H.R. 3630: Conference Report on H.R. 3036 The Middle Class Tax Relief & Job Creation Act of 2012

H.R. 3630

Conference Report on H.R. 3036 The Middle Class Tax Relief & Job Creation Act of 2012

Sponsor
Rep. Dave Camp

Date
February 16, 2012 (112th Congress, 2nd Session)

Staff Contact
Jared Powell

Bill Summary

The Conference Report accompanying H.R. 3630 would provide an extension of the current payroll tax rates for the remainder of calendar year 2012. In addition, the Conference Report would provide a fully-offset delay in the implementation of the Medicare Sustainable Growth Rate (the so-called “Doc-fix”) and extend and reform federally funded Unemployment Insurance (UI) benefits for the remainder of calendar year 2012. The legislation would offset the cost of extended UI benefits and the Doc-fix with a number of provisions to reduce the deficit, including increasing pension contribution for new federal employees, reductions from accounts related to the government takeover of health care, and auctioning spectrum frequencies. In addition, the bill would reform the federal UI benefit structure by lowering the maximum number of weeks of UI eligibility and allowing states to require drug testing and job training. A summary of the bill’s provisions follows below.

 

TITLE I—EXTENSION OF PAYROLL TAX REDUCTION

The Conference Report would extend current payroll tax levels for the final ten months of 2012, from March through December, without an offset. The current payroll tax holiday lowers the standard Social Security payroll tax rate by two percentage points for employees and self-employed, from 6.2 percent to 4.2 percent and 12.4 percent to 10.4 percent, respectively. Currently these tax rates are set to expire on February 29, 2012. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reduced the payroll tax rate for employees by two percentage points for calendar year 2011. To protect the Social Security trust fund from a loss of payroll tax revenues resulting from the payroll tax reduction, the law requires appropriated amounts to “be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had such amendments not been enacted.” According to CBO, this extension of the 2-percentage point payroll tax reduction through December 31, 2012, would provide taxpayers $94 billion in tax relief over ten years.

 

TITLE II—UNEMPLOYMENT BENEFIT CONTINUATION AND PROGRAM IMPROVEMENT

The Conference Report would extend and reform federally funded benefits under the Emergency Unemployment Compensation (EUC) program for the remainder of 2012. These extended benefits are set to expire on February 29, 2012. Under the Conference Report, the maximum number of weeks of eligibility for UI benefits for states with unemployment levels at the national average (8.3 percent) would be reduced by 30 weeks in September 2012. Under the Conference Report, states with unemployment levels below 9 percent would have their maximum weeks of eligibility fall from 93 weeks to 63 weeks after September 2012. States with unemployment levels at or above 9 percent would have their maximum number of weeks of UI eligibility fall from 99 weeks to 73 weeks.

Specifically, the Conference Report would effectively eliminate up to 20 weeks of federal benefits currently payable under the EB program. The legislation would then reduce federal UI benefits by an additional six weeks in September 2012. The agreement would do this by reducing the Emergency Unemployment Compensation (EUC) program from its current 53-week maximum to a new maximum of 47 weeks. Finally, the Conference Report would reduce the number of states in which greater amounts of federal benefits are payable by raising the unemployment rate thresholds for the EUC program in the summer and fall of 2012.

In addition, the Conference Report would reform the UI benefit program to allow states to require that participants are actively working and training towards employment and to streamline the program. Some of these reforms are listed below.

  • The Conference Report would overturn a Department of Labor ban on states’ screening and testing UI applicants for illegal drugs.
  • The Conference Report would permit all states to screen and test any UI applicant who either (1) lost their job because of drug use, or (2) is seeking a job that generally requires a drug test.
  • The Conference Report would create new cost-neutral “waiver” authority that would permit states flexibility in how they can use UI benefit funds for promoting pro-work reforms in UI.
  • The Conference Report would allow up to 10 states to use UI funds to test programs in which unemployed individuals are placed in training positions or real jobs, with the unemployment benefits used to support them and their wages.

  • The Conference Report would allow states that have enacted or are considering UI benefit reductions to continue to receive future federal extended benefit funds, overcoming the current “nonreduction rule” that has forced states to raise taxes to improve solvency.
  • The Conference Report would create national job search requirements for everyone collecting state and federal UI benefits, from the first through the last week of benefits.
  • The Conference Report would require reemployment eligibility assessments for every long-term unemployed person who begins collecting federal UI benefits, to determine what services and activities they need to return to work. The bill would also provide states almost $1 billion in new, time-limited funds to assist the long-term unemployed, partially unemployed and self-employed.
  • The Conference Report would require states to reduce current state and federal UI benefit checks to recover prior overpayments of UI benefits, in order to more quickly and effectively recover the current $12 billion in annual UI overpayments. States would be required to use rules for recovering federal overpayment dollars that are just as aggressive as states use to recover their own overpayments.
  • The Conference Report would require data exchange standards, designed to improve the accuracy and administration of UI benefits.

