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How Democrats Made the Health Care Numbers Add Up

The revised health care bill that Democrats released in advance of a House vote this weekend contained one initial mystery: how did they revise the Senate health care bill to make it more generous to the uninsured while simultaneously shaving more from the federal budget deficit?

Cost of healthcare
Lilli Day | Photodisc | Getty Images
Cost of healthcare

The biggest explanation: an increase in Medicare taxes on high income earners.

The increase, somewhat obscured in the initial release of information by Democratic Congressional leaders, goes beyond both the initial Medicare tax hike in the Senate-passed health care bill and the additional hike recommended by President Obama last month.

Under the final proposal to be voted on by the House and then the Senate, the existing Medicare hospital tax would increase by .9 percent to 2.35 percent for individuals earning more than $200,000 and couples earning more than $250,000.

In addition, the tax would be extended to so-called unearned income such as interest and dividends for the first time. The tax rate on unearned income would be 3.8 percent.

Taken together those two changes would raise some $210-billion over over 10 years. That's more than 20 percent of the $940 billion cost of the bill over the same time period.

The original Senate bill, which cost under $900-billion and cut $118-billion from the deficit, did not extend the Medicare tax to unearned income. Last month, Mr. Obama proposed extending the tax on unearned income at a rate of 2.9 percent.

The higher rate became a critical means of allowing Democrats to expand subsidies for low-income Americans to buy insurance, a key priority of liberals, while increasing the amount of deficit reduction in the bill, a key priority of conservative Democratic "Blue Dogs". House Democrats need to solidify their support among both groups to reach the majority of 216 needed for passage.

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