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Obama's health care plan adds new investment, Medicare tax on wealthy

President Obama's health care plan boosts Medicare and investment taxes on the wealthy. But high-cost 'Cadillac plans' catch a break.

By Guest blogger / February 22, 2010

President Obama (shown here at a press conference earlier this month) is pushing a compromise bill that includes two big revenue enhancers: a 0.9 percent increase in Medicare taxes and a 2.9 percent investment tax for wealthy households.

Pablo Martinez Monsivais/AP/File

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President Obama’s new $950 billion health plan would impose a new “payroll” tax on investment income, and keep a watered-down version of the Senate proposal to tax high-cost health plans.

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In his new health package, based largely on the Senate’s version of reform, the President lays out for the first time his own specific design. And to help pay for a broad expansion of insurance coverage, he includes several big revenue measures. The two biggest: He’d increase by 0.9 percentage point the Medicare tax for households with incomes over $200,000 for singles and $250,000 for joint filers. In addition, he’d impose a 2.9 percent tax on these same households on interest, dividends, annuities, and most other investment income.

The President has also endorsed the Senate proposal to tax high-cost insurance policies, but in his version the levy would not kick in until 2018, rather than 2013. It is designed as an excise tax on insurers, but is widely expected to result in reduced benefits for employees. In the Obama version, the excise tax would apply only to premiums above $27,500 for families and $10,200 for singles (the Senate bill limits were $23,000 and $8,500) and would be adjusted by the consumer price index plus one percentage point thereafter. As a result, the tax would slowly bite more workers since health care costs (and thus insurance premiums) have historically grown much faster.

The fate of the Obama plan is unknown. It will be the major topic of discussion at Thursday’s health summit, although there is little reason to believe the GOP, which has opposed all the key elements of the Obama plan for the past year, will embrace any of these ideas.

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