The reformed UI benefits in the Conference Report would expire on December 31, 2012.  According to CBO, reforming and extending unemployment benefits would increase spending by $30.1 billion over ten years.

 

TITLE III—MEDICARE AND OTHER HEALTH PROVISIONS

Medicare Physician Payment Rates: The Conference Report would prevent a 27.4 percent cut in Medicare physician payment rates slated to begin on March 1, 2012, and instead freeze payment rates at their current level though December 31, 2012. This provision also requires the Government Accountability Office (GAO) and HHS to submit reports to assist Congress in the development of a long-term replacement to the current Medicare physician payment system. According to CBO, this provision would increase spending by $17.9 billion over ten years. According to CBO, all other health provisions in the Conference Report (summarized below) would combine to reduce the deficit by a total $18.1 billion.

 

Additional Health Provisions:

Section 508 Hospital Payments: Under Medicare’s Inpatient Prospective Payment System (IPPS), payments are adjusted by a wage index that is intended to reflect the cost of labor in the area where the services are furnished compared to a national average. The Conference Report would extend higher wage payments to certain eligible hospitals, known as “Section 508 hospitals,” through March 31, 2012, after which time the program will terminate. These special payments were created in 2003 and were intended to last for just three years.  However, subsequent legislation allowed these hospitals to continue receiving the higher funding, without ever having to reapply for the higher wage rate despite the fact that the 1,200+ hospitals that go through the standard wage reclassification process have to reapply every three years. According to the House Committee on Ways and Means, CBO estimates that this provision would increase spending by $100 million over ten years.

Hospital Outpatient Hold Harmless Payments: The Conference Report would eliminate an expansion that was created in the president’s healthcare law and extends the outpatient hold harmless payments for eligible rural hospitals and sole community hospitals (SCHs) with fewer than 100 beds through December 31, 2012. The hold harmless payment provides a payment equal to 85 percent of the difference between an eligible hospital’s outpatient prospective payment system (OPPS) and the hospital’s costs. The provision also requires a study by the Department of Health and Human Services (HHS) on which types of hospitals truly need these payments in order to maintain beneficiary access to outpatient services. According to the House Committee on Ways and Means, CBO estimates that this provision would increase spending by $100 million over ten years.

Physician Work Geographic Adjustment: The Conference Report would extend the floor on the adjustment to the work portion of payments for physician services that accounts for the geographic area where a physician practices. This provision increases payments to physicians in 54 of the 89 Medicare geographic areas that would otherwise have an adjustment value below the floor. Additionally, the provision requires the Medicare Payment Advisory Commission (MedPAC) to examine whether any work geographic adjustment is needed, if so, at what level it should be applied, and the impact of the floor on beneficiary access to care. According to the House Committee on Ways and Means, CBO estimates this provision would increase spending by $400 million over ten years.

Outpatient Therapy Caps: The Conference Report would extend the therapy caps exceptions process through December 31, 2012, with modifications that will require that the physician reviewing the therapy plan of care be detailed on the claim, reject all claims above the spending cap that do not include the proper billing modifier, and provide for a manual review of all claims for high cost beneficiaries to ensure that only medically necessary services are being provided. Furthermore, the spending caps ($1,880 in 2012), which have been in effect since 2006, would be extended to the hospital outpatient department (HOPD) setting to prevent a shift in the site of service to higher cost settings once enforcement of the current exceptions process begins. Exempting these services in the HOPD setting made sense when the hard therapy cap was in place, but it no longer makes sense with the exceptions process. Additionally, HHS is required to collect data to assist in reforming the payment system for therapy services. MedPAC is required to recommend improvements to the outpatient therapy benefit to reflect the individual needs of patients. According to the House Committee on Ways and Means, CBO estimates this provision would increase spending by $700 million over ten years.

Payment for Technical Component of Certain Physician Pathology Services: The Conference Report would allow independent laboratories that have an arrangement with eligible hospitals to bill Medicare directly, as opposed to billing the hospital, for surgical pathology services through June 30, 2012. This four-month extension provides time for labs and hospitals to establish payment arrangements. Expiration after a reasonable transition period addresses concerns that Medicare is paying twice for the same service, which causes beneficiaries to make an extra co-payment.  Minimal CMS oversight of the policy has also made Medicare susceptible to making inappropriate payments.  Further, the GAO has recommended that this policy expire. According to the House Committee on Ways and Means, CBO estimates this provision would increase spending by less than $50 million over ten years.

