Earlier today, Congress passed a law to avert a scheduled 25 percent cut in Medicare reimbursement rates for doctors. While preventing those cuts is critical to ensuring access to needed care for America’s seniors, the way Congress paid for the “doc-fix” weakens the Affordable Care Act and imposes financial hardship on low- and moderate-income families.
How did Congress pay for the doc-fix? Starting in 2014, the Affordable Care Act provides sliding-scale tax credits to help lower the costs of premiums and cost-sharing for people earning up to 400 percent of the Federal Poverty Level (around $73,000 for a family of three.) The law allows the federal government to pay these tax credits directly to your insurer each month, so you’ll only be billed for the amount of the premium you owe in excess of your tax credit. Congress paid for the “doc-fix” by increasing the amount you will have to repay if it turns out, when you file taxes at the end of the year, your income was higher than expected and as a result you got a larger tax credit throughout the year.
As the Affordable Care Act was originally passed: if your income was above 400 percent FPL, then you would have to pay back the entire amount of the tax credit you received. But if your income was below 400 percent FPL, you would only have to pay back up to $250 for an individual or $400 for a family. Essentially, the law protected low- and moderate-income people from facing too harsh a penalty for having found a better job or gotten a raise.
As the Affordable Care Act was amended to pay for the “doc-fix”: the repayment caps are higher, and on a sliding-scale. If your income is below 200 percent FPL, you will have to pay back up to $300 as an individual or $600 as a family. The caps rise quickly as your income goes up, so that at 400 percent FPL you could have to pay back up to $1,500 as an individual or $3,000 as a family. The amendment also extends the caps up to 499 percent FPL, where families would have to repay up to $3,500 and individuals up to $1,750.
What’s the bottom line? Preventing the 25 percent payment cut for Medicare doctors is critically important. However, the way Congress paid for that “doc-fix” is harmful because it:
— Imposes a financial hardship on thousands of low- and moderate-income families, and threatens to undermine support for the Affordable Care Act. For a moderate-income family, suddenly discovering that they owe $3,000 could be financially devastating. Stories of families experiencing this type of financial harm could lead to further decline in public support for the Affordable Care Act.
— Risks reducing the number of people who will enroll in the advanced tax credits, since they will fear this type of unexpected financial penalty. This means fewer people will get the coverage they need.
— Sets a bad precedent that the Affordable Care Act can be raided to pay for other Congressional priorities. Supporters of the Affordable Care Act have already had to fight back attempts to gut the law’s $15 billion Prevention and Public Health Fund to pay for a provision to reduce paperwork burdens on small businesses. No doubt, policymakers will continue turning to cuts in the Affordable Care Act to finance other priorities. By paying for the “doc-fix” by weakening the Affordable Care Act’s protections for low- and moderate-income families, Congress took the first step down a dangerous path.
— Katherine Howitt, policy analyst