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Fiscal Cliff Deal: Mostly Good for Physicians

Article

A one-year delay in the proposed Medicare SGR payment cut is one of three wins of the fiscal cliff deal reached in Washington, D.C., for physicians.

The fiscal cliff deal struck between Vice President Joe Biden and Senate minority leader Mitch McConnell is a good deal for physicians.

The biggest win of all is the Sustainable Growth Rate (SGR) mandated 30 percent cut in Medicare reimbursement will be put off for another year. Judging from politicians' propensity to kick the can down the road - as long as there is still a road - I come to the conclusion that physicians shouldn’t be worried about that any more. Once the negative economic impact is so huge, it almost guarantees the cut would not be carried out.

The second biggest win is that the cut off for a tax increase is $450,000 as opposed to $250,000 as President Obama first proposed. While many physicians are making $250,000 and above, far fewer are making $450,000 and above. For the few physicians who do earn that much, however, you will see your marginal tax rate on income above $450,000 increase to 39.6 percent. Your first $450,000 of income, though, is permanently set at the Bush-era income tax rates.

The third win is the tax increase for capital gains and dividends are far less than anticipated. Only families making $450,000 and above will see their capital gain and dividends tax rate go up to 20 percent. The president’s original proposal will have the dividend tax rate for top earners go up to 39.6 percent as well. This is going to be beneficial for physicians building long-term wealth.

For physicians who make between $250,000 and $450,000 you will still see higher taxes as the result of phasing out of itemized deduction and the 3.8 percent "Obamacare" surtax on investment incomes. For physicians who make less than $250,000, everything will stay pretty much the same.

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