8.

part of the carrier's overall plan, the option of benefits
supplementary to Health Insurance at a subscription rate
actuarially commensurate with that option, and to deal
with situations where a federal employee or annuitant is
enrolled under the FEHB program for himself and family
but only some members of the family unit (and possibly
excluding the enrollee himself) are entitled to Health
Insurance benefits and others should be covered under the

carrier's overall plan.141

The Financing of Health Care Benefits

a. Present Law

Under the Hospital Insurance program, Hospital Insurance benefits available to individuals who are entitled to monthly social security benefits or who are qualified railroad retirement beneficiaries, are financed from taxes imposed under Internal Revenue Code §§3101 (b), 3111 (b) and 4101 (b). In the case of uninsured individuals who are transitionally entitled to Hospital Insurance protection, benefits are financed out of appropriations from the Federal Government. In the case of voluntary enrollees under the Hospital Insurance program, benefits are financed from the payment of premiums.

Under the Supplementary Medical Insurance program, benefits to voluntary enrollees are financed from premium payments by the enrollees, together with contributions

from funds appropriated by the Federal Government.

See, Medicare Amendments of 1974, SS141.

143

b.

The Medicare Amendments of 1974

Under the Medicare Amendments of 1974, health care benefits would be continued to be financed by taxes imposed by Internal Revenue Code §§3101 (b), 3111 (b) and 4101 (b), except that the taxes would be called health insurance taxes and in the case of the taxes imposed under Internal Revenue 663101 (b), such taxes would be imposed on the

amount of the social security tax base for that particular

142

year plus 25 per cent and except that the payroll taxes

imposed on the employer under Internal Revenue Code
§§3111 (b) would be imposed on a tax base of total pay-
143
roll.
If the present social security taxable wage
base of $13,200 were to remain in effect, the health
insurance taxes imposed under Internal Revenue Code
§§3101 (b) under the Medicare Amendments of 1974 would
be imposed upon an initial tax base of $16,500.
should the social security taxable wage base be increased
under the enacted escalator provisions, the tax base may
rise further beginning in 1975.

However,

In addition to these modifications of existing tax systems, the Medicare Amendments of 1974 would impose a new tax on unearned income (designated as a tax on "health insurance unearned income") of every individual not entitled to benefits under Title XVIII of the Social 144 The tax imposed would be a stated

Security Act.

142 Medicare Amendments of 1974, §§201 (c) ("I.R.C.863121 (u)'). Medicare Amendments of 1974, §§201 (c) ("I.R.C.§§3121 (s) (2)"). Medicare Amendments of 1974, §§212("I.R.C.§§1403 (a)").

144

percentage (similar to the rate of tax imposed under social security payroll and self-employment taxes) of "health insurance unearned income."145

To supplement the revenue which would be generated through this combination of taxes, the Medicare Amendments of 1974 would provide for a Federal Government contribution to the Medicare Trust Fund out of general revenues.146

145Under Medicare Amendments of 1974, §§212("I.R.C.§61403(b)"), the term "health insurance unearned income" would be defined as an amount determined by deducting from the adjusted gross income of an individual any part of that income in excess of the health insurance contribution base (the taxable wage base for purposes of the employee portion of the social security payroll taxes) and deducting from the remainder any part of the adjusted gross income that consists of wages subject to tax under I.R.C. §§3101 (b) (the payroll tax), self-employment income taxable under I.R.C. §§4101 (b) (the tax on self-employment income), amounts excluded from wages (otherwise taxable under I.R.C. §§310(b)) by reason of I.R.C. §§3121, and renumeration for services performed for another in an employment capacity but excluded from the definition of "employment" under I.R.C. §§3121(t) and from the definition of "trade or business" under I.R.C. §§1402 (c).

146 Medicare Amendments of 1974, §§112 (a) ("1839 (c) (1) ").

62

PART FIVE

DESCRIPTION OF THE COMPREHENSIVE HEALTH INSURANCE ACT

and a

COMPARISON OF THAT ACT WITH CURRENT LAW

AND THE MEDICARE AMENDMENTS OF 1974

A.

DESCRIPTION OF THE COMPREHENSIVE HEALTH INSURANCE ACT OF 1974

The Comprehensive Health Insurance Act of 1974 would replace the present Title XVIII of the Social Security Act and would sub147

stitute therefore an entirely new Title XVIII.

Each employer would be required to provide each of his non-aged, "full time" employees with the opportunity to obtain coverage for himself and the non-aged members of his family under an "employee health care insurance plan", an assisted health care insurance plan, or a prepaid health care plan.148 The employer may use a carrier or may self-insure. quired coverage may also be provided under a "special employee health care program. Any carrier in a certified state150

"

149

The re

that provides an employee health care insurance plan to a

147 But only with respect to "certified" states; See Comprehensive Health Insurance Act of 1974, §§102(b). 148 Comprehensive Health Insurance Act of 1974, §§101 ("1801 (a)"). 149Comprehensive Health Insurance Act of 1974, §§101 ("1844"), setting forth the requirements for approval of a "special employee health care benefit program" contemplates allowing a more liberal program than the minimum required for employee health care insurance plans; however, by allowing such programs to have "lower (durational) limitations" than those required with respect to covered services under Employee Health Care Insurance Plan, the matter is in doubt.

150States must be certified by the Secretary of HEW, Comprehensive Health Insurance Act, 88101 ("1861").

small employer would be required to offer the same plan to all employers in the same state151

Through federal grants, each state would be encouraged to offer, through carriers, an "assisted health care insurance plan (AHIP)" to state residents who are not entitled to benefits under the "federal health care benefits program (FHIP)" and are not covered under a plan provided directly by the employer (EHIP etc.) and who have aggregate incomes of less than specified amounts and to state residents who are not entitled to benefits under an FHIP and are not eligible for coverage under an employer-provided health care

plan152 An AHIP must also allow an employer, required to provide EHIP or comparable protection to his employees, to obtain health care benefits under an AHIP for his employees who are

state residents.153 All persons eligible, either directly

or through an employer, under the state AHIP program would have the option of obtaining coverage either under an AHIP or prepaid health care plan.

An aged resident in a certified state who is entitled to 154 social security section 202 benefits or is a qualified railroad retirement beneficiary would be entitled to federal health

care benefits under the FHIP or entitled to have the Secretary

15 Comprehensive Health Insurance Act, 101 ("1861 (a) (5) ") . 152 Comprehensive Health Insurance Act, $8101 ("1822(a)"). 153Comprehensive Health Insurance Act, 101 ("1822 (a) (2)"). 154or would be so entitled if employment with the federal, state or local governments or agencies or instrumentalities thereof were covered employment for purposes of social security cash benefits.