William A. Jacobson
Associate Clinical Professor of Law, Cornell Law School, Ithaca, NY
People often joke that government-run health care will have the efficiency of the motor vehicle department, and the compassion of the Internal Revenue Service. This joke will become reality if present Democratic health restructuring proposals are enacted.
Under both the House and Senate Health, Education, Labor and Pensions (HELP) Committee bills released to the public, the Internal Revenue Service will play a key role in monitoring and enforcing health care mandates against individual taxpayers. Yet the introduction of the IRS into the health care system has received scant attention.
The Senate bill imposes a new requirement that all persons who provide health care coverage to others must file a return with the IRS listing the names, addresses, social security numbers, and the coverage period for each person, and "such other information as the Secretary [of Health and Human Services] may prescribe." (Section 161(b) starting at page 107). The bill does not limit what information the Secretary may request, so it is conceivable and likely that information as to the nature of the coverage, the family members included, and other details will be reported to the IRS.
The House bill contains similar provisions in section 401(b) (at pp. 175-176). The following information must be reported by the person providing health coverage:
(A) the name, address, and TIN of the primary insured and the name of each other individual obtaining coverage under the policy, (B) the period for which each such individual was provided with the coverage referred to in subsection (a), and (C) such other information as the Secretary may require.
This information is to be provided to the IRS for good reason. The House bill provides for a tax on people who do not have acceptable coverage at "any time" during the tax year. House bill section 401 provides for a new section 59B (at pp. 167-168) of the Internal Revenue Code:
(a) TAX IMPOSED.—In the case of any individual who does not meet the requirements of subsection (d) at any time during the taxable year, there is hereby imposed a tax equal to 2.5 percent of the excess of—
(1) the taxpayer’s modified adjusted gross income for the taxable year, over
(2) the amount of gross income specified in section 6012(a)(1) with respect to the taxpayer.
The Senate version is similar, although the tax is called a "shared responsibility payment" not a tax. Section 161 (at pp. 103-104) words new section 59B of the IRC to require lack of coverage for a month (subject to certain exemptions) before the tax kicks in, and does not specify a specific percentage, but instead, directs that annually
the Secretary shall seek to establish the minimum practicable amount that can accomplish the goal of enhancing participation in qualifying coverage (as so defined).
The reporting requirements can only be understood in this tax context. In order to know which taxpayers to tax, the IRS needs to know which taxpayers do not have coverage received from someone else (normally, an employer).
These reporting provisions would allow the IRS to cross-check income tax returns and health coverage filings, and withhold tax refunds or utilize other collection methods for persons who do not have coverage unless they can prove they have acceptable coverage from some other source. This is similar to the cross-checking the IRS does on income reported separately by the person making the payment and the taxpayer receiving the payment. But for the first time the IRS is not checking for income to tax, but for lack of health coverage.
These provisions should have people interested in privacy greatly concerned. While income information already is reported to the IRS, the IRS traditionally has not received personal health care information about individuals.
The IRS involved in health care monitoring and enforcement. Somehow, I doubt that most supporters of Democratic health care restructuring concepts will like this detail. But it's in there.