Committee on Taxation, noted during 

the markup of H.R. 2576, the exclusion of nontaxable Social Security benefits is typical when applying income limitations to tax benefits. Mr. Barthold also stated that the staffs of the Joint Committee on Taxation and the Congressional Budget Office were 

aware of the exclusion of nontaxable Social Security benefits from 

the definition of modified adjusted gross income and the estimates 

fully accounted for this exclusion. 

In defending H.R. 2576 during the markup, the majority uses an 

example that relies on an extreme and implausible fact pattern 

when arguing that families with income of approximately $60,000 

per year will qualify for Medicaid. The example assumes a couple 

receiving the maximum amount of Social Security benefits because 

they have each earned the maximum amount of creditable wages 

every year during their working careers (‘‘maximum earner couples’’). Presently, this means earning a salary of at least $106,800 

each, or over $210,000 for the couple. But the majority’s example 

also assumes that this high-income couple has relatively modest 

sources of income outside of Social Security benefits—only about 

$20,000 per year, despite lengthy careers earning top salaries that 

would place the couple in the top 5 percent of income earners. 

This fact pattern is highly improbable. A more realistic fact pattern is presented by the average Social Security benefits and median non-Social Security income of pre-age 65 Social Security recipients. The average Social Security benefit for a low or middle inVerDate Mar 15 2010 21:44 Oct 20, 2011 Jkt 019006 PO 00000 Frm 00018 Fmt 6604 Sfmt 6604 E:\HR\OC\HR254.XXX HR254

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come worker retiring at age 62 today ranges from $8,300 to 

$13,700, and the median non-Social Security income of current 

beneficiaries ranges from $9,000 to $16,500 per year (depending on 

the age cohort of the recipients). These facts present a far different 

picture of who will be affected by H.R. 2576. The truth is that the 

bill will impose higher costs on low and moderate income retirees 

and persons with severe disabilities by either shifting them out of 

Medicaid coverage or requiring that they contribute significantly 

more of their income for health insurance coverage through reduced tax credits. These struggling retirees, persons with severe 

disabilities, and their families who lose coverage will be earning far 

less than $60,000 plus per year. 

SANDER M. LEVIN. CHARLES B. RANGEL. PETE STARK. JIM MCDERMOTT. JOHN LEWIS. XAVIER BECERRA. JOE CROWLEY. 

Æ 


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