The Tax Cuts and Jobs Act: Implications for Healthcare
By Ken Perez, vice president of healthcare policy, Omnicell, Inc.
H.R. 1, The Tax Cuts and Jobs Act (TCJA), gained passage in the Senate (by a 51-48 vote) and the House (by a 224-201 vote) on Dec. 20, 2017, and two days later, President Donald Trump signed the bill into law.
The TCJA constitutes the biggest tax reform legislation in three decades for the U.S. and unquestionably the most significant legislative accomplishment of the Trump administration in 2017. Two provisions and one possible pitfall of the TCJA are most relevant to the healthcare industry.
Decrease in the corporate tax rate from 35 percent to 21 percent
This change, excluding other provisions of the TCJA, will clearly benefit for-profit hospitals and health systems, as well as pharmaceutical companies.
Repeal of the Affordable Care Act’s individual mandate
Starting in 2019, the TCJA repeals the ACA individual mandate that requires all Americans under 65 to have health insurance or pay an annual penalty, $695 per person or 2.5 percent of income—whichever is higher.
Per the Congressional Budget Office’s November 2017 analysis, “Repealing the Individual Health Insurance Mandate: An Updated Estimate,” the repeal of the individual mandate in 2019 would increase the number of uninsured Americans—relative to a baseline that assumes continuation of cost-sharing reduction (CSR) subsidies in the ACA marketplaces—by 4 million in 2019, with that figure growing to 13 million in 2025 and remaining at that level thru 2027.
According to the CBO, the 13 million is composed of five million people who would not choose to obtain coverage thru the individual insurance market, five million people who would not enroll in Medicaid—not due to a pullback of the ACA’s Medicaid expansion, as that was not in the TCJA—and three million people who would choose to no longer have employer-sponsored insurance. The CBO admits that its projections are uncertain and states, “The preliminary results of analysis using revised methods indicates that the estimated effects on the budget and health insurance coverage would probably be smaller than the numbers reported in this document.”