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[House Report 112-254]
[From the U.S. Government Publishing Office]

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

                       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\
---------------------------------------------------------------------------
    \1\Pub. L. No. 111-148 (March 23, 2010).
    \2\Pub. L. No. 111-152 (March 30, 2010).
---------------------------------------------------------------------------
    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 
means-tested 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.

                         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 INCOME 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.
---------------------------------------------------------------------------
    \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.
    \4\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 (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).
---------------------------------------------------------------------------
    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 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.
---------------------------------------------------------------------------
    \5\As described in section 1402 of PPACA.

            TABLE 1.--THE PREMIUM ASSISTANCE CREDIT PHASE-OUT
------------------------------------------------------------------------
   Household income (expressed as a     Initial premium   Final premium
            percent of FPL)               (percentage)     (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.
---------------------------------------------------------------------------
    \6\As defined in section 5000A(f).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \7\The 9.5 percent amount is indexed for calendar years beginning 
after 2014 to reflect the excess of premium growth over income growth.
---------------------------------------------------------------------------

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 dollar 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\
---------------------------------------------------------------------------
    \8\Section 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).

                        TABLE 2.--RECONCILIATION
------------------------------------------------------------------------
                                                            Applicable
    Household income (expressed as a percent of FPL)       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 the case of unmarried 
individuals, or $44,000, in the case of married individuals 
filing joint returns.\10\ These thresholds are not indexed for 
inflation.
---------------------------------------------------------------------------
    \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.
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \11\Special 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.

              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        (2) 50% of provisional income exceeding $25,000.
                                        Security benefit.
----------------------------------------------------------------------------------------------------------------
                                                      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        (2a) $4,500............  (2b) amount of Social
                                        Security benefit.                                 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%
----------------------------------------------------------------------------------------------------------------
                                                       First-tier inclusion is the lesser of . . .
                                      --------------------------------------------------------------------------
$32,000 to $43,999...................  (1) 50% of Social        (2) 50% of provisional
                                        Security benefit.        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        (2a) $6,000............  (2b) amount of Social
                                        Security benefit.                                 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 needs-based 
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.
---------------------------------------------------------------------------
    \12\Section 1402 of PPACA.
    \13\Section 1902(e) of the Social Security Act (42 U.S.C. 1396a(e)) 
as modified by section 2002(a) of PPACA.
    \14\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.
---------------------------------------------------------------------------

                             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:

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).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 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 employer-based 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.
    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 one-
half 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 cost-sharing 
subsidies would be $2.4 billion over the 2012-2016 period and 
$10.8 billion over the 2012-2021 period.\1\
---------------------------------------------------------------------------
    \1\Subsidies 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.
---------------------------------------------------------------------------
    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.
    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-as-you-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.

                                 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.

    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 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

           *       *       *       *       *       *       *

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, [and]
                          (ii) any amount of interest received 
                        or accrued by the taxpayer during the 
                        taxable year which is exempt from 
                        tax[.], and
                          (iii) any amount of social security 
                        benefits of the taxpayer excluded from 
                        gross income under section 86.

           *       *       *       *       *       *       *

                         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 income 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.

                                  

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