"Fiscal Cliff" Explained!
The 2012 elections resulted in the Democratic Party retaining their control of the Senate and the Republican Party maintaining a majority in the House of Representatives. In the recently completed âlame duckâ session of Congress, the main Congressional agenda item was the year-end convergence of the urgent tax and spending issues know as the âfiscal cliffâ (are you sick of that term yet?). The key facets of the âfiscal cliffâ were the following.
At the end of 2012, lower, âtemporaryâ tax rates enacted a decade ago under President George W. Bush were set to expire. If Congress did nothing, individual income tax rates would rise sharply for all Americans.
Deep, across-the-board cuts in federal programs (sequestration) would take effect on January 1 if Congress took no action. This would include a 2% additional cut in the clinical laboratory fee schedule.
Another issue, contributing to a possible negative impact for clinical laboratories is that Medicare payments to physicians (including pathologists) were scheduled to be cut by 26.5% starting January 1, 2013. ASCLS believes that to avoid this cut, Congress will enact cuts in other areas to balance the revenue and expense.
Don Lavanty (Legislative Consultant), Elissa Passiment (Executive Vice President) and the Government Affairs Committee (GAC) have been monitoring the congressional and administrative negotiations closely to remain aware of any additional potential cuts to laboratory reimbursement.
With the Senate vote on December 31 and the House vote on January 1, a bill was passed which addressed most of the revenue side of the equation. It helps avoid the immediate ramifications of the âfiscal cliffâ but did not address the expense side of the equation and the potential sequestration ramifications. So an additional 2% cut to the laboratory fee schedule that was part of the sequestration has been delayed and will need to be addressed between now and March 1.
Here is a summary the significant revenue items addressed in the recently passed legislation, which amount to about $600 billion in new revenues over 10 years. (Source: Modern Healthcare.com, January 1, 2013 and CNN.com, January 2, 2013)
Tax rate for individuals making more than $400K and couples making more than $450K will rise from 35% to 39.6%
Itemized deductions will be capped for individuals making $250K and couples making $300K.
Taxes on inherited estates will go up to 40% (currently 35%)
Unemployment insurance will be extended for a year for 2 million people
The alternative minimum tax (AMT) will be permanently adjusted for inflation.
Child care, tuition, and research and development tax credits will be renewed.
The âDoc fixâ â Medicare reimbursement for physicians â will continue for one year (this avoids the 26.5% drop in reimbursement). You will see this issue referred to as the Sustainable Growth Rate (SGR). To pay for this item, the bill calls for a recoupment of past DRG overpayments to hospitals and re-pricing of end-stage renal disease payments.
One thing not addressed was the payroll tax rate. It had been previously reduced by 2% and that reduction expired on December 31 and was not renewed in this legislation. To put this in perspective, a person making $30K per year will see $50 less per month on their pay check and a person making $113,700 will see $189.50 less per month)
Source: ASCLS GAC eNewsletter Issue 13