The Republican tax plans are suddenly looking a lot more like health care bills, with provisions that may affect coverage and increase medical expenses for millions of families.
The House version of the tax bill, which President Donald Trump endorsed on Tuesday, would end a deduction that allows families of disabled children and elderly people to write off large medical expenses. The Senate plan would repeal the Affordable Care Act requirement that most Americans carry insurance, a move that insurers promise would raise premiums in the nationwide individual insurance market.
The provisions would help offset the cost of large tax cuts for corporations and individuals. But the move has sparked a new wave of opposition from the health care industry and others who are concerned about its impact — the same political headwinds that tanked Republican efforts to repeal the Affordable Care Act earlier this year.
Either proposal, if signed into law, “could be devastating for some families with disabilities,” said Kim Musheno, vice president of public policy at the Autism Society, a Bethesda, Maryland, organization that advocates for people with autism. “Families depend on that deduction. And if they deal with the individual mandate, that’s going to cut 13 million people from their health care,” she said, citing a Congressional Budget Office estimate.
Republicans and some conservative groups, though, argue that removing the penalty for uninsured individuals would represent a tax cut for many low-income people who pay it now. Americans for Tax Reform, the group led by anti-tax crusader Grover Norquist, said that Internal Revenue Service data from tax year 2015 show that 79% of households that paid the penalty earned less than $50,000 a year.
Most Americans already think the tax legislation is designed to benefit the rich and oppose the bill by a two-to-one margin, according to a Quinnipiac University poll released on Wednesday. The survey was conducted between Nov. 7 and Nov. 13 — before the repeal of the Obamacare mandate was introduced — and has a margin of error of 3 percentage points. Some of the details in both tax plans have changed since the survey, and the Senate tax-writing committee is still working on its draft.
Few Republicans have spoken out about the House bill’s repeal of the medical-expense break. The bill faces a vote on the House floor Thursday. But some criticism has begun to surface as advocacy groups including the AARP and the American Cancer Society have highlighted the harm the House bill could have on families battling diseases and on the elderly. People with tens of thousands of dollars in annual medical expenses often rely on the tax deduction to make ends meet.
Rep. Walter Jones, a North Carolina Republican, said Wednesday he’d vote against the House bill in part because it eliminates the deduction for out-of-pocket medical expenses.
“There are a lot of seniors in my district and this is life and death for them,” he said.
Jones went ahead and today became one of the 13 House Republicans who voted against the bill, as House members proceeded to approve the bill by a total vote of 227-205.
The deduction is allowed under current law if medical expenses exceed 10% of a taxpayer’s adjusted gross income. Almost 9 million taxpayers deducted about $87 billion in medical expenses for the 2015 tax year, according to the IRS.
Rep. Greg Walden, R-Ore. (Photo: House Energy)
Rep. Greg Walden, an Oregon Republican who chairs the Energy and Commerce Committee, said some of his constituents who live in expensive elder-care facilities could be harmed if the deduction is scrapped.
“I think it’s one we have to continue to massage a bit,” he said. “There’s a lot of things out there and there’s maybe going to be an opportunity to adjust some of them.”
He declined to elaborate.
ACA Individual Mandate
On the other side of the Capitol, Senate Republican leaders’ sudden decision to add a provision zeroing out the Affordable Care Act (ACA) individual mandate penalty to their bill has energized Democratic opposition.
“You don’t fix the health insurance system by throwing it into a tax bill and causing premiums to go up 10%,” Sen. Sherrod Brown, an Ohio Democrat, told reporters Wednesday.
Were the ACA’s insurance mandate repealed absent a new policy to compel the purchase of coverage, the CBO projects that premiums would rise 10% for people who buy insurance on their own and more than 13 million Americans would lose or drop their coverage.
But a reduction in the number of people with insurance also translates to less taxpayer money spent to provide subsidies for premiums under the ACA. Ending the requirement as of 2019 would save the government an estimated $318 billion, helping to offset the cost of lowering the corporate tax rate.
In addition, the Senate’s tax plan could trigger sharp cuts to Medicare and other programs in order to meet budget deficit rules, according to CBO.
The move to target the ACA comes after Republicans lost elections in Virginia and other states earlier this month. Health care was a significant factor in those races and Republicans will face punishing campaign ads if they try to chip away at the ACA or end the medical-expense deduction while cutting taxes, said political analyst David Axelrod, a former top adviser to President Barack Obama.
“The thing that makes it more of a potent issue is that it’s all being done to facilitate what essentially is a massive corporate tax cut and an individual tax cut that’s skewed to wealthy Americans,” he said in an interview. “You don’t have to work very hard to make those ads.”
The White House argues that the ACA’s insurance mandate isn’t popular and disproportionately affects low- and middle-income Americans who are forced to buy insurance that may be more expensive than they can afford.
“The President’s priorities for tax reform have been clear from the beginning: make our businesses globally competitive, and deliver tax cuts to the middle class,” White House spokesman Raj Shah said in a statement. “He is glad to see the Senate is considering including the repeal of the onerous mandates of Obamacare in its tax reform legislation and hopes that those savings will be used to further reduce the burden it has placed on middle-class families.”
‘Cut Top Rate’
Trump, though, has said proceeds from repealing the insurance mandate should be used to cut taxes even further for wealthy people.
“How about ending the unfair & highly unpopular Indiv Mandate in OCare & reducing taxes even further?” Trump said Monday in a tweet. “Cut top rate to 35% w/all of the rest going to middle income cuts?”
Like Republicans’ failed attempts to repeal the ACA, the tax plan is amassing a growing list of opponents from the world of medicine.
Insurers, hospital groups and disability advocates have spoken out forcefully against the health care proposals in the bill. Hospitals and insurance groups wrote a letter to Congressional leaders on Tuesday warning of dire health care outcomes if the tax measure becomes law.
“Repealing the individual mandate without a workable alternative will reduce enrollment, further destabilizing an already fragile individual and small group health insurance market on which more than 10 million Americans rely,” said the letter, signed by six health care groups, including the American Hospital Association and America’s Health Insurance Plans (AHIP).
—Read Scott Kicks Off Battle Over Senate Tax Bill Life Provisions on ThinkAdvisor.