AARP Rewards combines online learning, fitness challenges and a supportive community. Visit today.
Health Care Reform
by Susan Jaffe, AARP Bulletin, April 9, 2010
Q. President Obama says health care reform will save us money, but others say we’ll have to pay more in taxes. Who’s right?
A. The answer depends on whether your income is on the high side, whether you have “Cadillac” employer-sponsored health care coverage and how often you go to tanning salons (more about that one later), among other things.
First, here’s the bad news: Expanding coverage to 32 million people, providing subsidies to buy insurance, closing the Medicare drug coverage gap and other health care reforms aren’t free. But most of the taxes fall on wealthier Americans.
Under the new law, they will pay an extra 0.9 percent (for a total of 2.3 percent) in their Medicare payroll tax on the portion of their earned income above $200,000 or above $250,000 for married couples. That starts in 2013. They will also a pay a new tax on unearned income, including money from investments, dividends, annuities, royalties and rent. Social security, pensions or IRA income are excluded.
Starting in 2013, you can deduct from your taxes only medical expenses that exceed 10 percent of your income—up from 7.5 percent now. This change is postponed until 2017 for taxpayers age 65 and older.
Perhaps one of most controversial new taxes, which begins eight years from now, is a 40 percent tax on expensive “Cadillac” employer-sponsored health plans that cost more than $10,200 for individuals or $27,500 for a family. But the tax is imposed on the insurers.
Some readers have asked about the new tax on medical devices slated for 2013. It doesn’t apply to hearing aids or other medical items consumers usually buy in retail stores.
Beginning in July there will be a 10 percent sales tax on indoor tanning services. For those who don’t know what tanning services are, the law provides a precise definition: “… a service employing any electronic product designed to incorporate one or more ultraviolet lamps and intended for the irradiation of an individual by ultraviolet radiation, with wavelengths in air between 200 and 400 nanometers, to induce skin tanning.”
And, finally, people without health insurance who are required to have it will have to pay a penalty, starting at $95 or 1 percent of taxable income in 2014, $325 or 2 percent of taxable income in 2015, and $695 or 2.5 percent in 2016. After 2016, the penalty increases with a cost-of-living adjustment.
Susan Jaffe of Washington, D.C., covers health and aging issues and writes the Bulletin’s weekly column, Health Care Reform Explained: Your Questions Answered.
Please leave your comment below.
You must be logged in to leave a comment.
Visit the AARP state page for information about events, news and resources near you.
Free chapter from AARP’s book by Dr. Sanjay Gupta
Members save 15% on medical alert service.
WW will help you build a customized weight loss plan
AARP members receive exclusive member benefits & affect social change.
You are leaving AARP.org and going to the website of our trusted provider. The provider’s terms, conditions and policies apply. Please return to AARP.org to learn more about other benefits.
Your email address is now confirmed.
You'll start receiving the latest news, benefits, events, and programs related to AARP's mission to empower people to choose how they live as they age.
You can also manage your communication preferences by updating your account at anytime. You will be asked to register or log in.
In the next 24 hours, you will receive an email to confirm your subscription to receive emails
related to AARP volunteering. Once you confirm that subscription, you will regularly
receive communications related to AARP volunteering. In the meantime, please feel free
to search for ways to make a difference in your community at