Health care reform plans funded by new major tax, Medicare spending cuts


By comparison, nearly half of the $829 billion Senate Finance Committee plan is financed through Medicare cuts ($377.8 billion, or 41 percent of the bill’s 10-year cost), and 22 percent would come from an excise tax on so-called “Cadillac” health insurance plans, which would raise an estimated $201.4 billion over 10 years. The House plan would reduce the deficit by $104 billion and the Senate version by $81 billion.

Both the House and Senate proposals would impose a financial penalty on individuals if they do not buy health insurance, and both would force employers to pay a penalty to either the government or new “health exchanges” if they do not provide a government-approved health insurance plan to employees. In both cases, the House penalty is higher.

In the House plan, these “pay or play” provisions for employers make up the next largest percentage ($135 billion, or 11 percent) of the legislation’s financing, followed by a tax on medical devices and other health care revenue increases ($55 billion, or 5 percent), corporate income tax increases and other non-health revenues ($50.4 billion, or 4 percent) and a penalty on uninsured individuals ($33 billion, or 3 percent).

In the Senate Finance Committee plan, a tax on medical devices and other health care revenue increases make up the next largest financing percentage ($179.1 billion, or 20 percent), followed by corporate income tax increases and other non-health revenues ($100.1 billion, or 11 percent), net cuts to other health care spending ($26.3 billion, or 3 percent), “pay or play” provisions for employers ($23 billion, or 3 percent) and a penalty on uninsured individuals ($4 billion, or less than 1 percent).

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937. For more information, please see Tax Foundation Fiscal Fact No. 200, “Comparing Financing of the House and Senate Health Care Reform Plans.”