The individual mandate repeal and possible cuts to Medicare spending are the most high-profile impacts, but there are other effects you may not be aware of.
The individual mandate repeal and Medicare spending are getting most of the attention.
As well they should.
But those aren’t the only health-related items in the $1.5 trillion Republican tax cut bill on the verge of being approved by Congress and sent to the White House for President Trump’s signature.
There are provisions in the bill as it stands that would affect hospital construction projects, medical students, and nonprofit health organizations.
Some of the impacts are relatively minimal while others could have deep and long-lasting effects.
Without a doubt, the provisions that will have the biggest impact on the healthcare industry are the repeal of the individual mandate and the potential cuts in Medicare spending.
The individual mandate is a key component of the Affordable Care Act (ACA).
It requires everyone to have health insurance. Those who don’t sign up pay a penalty on the following year’s income taxes.
Experts have told Healthline that the mandate is necessary because it forces healthier consumers into the insurance pool overseen by ACA marketplaces.
Those healthier, less costly participants help balance out the less healthy, more costly participants.
The experts said the repeal of the mandate would prompt insurance firms to drop out of the ACA marketplaces and premiums to increase.
In early November, the Congressional Budget Office (CBO) released a report that predicted the loss of the mandate would cause premiums to rise 10 percent and result in 13 million fewer people having health insurance by 2027.
There is no mention of Medicare spending cuts in the GOP tax cut bill.
However, experts say the reductions in tax revenues under the bill would trigger a 2010 law that requires spending cuts in some federal programs if Congress passes legislation that creates a deficit.
Programs such as Social Security and unemployment benefits are exempt from the cuts.
But there is no exemption for Medicare, which pays for medical services for 54 million people in the United States 65 years and older.
Under the “pay as you go” law, Medicare faces the same 4 percent reduction as programs such as Meals on Wheels and aid to farmers.
It’s estimated that would create an annual reduction of $25 billion in Medicare spending, starting next year.
Congress could waive the Medicare spending reduction, but that requires a new, separate piece of legislation.
An expert told the San Francisco Chronicle that the cuts probably wouldn’t result in any beneficiaries losing coverage.
But, she said, it could reduce Medicare payments to providers such as hospitals, physicians, and skilled nursing facilities.
One of the key things the tax cut bill is keeping is the medical expense deduction.
This provision allows families to deduct extraordinary medical expenses that eat up more than 10 percent of their income.
The original House bill proposed eliminating this deduction.
However, the current bill hammered out by a Congressional conference committee expands the deduction for 2017 and 2018.
During those tax years, the deduction will kick in at 7.5 percent of a household’s annual income. After that, it returns to the 10 percent threshold.
Congressional leaders told the Washington Post the deduction is critical for people living in nursing facilities or people battling long-term diseases such as cancer or Alzheimer’s.
The deduction is now used by almost 9 million Americans.
Another winner in the tax cut bill could be the pharmaceutical industry.
The New York Times reports that companies such as Johnson & Johnson as well as Pfizer could benefit.
Besides saving money when the overall corporate tax rate drops to 21 percent, multinational firms like these pharmaceutical giants could reap rewards from a provision involving tax haven subsidiaries.
The companies would be required to eventually bring that money back to the United States, but they would be taxed on those funds at rates between 8 percent and 15 percent, much lower than current tax rates.
A story in Modern Healthcare also notes that the tax bill will cap at 30 percent the ability of for-profit healthcare corporations to deduct interest payments. That kicks in next year and will be further restricted beginning in 2022.
Not-for-profit organizations would have to pay a 21 percent excise tax on compensation exceeding $1 million to executives. The American Hospital Association opposes this provision, saying these groups need to pay top rates to hire top talent.
The bill keeps the tax waiver for reduced tuition for graduate students. Medical schools had pushed to preserve this break because it helps make graduate medical studies more affordable.
Finally, the bill does not make any changes in regards to tax laws for health savings accounts (HSAs), according to a report from NPR.