As a result of earlier legislation passed by Congress and signed by the President, a host of positive changes to the Medicare program and the tax code took effect on January 1^st. The changes to Medicare reduce seniors' out-of-pocket costs and improve their access to preventive care, home health, and rehabilitation therapy. The new tax changes allow Americans to keep more of their money to raise children, save, invest, and pay for their children’s educational costs.

    Effective January 1^st, the out-of-pocket costs seniors pay for hospital outpatient care, which had often exceeded Medicare’s standard 20 percent co-pay by hundreds of dollars, will be the same as the deductible for inpatient care - $776 in 2000. With the start of the new year, Medicare began offering free prostate cancer screenings to beneficiaries. Effective January 1^st, the government’s minimum payment for the test component of a Pap smear under Medicare is increased to $14.60, which will increase reimbursements to labs and enhance women’s access to these tests.

    With new provisions taking effect to allow Medicare+Choice plans to vary their benefit packages, six million seniors will be offered more benefits. Provisions approved by Congress last year provide $3.3 billion to Medicare+Choice plans to increase their benefit options and give them incentives to enter markets not offering a Medicare+Choice plan. Other new Medicare changes repeal the $1,500 occupational, physical, and speech therapy caps for two years. The new year brought greater access to home health care with increased payments pending the full implementation of a new payment system for home health care. And Congress added an extra $1.4 billion for this year to care for patients with medically complex problems who enter skilled nursing facilities and nursing homes.

   An array of tax changes also took effect with the new year, lowering the tax burden for millions of Americans. More than one million Americans will avoid a tax increase in 2000 because Congress extended a provision allowing filers to use personal nonrefundable credits - such as the child tax credit, the Lifetime Learning tax credit, the Hope scholarship tax credit, and the dependent care tax credit - to reduce their liability under the Alternative Minimum Tax. Seniors between the ages of 65 and 69 can now earn up to $17,000 without losing any of their Social Security benefits, up from $15,500 in 1999. The limit will increase to $30,000 in 2002.

    The maximum amount an individual can contribute on a salary reduction basis to a 401(k) plan increased from $10,000 in 1999 to $10,500 in 2000 because of cost-of-living adjustments Congress built into the tax code. More interest on qualified education loans will be deductible in 2000. The maximum deduction rose from $1,500 in 1999 to $2,000 in 2000, on its way to $2,500 in 2001 and thereafter. The exemption from estate taxes - previously $650,000 - is increased to $675,000 in 2000. It will reach $1 million in 2006. The standard deduction for 2000 will go up $100 for single taxpayers (to $4,400) and up $150 for married couples filing jointly (to $7,350).

    Taxes and Medicare will play prominent roles in this year’s congressional agenda. Congress will focus its tax relief efforts on (1) reducing the marriage penalty (the increased tax burden many married couples face compared to their individual tax liability as single filers), (2) expanding access to education and health care, (3) further reductions in the estate tax to help small businesses and farmers, and other targeted changes in the tax code. Congress also will work to strengthen the financial health of Medicare and provide expanded benefits such as prescription drugs for beneficiaries who need help the most. With bipartisan cooperation between Congress and the administration, the next New Year can be an even better one for taxpayers and those who rely on Medicare.

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