Tuesday Nov 21, 2017
Tax Bills Could Add to Health Care's Ills
"The difference between death and taxes is death doesn't get worse every time Congress meets."
– Will Rogers
After 11 months of building anticipation, tax reform has finally risen to the top of the legislative agenda in Washington, D.C. Tax reform is a priority issue for congressional Republicans and the Trump Administration, and the pressure on Congress to pass a comprehensive tax reform package before the end of the year has intensified.
During an Oct. 11 speech(www.whitehouse.gov), President Trump quipped, "And our great congressmen, congresswomen, and all of the people that we're working with, all I can say is: You better get it passed."
After nearly two decades in Washington, I can tell you that nothing stokes the embers of the legislative and political processes quite like a tax bill. The tax code is complicated, and legislative efforts to reform the tax code come with plenty of political opportunities. However, each opportunity also has potential political consequences. Balancing policy opportunities against political consequences will be the name of the game as this process moves forward.
Last week, the House approved the Tax Cuts and Jobs Act(www.congress.gov) (H.R. 1) on a vote of 227-205. Thirteen Republicans and 192 Democrats voted against the legislation. The Senate began working on its version of tax reform legislation(www.finance.senate.gov) last week, with the Finance Committee holding multiple days of hearings on the proposal introduced by committee chairman Orrin Hatch, R-Utah.
The Senate bill, also titled the Tax Cuts and Jobs Act, faces a more challenging path than its House companion. Following the Thanksgiving recess, the Senate will attempt to approve its version of tax reform. Should it be successful, a conference committee would be required to reconcile the differences between the House- and Senate- approved versions of the bill. Should an agreement be reached by the conference committee, that agreement would require approval by both chambers before being sent to the president for enactment into law. The president has stated his expectation that this will all happen before the end of the year.
The AAFP does not have extensive policy on taxes or tax policy. However, we do have policy on many of the individual provisions in the current tax code. Our engagement in the tax reform debate has been, and will be, limited to those areas where we have policies established through the Congress of Delegates or Board of Directors. One of those areas is a provision known as the student loan interest deduction, or SLID.
Section 221 of the Internal Revenue Code provides a deduction of up to $2,500 for "the interest paid by the taxpayer during the taxable year on any qualified education loan." The deduction applies only to filers with gross incomes less than $80,000 (or $160,000 for joint filers).
Section 1204 of H.R. 1 would repeal Section 221 of the Internal Revenue Code, thus eliminating the ability of family physicians -- especially family medicine residents -- to deduct the interest paid on their student loans from their federal tax filings. Given the negative impact the elimination of the SLID would have on family medicine residents and students, the AAFP, in a Nov. 10 letter to House leadership(1 page PDF), expressed concern with Section 1204 of the House bill. In our letter, we called on the House to: "preserve the deduction -- a modest yet meaningful signal to the next generation of family physicians that the nation values their choice to enter this critical medical specialty."
In a Nov. 13 call-to-action, Alexa Mieses, M.D., M.P.H., resident member of the AAFP Board of Directors, challenged family medicine residents and medical students to contact their representatives using the AAFP’s Speak Out tool and request that they retain the deduction for interest on student loans. The response to Mieses' call-to-action has been strong, but we need more voices to weigh in on this important issue to ensure that this provision is not included in any final tax reform bill. If you have not communicated your support for the SLID policy with your representative, do so today. We need your support!
A second provision of concern in the House bill is the elimination of the medical expense deduction. This provision allows individuals to deduct qualified medical expenses that exceed 10 percent of an individual's adjusted gross income for the year. The AAFP, to date, has not communicated with the House or Senate on this provision, but we are deeply concerned about the negative impact the elimination of this policy would have on patients with high medical costs.
Although the Senate bill shares a title with the House bill, its content and scope are much different and far more concerning in some respects than the House bill. The Senate bill does not include the elimination of the student loan interest or medical expense deduction, but it does have other health-related challenges. The most notable health care provision is one that would repeal the ACA individual mandate starting in 2019.
Repealing the individual mandate would result in savings of more than $300 billion to the federal government -- savings that could be used to further offset other tax policies. However, as noted previously, it comes with political consequences -- namely higher premiums and a potentially massive increase in the number of uninsured. According to the Congressional Budget Office(www.cbo.gov) (CBO), repealing the individual mandate would result in premium increases of up to 20 percent and 13 million people becoming uninsured by 2027.
Beyond the impact on premiums and coverage as noted by the CBO, the elimination of the individual mandate would ultimately result in a complete destabilization of the individual and small group markets. On Nov. 16, the AAFP joined with our "Group of 6" collaborators in issuing a joint statement(2 page PDF) opposing the inclusion of the individual mandate policy in the Senate's tax reform legislation.
The joint statement summarized our position as follows: "Our organizations, which represent more than 560,000 physicians and medical students, strongly support policies that ensure every American has access to affordable health coverage. We are concerned that a proposed provision in the Senate tax reform legislation to repeal the individual mandate is inconsistent with our goals."
There are compelling economic reasons why tax reform is needed, but there are also several reasons to be cautious. Our goal moving forward in this debate will be to ensure that the final tax bill does not cause irreparable harm to our nation's health care system or disadvantage patients, family physicians, or medical students. Tax reform has a long path yet to travel, and it will be full of twists and turns. If you have an affinity for politics, pull up a chair.
Thursday is Thanksgiving. This is a time of year when we pause to reflect and show gratitude for the people and events that have enriched our lives. I want to personally thank you for what you do each day to provide care to individuals and families in your communities. We have a robust discussion on this blog about all that is right and wrong with our health care system, but there is a fundamental element of our health care system that is undercelebrated and that is the important and consequential role that each of you play in people's lives each day. Thank you. I hope you have an opportunity to spend time with family and friends this week, and may you enjoy a few hours away from your EHR. Happy Thanksgiving.
Posted at 09:00AM Nov 21, 2017