Healthcare Daily Digest for Wednesday, 3 April: Healthcare Credits This Year Could Lead to Surprise Tax Bill Next Year

“Government do take a bite, don’t she?” — Raising Arizona

So, you want to take advantage of the government healthcare subsidies because you want to be able to afford healthcare (which, for reasons best explained by the term “rampant greediness,” costs roughly all the money in the world annually for a family of just you and your cats). As the AP helpfully reminds us, though: “Healthcare credits could trigger surprise tax bills.”

“President Barack Obama’s new health care law will offer subsidies to help people buy private health insurance on state-based exchanges, if they don’t already get coverage through their employers. The subsidies are based on income. The lower your income, the bigger the subsidy.”

Here’s where it gets tricky: those wanting the subsidy will apply in the fall. Both you and the government are probably not clear on how much you’re going to make in 2013. This means it will rely on what you said in your 2012 tax return to decide the level of your healthcare subsidy.

“What happens if you or your spouse gets a raise and your family income goes up in 2014? You could end up with a bigger subsidy than you are entitled to. If that happens, the law says you have to pay back at least part of the money when you file your tax return in the spring of 2015.”

And therein’s the rub.

“I think this will be the hardest thing for members of the public to understand because it is a novel aspect of this tax credit,” said Catherine Livingston, who recently served as health care counsel for the Internal Revenue Service. “I can’t think of what else they do in the tax system currently that works that way.”

(Oh, and another wrinkle: most of those subsidies won’t even come directly to those applying. Instead, they’ll be funnelled “directly to insurance companies and consumers will get the benefit in reduced premiums.”)

There are four thresholds for repaying the subsidies:

A family of four making less than $47,000 would have to repay a maximum of $600.

If the same family makes between $47,000 and $70,000, the amount they have to repay is capped at $1,500.

If the same family makes between $70,000 and $94,200, the amount is capped at $2,500.

Families making more than four times the poverty level have to repay the entire subsidy.

Healthcare headlines for Wednesday:

Lower Loan Debts for Medical Students: “In January, Iowa Gov. Terry Branstad earmarked $2 million in his proposed budget to forgive loans of students who become primary care, emergency medicine and obstetric doctors in rural Iowa. Another $2 million would match grants from hospitals that increases the number of medical residencies.”

I’d Like to Learn More About This So-Called “Stock Market”: “U.S. stocks rose on Tuesday, putting the S&P 500 within striking distance of its all-time intraday high as healthcare stocks surged on prospects of a boost to earnings.”

Someone’s Gotta Do Something About This Sequestration: “Healthcare providers will see their Medicare reimbursements lowered by 2 percent starting this month, yet another victim of sequestration’s across-the-board cuts.”

Business, Wealthy People Suggest Unlikely Ally in IRS: “Businesses and wealthy owners of estates and trusts asked the IRS on Tuesday for changes to a part of President Barack Obama’s 2010 healthcare law that has received comparatively little attention: a 3.8 percent tax on investment income intended to provide the bulk of the law’s funding.”