Ambulance Add-On Payments: The Conference Report would extend through December 31, 2012, the following add-on payments:  two percent for urban ground ambulance services, three percent for rural ground ambulance services, and an increase to the base rate for ambulance trips originating in qualified “super rural” areas as calculated by the Secretary (currently 22.6 percent). It also requires two reports – one from GAO on ambulance provider costs and another from MedPAC on whether or not the ambulance fee schedule should be reformed. These studies will help inform Congress as to whether these add-on payments should be continued in future years. This provision also extends a policy that allows air ambulance services originating in certain rural areas to continue to receive a 50 percent add-on payment to their base rate. According to the House Committee on Ways and Means, CBO estimates these provisions would increase spending by $100 million over ten years.

Qualifying Individual (QI) Program: The Conference Report would extend the Medicare QI program, which provides federal reimbursement for states to cover Part B premiums for seniors with incomes between 120 and 135 percent of poverty, through December 31, 2012. According to the House Committee on Ways and Means, CBO estimates this provision would increase spending by less than $600 million over ten years.

Extension of Transitional Medical Assistance (TMA): The Conference Report would extend TMA, through December 31, 2012, for low-income families transitioning into employment. According to the House Committee on Ways and Means, CBO estimates this provision would increase spending by less than $1.1 billion over ten years.

 

Health Offsets:

Reducing Bad Debt Payments:  The Conference Report would reduce the amount of reimbursement paid by Medicare for beneficiary cost-sharing they are unable, or unwilling, to collect (“bad debt”) from patients. The legislation would reduce bad debt reimbursements from 75 percent to 65 percent beginning in FY 2013 for providers who are currently being reimbursed at 70 percent, while phasing in the reduction to 65 percent over three years for providers who are reimbursed at 100 percent of their bad debt. Under current law, Medicare reimburses hospitals and skilled nursing facilities (SNFs) for 70 percent of the beneficiary cost-sharing they are unable, or unwilling, to collect (“bad debt”). Certain other providers, such as federally qualified health centers (FQHCs) and dialysis centers, are reimbursed 100 percent for the bad debt. SNFs are reimbursed 100 percent for the bad debt resulting from the treatment of “dual eligible” beneficiaries, those enrolled in both Medicare and Medicaid. Although CMS requires providers to take reasonable steps to collect bad debt, this generous reimbursement policy is believed to discourage providers from doing as much as they could. In addition, President Obama has recommended that bad debt payments be reduced to 25 percent.  According to the House Committee on Ways and Means, CBO estimates this provision would reduce spending by $6.9 billion from 2012 through 2022.

Resetting Clinical Laboratory Payment Rates: The Conference Report would reduce payment rates for clinical laboratory services by two percent in 2013.  As the two percent reduction is applied after the update is calculated, the resulting 2013 update amount becomes the new reset base on which the 2014 update will be applied.  The two percent reduction is less than the ten percent cut MedPAC suggested as part of its October 2011 package of potential policies to offset the cost of a comprehensive SGR fix.  According to the House Committee on Ways and Means, CBO estimates this provision would reduce spending by $2.7 billion from 2012 through 2022.

Medicaid Disproportionate Share Hospital (DSH) Allotments: The Conference Report would rebase the Disproportionate Share Hospital (DSH) allotments for FY2021. DSH adjustment payments provide additional help to those hospitals that serve a significantly disproportionate number of low-income patients; eligible hospitals are referred to as DSH hospitals. This annual allotment is calculated by law and includes requirements to ensure that the DSH payments to individual DSH hospitals are not higher than the actual uncompensated costs. According to the House Committee on Ways and Means, CBO estimates this provision would reduce spending by $4.1 billion over ten years.

Correcting the Medicaid “Federal Disaster” Matching Rate: The Conference Report would eliminate funding for the “Louisiana Purchase” contained in the government takeover of health care beginning in FY 2014. The so-called Louisiana Purchase would provide extra Medicaid funding to any state in which every county has been declared a disaster area. According to the House Committee on Ways and Means, CBO estimates this provision would reduce spending by $2.5 billion over ten years.

Reduction in the Prevention and Public Health Fund: The Conference Report would reduce funding in the so-called “Prevention and Public Health Fund,” also known as the “Harkin Fund,” which was created in the government takeover of health care and provides the Secretary of HHS unlimited authority to spend above and beyond appropriated levels for any activity authorized by the Public Health Service Act. According to the House Committee on Ways and Means, CBO estimates this provision would reduce spending by $5 billion over ten years.

