Podcasts > Money Rehab with Nicole Lapin > The Fate of Medicaid and the Latest on the Big, Beautiful Bill

The Fate of Medicaid and the Latest on the Big, Beautiful Bill

By Money News Network

In this episode of Money Rehab with Nicole Lapin, Nicole examines a major economic bill currently under debate in Congress. The bill proposes to make permanent several Trump-era tax cuts while introducing significant changes to social programs, including substantial Medicaid cuts and new work requirements that could affect healthcare coverage for millions of Americans.

The discussion covers key aspects of the bill's legislative process through budget reconciliation and explores its potential impact on different income levels. Nicole breaks down specific provisions like the SALT deduction cap debate between the House and Senate, and outlines practical strategies for those who might be affected by these changes, particularly residents in high-tax states. The episode provides context for understanding how this legislation could reshape both tax policy and social programs in the coming years.

The Fate of Medicaid and the Latest on the Big, Beautiful Bill

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The Fate of Medicaid and the Latest on the Big, Beautiful Bill

1-Page Summary

Major Economic Bill Under Consideration

A significant economic bill is being debated that would make permanent several tax measures while reshaping social programs and tax deductions across different income levels.

Key Provisions and Their Impact

The bill aims to make permanent the Trump administration's 2017 individual tax cuts and establish $1,000 savings accounts for babies born between 2025 and 2028. However, it also proposes substantial changes to welfare programs, including $880 billion in Medicaid cuts that could jeopardize healthcare coverage for millions of Americans.

The bill introduces new Medicaid work requirements of 80 monthly hours, similar to Arkansas's 2018 program that resulted in 18,000 people losing coverage and increased medical bankruptcies. Rural hospitals, which depend heavily on Medicaid funding, could face significant financial strain under these cuts.

Another contentious element is the SALT (State and Local Tax) deduction cap. While the House version proposes raising the cap from $10,000 to $40,000 to benefit residents in high-tax states, the Senate version maintains the current $10,000 cap, creating a divide between the chambers.

Legislative Process

The Senate is pursuing this bill through budget reconciliation, which requires only 51 votes instead of the usual 60 needed to overcome a filibuster. The Senate parliamentarian, Elizabeth McDonough, must verify that each provision complies with the Byrd rule by directly affecting federal spending, revenue, or debt limits.

Strategic Planning Options

For those affected by these potential changes, particularly in high-tax states, several strategies are available. Homeowners can prepay their 2025 property taxes before year-end to maximize current deductions, while businesses can utilize the Pass-Through Entity Tax (PTET) to directly pay state taxes that remain fully deductible on federal returns. However, tax professionals should be consulted to determine the best approach for individual situations.

1-Page Summary

Additional Materials

Counterarguments

  • The permanence of the 2017 individual tax cuts could disproportionately benefit higher-income individuals, potentially exacerbating income inequality.
  • Establishing $1,000 savings accounts for babies might not significantly impact long-term financial security without additional measures to address systemic economic disparities.
  • The proposed $880 billion in Medicaid cuts could be seen as a reduction in the social safety net, potentially leading to worse health outcomes for vulnerable populations.
  • Implementing Medicaid work requirements may not take into account the complexities of unemployment, such as the availability of suitable jobs or the presence of other barriers to employment.
  • The financial strain on rural hospitals could lead to closures, reducing access to healthcare in rural areas and possibly resulting in negative health outcomes.
  • The debate over the SALT deduction cap reflects differing regional tax burdens and may suggest a need for a more nuanced approach to federal tax policy that accounts for these disparities.
  • Using budget reconciliation to pass the bill could be criticized for bypassing broader bipartisan support and potentially leading to less stable policy outcomes.
  • The Byrd rule's requirement for provisions to directly affect federal spending, revenue, or debt limits may limit the scope of the bill and exclude necessary policy changes that do not meet these criteria.
  • Prepaying property taxes and utilizing PTET may benefit those with the financial means to take advantage of these strategies, potentially creating a tax planning advantage that is not accessible to all taxpayers.

Actionables

- You can start a savings fund for future family members by setting aside a small amount each month into a high-yield savings account or a 529 college savings plan, which could potentially grow tax-free and be used for educational expenses, mirroring the intent of the proposed $1,000 savings accounts for babies.

