By Ryan Kelly –
Tax reform has long since been a goal of Republicans since the election of President Trump, and it appears that the House and Senate have found common language with enough votes to pass (down party lines).
The legislation, which will provide substantial tax breaks to individuals in all tax brackets (except for those not currently paying taxes), may increase the federal deficit by $1.5 trillion, according to the Congressional Budget Office. House and Senate Republicans are anticipating increased tax receipts to make up the shortfall.
It is this deficit, along with provisions to effectively eliminate the individual mandate for health insurance, that is causing some in the healthcare community heartburn.
In my investigation into what is likely going to make it into a reconciled House/Senate bill, I became nauseous at the lies, mistruths and propaganda put out about the bill. It’s times like these that I wonder if there are any national news sources that are unbiased any longer.
So, instead of citing any source out there, I’m simply going to tell you the good and the bad of what I think will happen. Please keep in mind, regarding “the good” and “the bad,” this is in my point of view. And, this relates only to how it will affect healthcare both directly and indirectly.
The tax cut will benefit all Americans of all economic tax brackets, with the exception of the lowest tier, who do not pay taxes. This will ideally free up extra dollars that can be saved and used toward healthcare as needed.
The tax cut will allow medical professionals (who normally fall in the middle class) to receive substantial tax breaks and eliminate the inheritance tax, which is essentially a double tax on already taxed dollars.
The tax cut will likely eliminate the tax penalty on the individual mandate for health insurance, which will allow individuals to self-pay or find more affordable coverages as they come online soon. I see this a positive due to the very high premiums that many must pay with no ability to meet the high deductibles. But…
The tax cut, by eliminating the penalty for not having a health insurance plan, will likely destabilize the health insurance marketplace to some degree, causing premiums to continue to increase from unreasonably high levels to absurd levels.
The tax cut will likely prompt Congress to find additional cuts to entitlement programs, which will likely focus on Medicare and Medicaid. It will almost certainly create a necessary cut to both, with Medicare possibly receiving a phased-in age of benefit increase for future generations (which was probably coming sooner or later anyway).
Perhaps the worst provision that I see is actually not with any of the above, but it’s with the rollback of tax-exempt municipal bond financing for capital projects undertaken by not-for-profit hospitals and other qualifying not-for-profit organizations. It would prohibit advance re-funding of prior tax-exempt bond issues. This may prevent rural hospitals from having access to the bond market and force them to rely more heavily on conventional loans, which often carry higher interest and are more difficult to come by (thanks in large part to Dodd Frank).
I think it’s safe to say that it will have at least a moderate level of impact to the insurance marketplace, to consumer choice, and to hospital financing. Whether this ends up being a catalyst for positive or negative change remains in the details and the rollout of the new provisions.
My suggestion for providers – stay flexible and prepare to change as needed. My suggestion to consumers – find a health insurance plan that works best for you, and either create an official Health Savings Account (HSA) or start your own savings account to be used just for healthcare needs in case of emergencies. These are all things we should be doing anyway, but it may be even more important moving forward.