 

TITLE IV—TANF EXTENSION

The Conference Report would extend the authorization of the Temporary Assistance for Needy Families (TANF) state block grant program at current level of $16.5 billion annually, through September 30, 2012. In addition, the bill would improve program administration by standardizing data elements to improve integrity and collaboration. The legislation would also prohibit welfare funds from being accessed in strip clubs, liquor stores, and casinos by blocking welfare Electronic Benefit Transfer (EBT) cards from working in ATMs there.

The Conference Report would require states receiving federal grants through the Temporary Assistance for Needy Families (TANF) program to maintain policies that prevent TANF assistance from being used in a transaction in any of the following places:

  • Any liquor store;
  • Any casino, gambling casino, or gaming establishment; or
  • Any retail establishment which provides adult-oriented entertainment in which performers disrobe or perform in an unclothed state for entertainment.

The bill would define a “liquor store” as “any retail establishment which sells exclusively or primarily intoxicating liquor.” Further, the bill would stipulate that a “casino” does not include “a grocery store which sells groceries including such staple foods and which also offers, or is located within the same building or complex as, casino, gambling, or gaming activities.”

To enforce the requirement established in this legislation, the bill would require that federal TANF assistance be reduced by 5 percent in any state that does not report its implementation of these policies within two years.  The reduction would be enforced in the fiscal year immediately succeeding the year in which two-year period ends and would continue each year until the state demonstrates that these policies have been implemented.

 

TITLE V—FEDERAL EMPLOYEES RETIREMENT

Retirement Contributions: The bill would increase the employee contribution to the Federal Employees Retirement System (FERS) for new federal employees with less than five years of previous federal service by 2.3 percent.  The increase would apply to new employees hired after December 31, 2012. Under current law, employees covered by FERS contribute 0.8 percent of their pay to the Civil Service Retirement and Disability Fund, while the federal government contributes an amount equal to 11.9 percent of their pay, according to CRS. This provision would reform federal workforce retirement programs to bring them more in line with the standard practices used in the private sector.

 

TITLE VI—PUBLIC SAFETY COMMUNICATIONS AND ELECTROMAGNETIC SPECTRUM AUCTIONS

Spectrum Auction Authority and Public Safety Communications:  The Conference Report would advance wireless broadband service, spur billions of dollars in private investment, and create hundreds of thousands of jobs by auctioning spectrum frequencies used to provide broadband services.  This would provide additional broadband spectrum and authorize the Federal Communications Commission to conduct incentive auctions. Incentive auctions give the FCC the flexibility to promote more efficient use of spectrum by sharing a portion of auction proceeds with current licensees that are willing to return their licenses to the Commission for re-auction.

Specifically, the bill would establish clearing and auction timelines for spectrum in 1915-1920 MHz and 1995-2000 MHz (the PCS H Block), 2155-2180 MHz (the AWS-3 block), 1755-1780 MHz, 15 MHz from the government spectrum at 1675-1710 MHz paired with 15 MHz to be determined by the FCC.  The bill would also allow the president to substitute alternate spectrum for 1755-1780 MHz and would reallocate the 700 MHz D Block from commercial to public safety use. The bill would also grant the FCC authority to conduct incentive auctions under which it shares some of the proceeds with licensees who return spectrum.  The bill would also assign certain spectrum for public safety broadband use to the Administrator. According to CBO, this provision would produce a net $15.2 billion in auction proceeds over ten years to help offset other costs within the legislation.

 

TITLE VII—MISCELLANEOUS PROVISIONS

Repeal of Certain Timing Shifts of Corporate Estimated Tax Payments:  The bill would repeal a series of recently enacted tax payment schedule timing shifts that have been implemented to modify the required payment of taxes for budgetary estimate purposes. Under current law, companies are generally required to pay corporate estimated taxes according to a regular schedule set by statute. For companies with assets of $1 billion or more, that general payment schedule has occasionally been modified to shift the timing for payment of certain such installments. Typically, these provisions have increased covered corporations’ estimated tax payments that are due in the fourth quarter of particular years by a certain percentage, while decreasing those corporations’ payments by a corresponding amount in the first quarter of the following years. Under the bill, a series of these recently enacted timing shifts would be repealed, restoring the regular payment schedule that applied prior to their enactment. 

 

Cost

According to CBO, the Conference Report would change revenues and direct spending to produce increases in the deficit of $101.1 billion in fiscal year 2012 and $89.3 billion over the 2012-2022 period. The bill would reduce revenues by $77.6 billion over the 2012-2022 period and increase direct spending by $11.7 billion over that period, according to CBO’s and JCT’s estimates.