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Your health care questions about the tax bill, answered

Dylan Scott covers health care for Vox. He has reported on health policy for more than 10 years, writing for Governing magazine, Talking Points Memo and STAT before joining Vox in 2017.

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The Republican tax bill will, barring some unforeseen final twists, become law by the end of this week. The nation's tax code will be permanently altered. We've spent a lot of time here at VoxCare trying to communicate that this tax bill is unusually health care centric. Since it's likely to be etched into the federal statute in a matter of days, I thought we should catch you up on what actually made it into the bill.

Obamacare's individual mandate will be repealed

This is the big one, the one you've heard the most about: The ACA's requirement that every American buy health coverage or pay a penalty will be repealed. It will be the most significant blow that Republicans have dealt to the health care law since taking over Washington this year.

According to the CBO, this could lead to as many as 13 million fewer Americans having health insurance 10 years from now versus current law, and premiums rising an additional 10 percent in most years compared to what they would have been if the mandate stayed. We would expect more healthy people to drop out of the markets without the mandate, leaving the remaining pool sicker and therefore more expensive.

But as I sought to explain earlier today, I would caution against overreacting. Some kind of individual market, where millions of people who receive federal subsidies and are therefore protected from any premium hikes, will likely persist. Then you have the rest of the health care law that is likely to remain untouched after Doug Jones's win in the Alabama Senate race:

  • Medicaid expansion, which covers 15 million people, will remain
  • The protections for people with preexisting medical conditions will still be law
  • The auxiliary pieces of the law — like the requirement that even employer coverage provide free preventive services — will stick

That's a lot of Obamacare that Republicans seem unable to touch with an even-narrower Senate majority.

The biggest wild card is whether the loss of the mandate will prompt insurers to simply exit the law's marketplaces and leave broad swaths of the country without any plan options, particularly after the Trump administration makes non-ACA coverage more and more available.

"People who are healthy will be able to get much cheaper insurance, and won’t have to pay a penalty with the mandate gone," Larry Levitt at the Kaiser Family Foundation told me. "That’s going to understandably make insurers hyperventilate."

The medical expense deduction will stay

When the dust settled, Republicans ultimately decided to continue allowing people with high medical expenses to deduct them when they file their taxes.

In fact, for the next two years, the GOP tax bill will lower the threshold for people to deduct their health care spending from their taxes. Under current law, changed by the ACA, you can deduct your medical expenses only if they exceed 10 percent of your income. The tax bill would lower that bar to 7.5 percent in 2018 and 2019.

That should allow more people to deduct their health care costs from their taxable income. (Though it gets complicated, because the bill also doubles the standard deduction, which should reduce the number of people who itemize their deductions.)

What we know for sure is this is a big change from the House bill, which would have eliminated the deduction entirely. Groups like the AARP, which said older people with long-term care needs are particularly dependent on the deduction, had been outraged. We know that lower-income people are more likely to use it than people with higher incomes.

But, because Republicans slowly abandoned their pursuit of radically simplifying the tax code, the medical expense deduction will remain.

The tax bill is mostly good news for pharma

It's safe to say the drug industry was one of the health care sectors most invested in tax reform. Things shook out pretty nicely for those firms.

Erin Mershon at STAT has a nice breakdown of the tax plan's implications for pharmaceutical manufacturers. The highlights:

  • The corporate tax rate is slashed from 35 percent to 21 percent
  • The orphan drug tax credit, which encourages firms to research new medicines for diseases that don't affect as many people, is partially preserved. Companies can deduct 25 percent of the costs of clinical trials for rare disease treatments. That is down from 50 percent under current law, but an improvement on the House bill, which eliminated the credit.

The repatriation rate will be cut dramatically. This is the tax rate that companies pay when they bring cash back to the United States from other countries. Right now, it's 35 percent; the final tax bill would cut it to 15.5 percent for cash and 8 percent for other items. For drug firms like Pfizer, with nearly $200 billion being stored overseas, that's a big deal.

A quick note on medical education

There are some other knick knacks in the bill that will affect health care. One point to clear up: Republicans have eliminated the provisions in their bill that would have ended tax breaks for student loans and levied a tax on tuition waivers for graduate students. The final bill won't do either of those things.

We don't need to revisit the question of whether there is really a doctor shortage in the United States. But given the expense of getting a medical degree, those changes would have undoubtedly been a hindrance for aspiring physicians.

As with the medical expense deduction, however, Republicans ultimately decided not to go after this kind of "heartstring" tax break in their bill.

Chart of the Day


What actually works to treat back pain. If you missed it, please go read this great piece from Vox's Julia Belluz. She reviewed more than 80 studies to try to reach some conclusions about what treatments actually work for lower back pain, that most common and perplexing of conditions.

You should also check out her feature story, out Monday, about Jewel, an obese teen who had bariatric surgery.

Kliff’s Notes

Today's top news

  • “Humana and Private-Equity Firms in Talks to Buy Kindred Healthcare”: “Humana Inc. is in advanced talks to join with two private-equity firms in a deal to acquire home-care provider Kindred Healthcare Inc., a move that would add to a cascade of transactions aiming to bring together insurance operations with other health-care businesses.” —Anna Wilde Mathews, Dana Mattioli, and Dana Cimilluca, Wall Street Journal
  • “CDC director tells staff ‘there are no banned words,’ while not refuting report”: “A Health and Human Services official who asked not to be named told STAT it was not accurate to say that CDC had been ordered not to use the seven words. Instead, he said, agency budget analysts were told that some words and phrasing might be more likely to win support for the CDC’s budget in the current Congress.” —Helen Branswell, STAT
  • “DCS director resigns over Indiana kids being placed at risk”: “In her letter of resignation, the longtime director of the Indiana Department of Child Services lashed out at the governor's office, warning that a continuation of its policies will 'all but ensure children will die.'” —Marisa Kwiatkowski, the Indianapolis Star

Analysis and longer reads

  • “How blue states might save Obamacare's markets”: “The looming demise of Obamacare’s individual mandate is spurring talks in a handful of blue states about enacting their own coverage requirements, as state officials and health care advocates fear repeal will roil their insurance markets.” —Rachana Pradhan, Politico
  • “In Election Year, Drug Industry Spent Big To Temper Talk About High Drug Prices”: “Facing bipartisan hostility over high drug prices in an election year, the pharmaceutical industry's biggest trade group boosted revenue by nearly a fourth in 2016 and spread the millions collected among hundreds of lobbyists, politicians and patient groups, new filings show.” —Jay Hancock, NPR
  • “The Big Five Health Insurers’ Membership And Revenue Trends: Implications For Public Policy”: “The analysis documents the shifting mix of enrollment and corporate revenues as private insurers have expanded into Medicare and Medicaid. Despite reported losses in insurers’ individual-market business, corporate reports reveal healthy profitability and strong revenue growth overall, with other market segments—including Medicare and Medicaid—offsetting losses. The data underscore a growing mutual dependence between public programs and private insurers.” —Cathy Schoen and Sara R. Collins, Health Affairs

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