Health Care Provisions in Tax Reform Legislation

The Senate passed tax reform legislation on December 2 by a 51-49 vote, with all Democrats voting no and Sen. Bob Corker (TN) the only Republican to oppose the bill. The House passed their version of tax reform legislation on November 16. Differences between the two bills will need to be reconciled in a conference committee, and then that final bill (called a conference report) would have to pass in the House and Senate before being sent to the President. The House and Senate have appointed members of a bipartisan conference committee, and they hope to finish the conference and send a bill to the President before the Christmas holidays. 

Health care-related issues have played a prominent role in the negotiations in the Senate tax reform bill, particularly in securing the vote of Sen. Susan Collins (R-ME). Health care provisions are also key differences in the House and Senate bills that need to be resolved. The Senate bill includes a repeal of the Affordable Care Act’s (ACA) individual mandate, which requires individuals to purchase health insurance or pay a penalty; the House version does not. The Congressional Budget Office (CBO) has estimated that repeal of the individual mandate would result in budget savings of $338 billion over 10 years, due to decreased government spending on subsidized ACA coverage. CBO also estimates that 13 million more people would be uninsured and premiums would increase by 10 percent, as healthier people choose to go without coverage, resulting in a less healthy and therefore more expensive risk pool.

To address her concerns on repealing the individual mandate and to secure her vote on the tax reform bill, Collins demanded and received assurances from Senate Majority Leader Mitch McConnell (R-KY) and the President that they would support passage of two separate bills to stabilize the ACA insurance markets: legislation introduced by Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA) that would fund ACA cost-sharing reduction subsidies for two years, and a bill introduced by Collins and Sen. Bill Nelson (D-FL) that would fund short-term, state-based high-risk pools or reinsurance programs. Collins believes these stabilization bills will help mitigate the negative effects of repealing the individual mandate. However, CBO has estimated that passage of the Alexander-Murray bill would do nothing to blunt the effects of repealing the individual mandate, and Democrats argue that the damage caused by eliminating the mandate far outweighs any positive effects of passing the two stabilization bills. Another matter of uncertainty is when and how the House and Senate would pass these bills—if they may be included in must-pass spending legislation, and whether the bills would face major opposition from House Republicans.

Another difference in the Senate and House tax reform bills and a factor that secured Collins’s vote for the Senate bill was the inclusion of her amendment to decrease the threshold for medical expense deductions from the current 10 percent of a person’s adjusted gross income to 7.5 percent for 2017 and 2018. This is in contrast to the House version, which eliminates the medical expense deduction entirely. The deduction provides tax relief for many middle class people with high-cost chronic illnesses, and Collins’s amendment garnered support from various health care and disease groups.

A significant concern underlying the House and Senate tax reform efforts is that final passage of a bill will trigger automatic spending cuts to mandatory spending programs, including Medicare. 2010 “Pay as you go” (PAYGO) legislation requires that all passed bills cannot collectively increase the estimated national debt. If a passed bill does violate PAYGO, then an automatic cut across mandatory spending programs would be required to offset the cost, including cuts to Medicare capped at 4 percent. Because the Senate bill is estimated to increase the deficit by about $1.5 trillion over the next decade, it would trigger a Medicare cut of $25 billion per year. Congress can waive PAYGO rules through legislation, but it requires 60 votes in the Senate. Republican leadership in the House and Senate have insisted that they will not let these cuts go into effect, and they may include a PAYGO waiver in must-pass spending legislation.

Posted: | Author: AKF Staff