  • By starting early, even before family expansion, you're preparing for the future educational needs of your children or relatives. For example, if you save $50 a month starting now, by the time a child born in 2025 reaches college age, you could have a substantial amount set aside to help with their education costs.
  • If you're a homeowner, consider creating a property tax savings plan by estimating your future property tax payments and saving a portion each month in a dedicated account, which could allow you to prepay taxes and potentially maximize deductions under current laws.
  • This proactive approach means you won't be caught off guard by large lump-sum payments and can take advantage of any current tax benefits. For instance, if your annual property tax is $3,000, saving $250 monthly will enable you to prepay your taxes, possibly reducing your taxable income.
  • Engage with local healthcare advocacy groups to stay informed and potentially influence policy regarding Medicaid cuts and work requirements, ensuring you and your community are prepared for any changes that could affect healthcare coverage.
  • By participating in town hall meetings, signing petitions, or volunteering with advocacy groups, you can contribute to the conversation on healthcare policies. This involvement can help safeguard your own access to healthcare and support the stability of rural hospitals that are vital to many communities.

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The Fate of Medicaid and the Latest on the Big, Beautiful Bill

Provisions and Impacts of Economic Bill

An economic bill currently under consideration seeks to solidify prior tax measures, alter social safety net programs, and adjust tax deductions, with significant ramifications for Americans at different economic levels.

Bill to Permanentize Trump's 2017 Tax Cuts, Create Baby Tax Savings Accounts

Bill Seeks to Make 2017 Individual Tax Cuts Permanent

The economic bill aims to perpetuate the Trump administration’s 2017 tax cuts, which were set to expire, maintaining reduced tax rates for individuals.

Bill to Create $1,000 Baby Savings Accounts for 2025-2028

In addition to making tax cuts permanent, the bill proposes the creation of savings accounts for babies born between 2025 and 2028. Each baby would receive a $1,000 savings account.

Bill to Cut Medicaid, Snap Benefits Raises Human Cost Concerns

The bill proposes substantial fiscal reductions to welfare programs, prompting debates on the potential human toll these cuts could cause.

Bill Proposes $880 Billion Medicaid Cuts, Risking Coverage Loss For Millions

Medicaid faces cuts amounting to $880 billion over the timeframe proposed by the bill, potentially jeopardizing healthcare coverage for millions of Americans.

New Medicaid Work Requirements Cause Coverage Losses and Medical Bankruptcies

The bill introduces work requirements for adult Medicaid recipients, demanding 80 hours of monthly work, school attendance, or community service for eligibility. These stipulations align with Arkansas’s 2018 requirements that led to 18,000 coverage losses and did not improve employment. Additionally, the state saw an increase in medical bankruptcies.

Reduced Medicaid Funding Could Threaten Rural Hospitals' Viability

If passed, reduced Medicaid funding risks destabilizing rural hospitals financially, as they rely on Medicaid for essential services. This could force service reductions or hospital closures.

Bill to Raise Salt Deduction Cap Sparks GOP Debate

The retention and expirat ...

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Provisions and Impacts of Economic Bill

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Counterarguments

  • Making the 2017 individual tax cuts permanent could disproportionately benefit higher-income individuals and exacerbate income inequality.
  • The creation of $1,000 baby savings accounts, while potentially helpful, may not significantly impact the long-term financial security of children, especially in lower-income families.
  • Cutting Medicaid by $880 billion could reduce the deficit but may also shift costs to states, potentially leading to reduced coverage or benefits for recipients.
  • Work requirements for Medicaid could encourage self-sufficiency but might also penalize those who are unable to work due to caregiving responsibilities, lack of jobs, or education opportunities.
  • While reduced Medicaid funding could threaten rural hospitals, proponents might argue that it encourages efficiency and the need for innovative healthcare delivery models in rural areas.
  • The expiration of the $10,000 cap on SALT deductions affects taxpayers differently across states, and retaining the cap could be se ...

Actionables

- You can evaluate your current tax situation to anticipate changes by consulting with a tax professional or using updated online tax calculators that reflect the proposed permanent individual tax cuts. This will help you understand your potential future tax liabilities and plan accordingly.

  • If you're expecting a child during the specified years, start researching financial institutions that may offer the proposed $1,000 baby savings accounts. Look for those with the best interest rates and lowest fees to maximize the growth of the initial deposit over time.
  • Revi ...

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The Fate of Medicaid and the Latest on the Big, Beautiful Bill

Political and Legislative Process Of Passing the Bill

As the Senate gears to vote on an economic bill, the political and legislative mechanisms utilized for its potential passage have come under scrutiny.

Bill Pushed Through Senate Via Budget Reconciliation Process

Reconciliation Lets the Senate Pass Bills With a 51-vote Majority Instead of the Usual 60 Needed to Overcome a Filibuster

The Senate is utilizing the budget reconciliation process to pass the economic bill, a procedure which allows for legislation to be expedited through a simple majority. This method circumvents the traditional necessity for a 60-vote majority to bypass a filibuster, lending the Senate the ability to enact a bill with a 51-vote majority instead.

