With ACA’s fate unsettled, healthcare groups eye options for killing taxes
With GOP efforts to gut the Affordable Care Act on the verge of derailing, healthcare industry groups seeking repeal of several taxes are looking to hitch a ride on new legislative trains.
Potential vehicles for tax relief are the bipartisan Food and Drug Administration user-fee legislation, which must be enacted by the end of September to delay massive layoffs at the agency; reauthorization of the Children’s Health Insurance Program; the 2018 omnibus budget bill; the Medicare extenders package; and broader tax reform legislation. “We’ll let it play out for the next couple of days and see what the Senate does,” said Scott Whitaker, CEO of the Advanced Medical Technology Association; his group has fought for years to eliminate the 2.3% excise tax on device sales. That levy takes effect again in 2018 after a two-year delay. “But we’ll pivot to any moving vehicle. We’re not going to give up.”
Legislation to stabilize the individual health insurance market is seen as a dark horse option, given the deep divide between Republicans and Democrats over the future of healthcare. Senate Majority Leader Mitch McConnell (R-Ky.) recently said he would negotiate market repairs with Democrats if his ACA repeal bill died, and senior Democrats have expressed their willingness to work with him if ACA repeal is dropped.
“It’s well within reason that one or more of these taxes could be included in a bipartisan tax reform bill a year from now, but it’s a steep road,” said Billy Wynne, a Democratic lobbyist who represents healthcare industry groups. The current repeal-and-replace effort “was definitely their best chance to get this done.”
Still, there is bipartisan support for eliminating at least some of the ACA’s healthcare industry taxes, which provide revenue for the law’s coverage expansions and Medicare benefit enhancements. Democrats have backed repealing the taxes on medical devices, health insurance premiums and high-value employer plans, which they say increase costs for consumers. The device and Cadillac plan taxes were delayed as part of a bipartisan budget deal at the end of 2015.
AdvaMed argues that the medical-device tax has contributed to the loss of 29,000 device industry jobs nationally since 2013 and has slowed the pace of product innovation. Some are skeptical of that claim, with a 2014 Congressional Research Service study concluding the financial impact of the tax on device firms would be negligible.
America’s Health Insurance Plans sent a letter to Senate Finance Committee Chairman Orrin Hatch (R-Utah) last week urging Congress to repeal the health insurance premium tax and the Cadillac plan tax as part of broader tax reform. AHIP said the premium tax has raised the cost of health insurance by more than $100 billion. That tax, suspended for two years, resumes Jan. 1.
The Congressional Budget Office projects that repealing the annual fee on health insurance premiums would reduce federal revenue by $144.7 billion over 10 years, delaying the Cadillac tax on employer plans would cost $66 billion and wiping out the medical-device tax would cost $19.6 billion.
There is less political support for eliminating the annual fee on sales by manufacturers and importers of branded drugs, which the CBO estimated would reduce federal revenue by $28.5 billion over 10 years. Both President Donald Trump and congressional Democrats have been sharply critical of the pharmaceutical industry’s price increases and may feel drugmakers are less deserving of a tax break.
Cutting healthcare taxes would leave less budgetary room for other tax changes Republicans may value more, such as reducing corporate income tax rates, said Sheila Burke, a strategic adviser at Baker Donelson and chief of staff to former Senate Majority Leader Bob Dole.
How much would repealing ACA taxes on the healthcare industry cost over 10 years?