Tax bill provides back-door approach to threaten ACA
With the passage of the tax reform bill in the Senate early Saturday morning, the way appears clear for Republicans to bring about their long-awaited efforts to change tax laws and achieve something—anything—during their year of federal government domination.
While differences with the House version of the tax reform bill must still be ironed out in a conference committee, the final form of legislation suggests downstream implications for healthcare organizations. That’s because the tax legislation, particularly that passed by the Senate, offers direct and indirect impacts that could slash revenue for healthcare organizations.
The Senate bill provides a backdoor effort to knock the props out of a key tenet of the Affordable Care Act. It eliminates the ACA’s repeal of the individual mandate that requires Americans to have health insurance. The repeal was included as a way to offset the cost of the tax bill—it does that reducing the number of Americans who would buy insurance and receive federal subsidies to afford payments because their income levels fell under certain minimum amounts. Very simply, fewer Americans needing subsidies, less money spent by the government to pay them, and more savings to redirect to offset other components of the tax program.
Congressional budget office reports suggest that 4 million people will initially opt out of healthcare coverage, with that total rising to as many as 13 million by the mid-2020s. So those people are at risk for becoming uninsured, potentially impacting healthcare organizations’ efforts to be reimbursed for their care if they face major medical events.
In addition, eliminating the requirement will mean that healthy people who were compelled to have health insurance will opt out, likely raising the costs for insurance for those left in the pools overall, both those in state exchanges and by private insurers.
Providers are likely to increase charges if they face rising numbers of uninsured or underinsured patients. As has happened in the past, these costs will be passed on to either private or public payers. Expenses for public programs are likely to rise, and health insurers will deal with these rising costs as they have in the past—by passing them on to consumers. And consumers will respond to rising healthcare costs by delaying care or taking on higher deductibles, which typically result in delayed care.
It’s clear that any of these eventualities will work counter to efforts to improve population health and shift to value-based care. Key tenets of those approaches are to encourage frequent, pre-emptive efforts to stay current on patient care and not delay treatment until interventions will be costly.
A largely unnoticed impact of the GOP tax bills is the potential for sequestration of funds to meet the “pay as you go,” or PAYGO, budget rule. It requires that tax cuts as well as increases in entitlements and other mandatory spending must be offset by tax increases or cuts in mandatory spending.
Because PAYGO does not apply to discretionary spending, which is controlled through the appropriations process. Under PAYGO, if the Office of Management and Budget determines that spending on such programs will exceed revenues, the President must sequester (apply an across-the-board spending cut) certain mandatory spending programs—spending for each program is reduced by the same percentage for one year to offset the average projected deficit. Unless Congress acts to reduce or eliminate the project deficit increase, there is another sequestration the following year.
The tax plans passed by both the House and Senate could trigger PAYGO sequestrations of epic proportions, including an estimated $25 billion reductions in Medicare per year. However, PAYGO sequestrations have never been made, and the GOP swung key votes in the Senate by promising that a move to avoid sequestration would be voted upon.
However, it’s clear that spending on “welfare” programs, such as Medicare, Medicaid, and disability and Social Security are also in the crosshairs of Republicans who want to shrink the size of the federal government and put the responsibility for this spending elsewhere.
As such, including the provision to repeal the individual mandate provision in the Senate tax bill serves as another step to kick the supports away from the ACA, without having to craft any difficult plan to actually replace it.
While another step in the process, the Senate bill still needs to be brought together with the House bill to reach a final version through a consensus process; after a joint committee can reach agreement on a single bill, it will be voted upon by both the House and Senate and then would be signed by the president.
But barring the unusual, a tax bill that will contain downstream effects on healthcare providers and thus will impact providers’ spending in a variety of areas, including healthcare IT and other areas.