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House Passes Health Insurance Income Formula Bill, Contracting Measure

By Charlene Carter, CQ Staff

October 27, 2011 -- The House passed a bill that would repeal a requirement that government agencies withhold federal taxes from payments to contractors, and endorsed a second bill to offset the first measure's lost revenue.

The second measure (HR 2576), passed 262-157, would rewrite an income formula used to calculate subsidies for the purchase of health insurance on state-run exchanges and to determine eligibility for Medicaid.

The House passed 405-16 the measure (HR 674), offered by Wally Herger, R-Calif., a member of the Ways and Means Committee, that would repeal the law (PL 109-222) that requires the federal government, as well as state and local governments, to withhold 3 percent of most payments made to government contractors. That rule is scheduled to take effect Jan. 1, 2013. All 16 votes against the measure came from Democrats.

The repeal has gained bipartisan support in Congress, and the Obama administration endorsed it.

"The effect of the repeal of the withholding requirement would be to avoid a decrease in cash flow to these contractors, which would allow them to retain these funds and use them to create jobs and pay suppliers," according to a statement of administration policy issued last week.

Majority Leader Eric Cantor, R-Va., said, "This is another bipartisan and commonsense solution to support the small business men and women of our economy so that they can support and begin to regenerate our ailing economy."

Sander M. Levin of Michigan, the ranking Democrat on the Ways and Means Committee, said the bill is not going to address the need for creation of jobs.

"Let's not pretend it's a job creation bill," Levin said. "To call it that is a pure smokescreen."

New Jersey Democrat Bill Pascrell Jr. agreed, calling the measure a "very small part of a jobs plan."

The Congressional Budget Office estimated the cost of the repeal at $11.2 billion through fiscal 2021.

The health measure (HR 2576), sponsored by Republican Diane Black of Tennessee, would take into account an individual's Social Security benefits when determining eligibility for certain health care programs, such as Medicaid.

Under a provision in the 2010 health care law (PL 111-148, PL 111-152), individuals would be allowed to exclude Social Security benefits from their income when calculating such eligibility. The bill would rescind that, and it could reduce deficits by $13 billion through fiscal 2021, according to estimates by the CBO and the Joint Committee on Taxation.

"By aligning this definition with other federal subsidy programs, the legislation ensures that taxpayer funds will not be used to enroll middle class individuals into Medicaid," Ways and Means Chairman Dave Camp, R-Mich., said.

New York Democrat Joseph Crowley refuted Republicans' arguments that the provision was a glitch in the law, but that it was written into the law deliberately.

"Benefits are generally not added back in determining one's modified adjusted gross income for other benefits that they receive such as IRA contributions, student loan interests, and adoption tax benefits, but we are changing that definition today for consideration of who can obtain tax credits to purchase private health insurance." Crowley said. "There is nothing about this bill that is well intentioned."

Under the rule governing consideration of the two measures, the health bill will be incorporated into the withholding measure, and the combined measure (HR 674) will be sent to the Senate.

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