Senate Parliamentarian Ensures Provisions Directly Impact Federal Spending, Revenue, or Debt Limit per Byrd Rule

Central to this process is the role of the Senate parliamentarian, Elizabeth McDonough, who is responsible for a meticulous review known as the "Byrd bath". McDonough's job is to certify that each provision rigidly adheres to the Byrd rule by directly influencing federal spending, revenue, or the debt limit—criteria ...

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Political and Legislative Process Of Passing the Bill

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Counterarguments

  • The use of budget reconciliation can be seen as a partisan tool that undermines the spirit of bipartisan cooperation.
  • Relying on a simple majority through reconciliation may lead to more polarized and less stable legislation, as it could be easily reversed when the opposing party gains control.
  • The Byrd rule, while intended to maintain fiscal discipline, can be seen as a limitation on the scope of legislation, potentially excluding important policy measures that do not directly impact federal spending, revenue, or the debt limit.
  • The role of the Senate parliamentarian, though intended to be neutral, can become controversial if significant provisions of a bill are struck ...

Actionables

  • You can track the progress of the bill to understand the legislative process by setting up alerts on a government tracking website or app. This will notify you when there are updates on the bill's status, including any delays due to the parliamentarian's review. For example, use a service like GovTrack.us to follow the bill and receive email updates on its movement through Congress.
  • Engage with your representatives by writing to them about your stance on the bill, emphasizing the urgency of the budget reconciliation process. Use online platforms that facilitate communication with elected officials, such as Democracy.io, to send a personalized message explaining how you believe the bill will impact federal spending and why it's important to you.
  • Create a social media group or page focused on discussing the economic bill and its implicatio ...

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The Fate of Medicaid and the Latest on the Big, Beautiful Bill

Strategies to Prepare For Bill Changes

To navigate the complexities of taxation and optimize deductions, two strategies stand out for individuals and businesses in high-tax states.

Prepay Property Taxes to Maximize Salt Deductions in High-Tax States

Individuals living in high-tax states currently face a cap on their state and local tax (SALT) deductions.

$10,000 Salt Cap Costs Homeowners In High-Tax States Thousands In Deductions

The SALT cap limits deductions to $10,000, which could cost homeowners thousands in lost deductions, particularly in states with high property taxes.

Prepaying 2025 Property Taxes Before Year-End Boosts 2022 Deduction

To counter this, individuals are advised to prepay their 2025 property taxes before the end of the current year, provided their local governments permit. This could potentially boost their deductions for the current tax year, offering significant tax savings.

Mitigate Salt Cap Impact With Ptet

Businesses have a different avenue available to them to help soften the blow of the SALT cap—a strategy known as the Pass-Through Entity Tax (PTET).

Ptet Lets Pass-Through Businesses Directly Pay State Taxes, Fully Deductible Federally

The PTET enables pass-through businesses to pay state taxes directly. T ...

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Strategies to Prepare For Bill Changes

Additional Materials

Counterarguments

  • Prepaying property taxes may not be beneficial if tax laws change, potentially leading to a situation where the prepayment does not yield the expected tax benefit.
  • The strategy of prepaying taxes assumes that the taxpayer has the available cash to do so, which may not be the case for all individuals.
  • PTET may not be advantageous if the state tax rate is lower than the federal tax rate, as the deduction would be less valuable.
  • The PTET strategy may not be available in all states, limiting its applicability for some businesses.
  • Consulting a tax professional incurs additional costs, which may offset some of the tax savings gained from these strategies.
  • Changes in tax legislation can occur, potentially retroactively affecting the benefits of strategies like PTET or prepaying pr ...

Actionables

  • You can analyze your anticipated property tax bills for the next few years to see if prepaying makes sense financially. By comparing your future property tax liabilities with your current financial situation, you might find that prepaying could save you money in the long run. For example, if you expect your property taxes to increase significantly due to local levies or reassessments, paying them ahead of time at the current rate could be beneficial.
  • Consider forming a pass-through entity if you're a freelancer or sole proprietor to take advantage of PTET. By restructuring your business as an S Corporation or a Limited Liability Company (LLC) that's taxed as a pass-through entity, you could potentially reduce your federal tax liability. For instance, if you're a freelance graphic designer, setting up an LLC could allow you to pay state taxes at the entity level and deduct them federally.
  • Explore local tax credit progra ...

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