U.S. Supreme Court Upholds Individual Mandate Contained in the 2010 Patient Protection and Affordable Care Act

The Supreme Court today ruled 5 to 4 that Congress does have the power to require that individuals acquire and maintain health care insurance. The decision also prohibits the federal government from withholding funds from state Medicaid programs (under certain circumstances).

With the decision, the 3.8% Medicare Contribution Tax (MCT) remains, effective January 1, 2013. The MCT is applicable to unearned income, to be calculated and paid in addition to an individual’s ordinary income tax or AMT liability (as applicable). The MCT is calculated based upon the lesser of (i) the individual’s net investment income for the year, or (ii) any excess of modified adjusted gross income (MAGI) over the threshold amount ($250,000 for joint filers). MAGI is defined as AGI for the tax year, increased by otherwise excludable foreign earned income or foreign housing costs under IRC Sec. 911. The MCT applies to estates and trusts, and is subject to estimated tax payment rules. 

For investors striving to understand the impact of the U.S. Supreme Court decision, the broader question will be the details of implementing the 2010 health care legislation. Further, the impact on HMOs and  hospitals and similar health care models could be most impacted by the Court's decision. Accordingly, persons contemplating investing in the broad health care industry should be very cautious while remaining attendant to long term objectives, risk tolerance, investment horizon, and other factors.

Separately, based on research assessing the cost of the 2010 health care legislation, it is estimated there will be between $340 billion and $530 billion in federal deficits during the next decade;  overall, federal spending could increase by more than $1.1 trillion from 2012-21. The law, however, does rely on achieving savings to pay for its other provisions, such as providing subsidies to low-income individuals to pay for health coverage on insurance exchanges. Exchange subsidies will cost $777 billion during the next 10 years, according to the Congressional Budget Office.

We will continue to provide updates as to the continuing impact of the 2010 legislation and today's U.S. Supreme Court decision.


Timothy Speiss is the Partner-in-Charge of EisnerAmper's Personal Wealth Advisors Group and Vice President of EisnerAmper Wealth Planning LLC. He chairs our Asia Practice and is a member of the firm’s community service group, EisnerAmper Cares.

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