House panel votes to toughen Medicaid eligibility requirements

A House panel voted along party lines Thursday to make it harder for Americans to become eligible for Medicaid and insurance subsidies under the federal healthcare reform law.

The law counts only the taxable portion of Social Security benefits when calculating Medicaid eligibility, allowing up to a million middle-income early retirees to potentially be eligible for a program meant to help low-income people.

The Ways and Means Committee voted 23-12 to replace the healthcare law's Modified Adjusted Gross Income (MAGI) with the standard, more restrictive eligibility standard for federal assistance programs; Rep. Ron KindRonald (Ron) James KindAmericans worried about retirement should look to employee ownership House passes concealed carry gun bill Congress barreling toward explosive immigration fight MORE (D-Wis.) voted with Republicans.

Rep. Diane BlackDiane Lynn BlackWomack wins initial support to become Budget chairman House Foreign Affairs chairman to retire This week: Clock ticks toward shutdown deadline MORE (R-Tenn.), the sponsor of the bill, called changing the law a matter of "fairness."

Without the change, she said, the law "could result in individuals, whose incomes are up to 425 percent of the poverty level, receiving Medicaid. This is unacceptable."

In order to avoid any gaps between Medicaid and the insurance subsidies, the law created a single formula for calculating people's revenue. Changing that formula to make it harder for people to qualify for Medicaid also would make it harder for people to qualify for the sliding-scale subsidies in the law.

Rep. Sandy Levin (D-Mich.) said some 500,000 people might lose eligibility for the insurance subsidies altogether — even though Social Security income isn't usually counted when calculating other tax subsidies.

"We need to proceed with care," said Levin, the top Democrat on the committee.

Rep. Joseph Crowley (D-N.Y.) said the bill could be "Republicans' first step on the slippery slope to limit middle class Americans' ability to claim certain deductions for retirement security, college tuition expenses or even adoption assistance."

"While this Congress begins the steps of peeling back tax benefits for the middle class," he said, "they refuse to even consider or debate a temporary surtax on people who make over $1 million a year. Shameful."

Separately, the committee voted to repeal a 3 percent withholding tax on government contractors enacted in 2005. Repealing the tax would cost the federal government about $11 billion, which Republicans want to offset by the $13 billion savings from the tougher Medicaid standard.

Update: This post was updated at 2 p.m. to add comment from Rep. Joseph Crowley.