Tip Sheets

Keep these points in mind when covering the tax bill’s impact on health care

Joanne Kenen

By Joanne Kenen

The tax bill nearing final passage in Congress contains numerous provisions that will have a profound impact on health coverage, science and medical education, and the health industry. The House and Senate bills differ; it’s impossible at this point to know which chamber will prevail on specific measures, though the odds are it will look more like the Senate, which has a narrower Republican margin, and which is constrained by rulings by the Senate parliamentarian on what provisions are allowed under the arcane budget reconciliation process.

Republican leaders hope to negotiate a final version and pass it before Congress recesses sometime around Dec. 22, give or take a few days depending on the duration of their short-term spending patch, or continuing resolution.

The tax bill balloons the deficit in the neighborhood of a trillion dollars over a decade, according to Congress’s own estimate. Mandatory “pay-go cuts” triggered by the tax bill probably – though not definitely – will be waived. That would stop the automatic cuts to Medicare and other domestic programs, which could account to about $25 billion a year alone for Medicare. However, expect many battles in the months to come over the desire to cut both domestic discretionary programs and entitlements such as Medicaid and Medicare in order to keep down the deficit. There will be a lot less money in the federal coffers to go around, and Republicans will push their smaller government vision. States may face similar pressures to cut social services since the deduction for state and local taxes will be limited or ended.

Below are some of the health provisions in the tax bill. Keep in mind that other provisions – taxes on certain college and university endowments, treating graduate school teaching fellowships as income, treatment of student loans – will affect post-graduate science and medical education. Some of the overseas tax provisions – on repatriation of foreign income – affect the pharmaceutical industry, including those with operations in storm-ravaged Puerto Rico. The House bill repeals the orphan drug tax credit; the Senate shrinks it.

Repeal of the individual mandate

After months of trying – and ultimately failing – to repeal and replace the Affordable Care Act championed by former President Barack Obama, the Senate in its tax bill included repeal of at least the individual mandate – a policy lynchpin of the ACA.  The House is considered likely to back the repeal during conference committee negotiations.

The Congressional Budget Office estimates that axing the mandate will mean 4 million fewer people will have health insurance in one year, 13 million fewer in a decade. That insurance will become more expensive because those who buy it will likely be older and/or sicker than those who drop out of the market. This has implications for people with pre-existing conditions, who will need insurance but find it more expensive. The insurance subsidies will still be available for those who qualify based on their income.

Medical deductions

The House bill eliminated the medical expense tax deduction – which would be a blow to people with significant health expenses, such as people with disabilities (or a family member with a disability); costly chronic diseases; long-term care expenses; home health; or large drug expenses.  The Senate bill initially left the deduction intact – but at the last minute made it a bit more generous for two years. Right now, people can deduct expenses that are more than 10 percent of adjusted income. The Senate bill, in a concession to Sen. Susan Collins, modified that to 7.5 percent, where it had stood until the ACA raised the threshold. About 8.8 million people were able to deduct their expenses in 2015, according to AARP, and they were disproportionately older.

Collins also said she had obtained a promise from Senate Majority Leader Mitch McConnell to move ahead on the Alexander-Murray bill to restore cost-sharing reduction subsidies and to work on a reinsurance bill. She hopes that will decrease the impact of the premium rise from the mandate repeal.


The House bill ends a tax credit that helps businesses comply with the Americans with Disability Act. (Read more in this Daily Beast story.)

Fetal rights

Language that enables tax-preferred 529 savings accounts to be established for a fetus (giving some legal rights to the fetus, a long-time goal of some in the anti-abortion movement) was stripped from the Senate bill because it violated the strict rules that govern budget reconciliation. It is still in the House bill but unlikely to make it into the final version because of a ruling by the Senate parliamentarian.

Hospital bonds

The House bill eliminates tax-exempt private activity bonds used by nonprofits – including hospitals and academic medical centers, but the Senate preserves them.  Both bills ban tax-exempt advance refunding of prior tax-exempt bond issues, now a considerable part of the municipal bond market. The measure – particularly the House version – is likely to give hospitals less access to affordable capital. Since this would be a bigger problem for small hospitals, some analysts believe it may spur more mergers and consolidations. (Modern Healthcare has more on this.)

Joanne Kenen is AHCJ’s health reform topic leader and executive health editor at Politico. A Washington-based writer who specializes in health and health policy, Kenen's work has appeared in the Atlantic, The Washington Post, Slate, the Washingtonian, Kaiser Health News, Health Affairs, Miller-McCune, the American Prospect, AARP Magazine and numerous other publications.