The US House and Senate have reached an agreement on a major overhaul of the US tax reform system that contains a significant blow to the Affordable Care Act (ACA), repealing the penalties for individuals who fail to purchase health insurance.
The agreement on HR 1, a 1100-page piece of legislation, sets the stage for votes in both chambers as early as Tuesday. Quick action is expected, because Congress is due to take a holiday recess beginning December 22.
“For the first time in 31 years, the House and the Senate have now come together to deliver progrowth tax reform that will help more Americans across our country keep more of their hard-earned money,” said Rep. Kevin Brady (R-TX), chairman of the House Ways and Means Committee and also chief of the House-Senate panel that struck the agreement.
It was not celebrated across the aisle, however. At the only public hearing on the tax bill, Democrats who sat on the House-Senate committee said that it was being rushed through Congress without a thorough examination of the consequences.
According to the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT), the tax bill would reduce most income tax rates for individuals, increase the standard deduction and the child tax credit, repeal deductions for personal exemptions, repeal or limit certain itemized deductions, and increase the exemption amounts for the individual alternative minimum tax. If Congress votes to approve HR 1 and President Donald J. Trump signs it ― both of those actions are expected ― the changes would take effect on January 1, 2018.
Depending upon estimates from various groups, such as the CBO and JCT, the tax reform bill could balloon the deficit by at least $1 trillion.
The increase in the deficit could trigger automatic cuts of $25 billion to Medicare and reduce other mandatory government spending, according to the CBO. The cuts can be averted if the Senate finds a procedural way to avoid them.
Many Medical Societies Object
Health organizations, medical societies, and consumer advocates have expressed alarm over the repeal of the penalties for not purchasing insurance. The CBO and JCT estimate that repealing the penalties would reduce the deficit by $338 billon over the next decade, decrease the number of people with health insurance by 4 million in 2019 and by 13 million in 2027, and increase premiums in the nongroup market by about 10% in most years for the next 10 years.
The American Association of Retired Persons says that 64-year-olds could see their premiums increase by an average of $1490 a year.
The American Academy of Family Physicians and the American College of Physicians (ACP) have said they oppose elimination of the penalties, stating it will undermine incentives for people to buy insurance and will likely reduce coverage overall. ACP President Jack Ende, MD, said that the ACA ― through the mandate, in part ― has reduced the uninsured rate to its lowest level in decades, from 18.2% in 2010 to 10.3% in 2016.
“Republican leadership in the House and Senate have come up with a deal that will increase health insurance premiums, making millions of people ― including those with preexisting conditions like cancer or diabetes ― pay more for their coverage, while causing millions more to lose their health coverage altogether,” said Frederick Isasi, executive director of the nonprofit consumer group Families USA in a statement.
Medical Interest, Student Loan Deductions
Several other proposals that might have posed a threat to healthcare were revised or dropped. The House originally proposed to completely eliminate the deduction for medical expenses. Instead, the new bill maintains the deduction at 7.5% of adjusted gross income (AGI) in 2017 and 2018 and raises it to 10% of AGI in 2019.
The House also proposed to eliminate the deduction for student loan interest and to repeal the deduction for college tuition and related expenses for graduate education. The new bill would reportedly reverse those decisions and keep the deductions.
Hospitals were concerned about the House’s proposal to eliminate tax-exempt private-activity bonds, which are used by nonprofit hospitals and academic medical centers to fund new construction and other infrastructure projects. Elimination would have increased borrowing costs for medical schools and teaching hospitals, said the Association of American Medical Colleges.
The new tax package continues the tax-preferred status of those private-activity bonds.
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