Hospital Impact—The tangled web of healthcare and taxes

Affordable Care Act highlighted
The ACA is the law of the land until Congress repeals it. (Getty/Ellenmck)
Kent Bottles
Kent Bottles

While it appears at first glance that the Republicans have moved on from trying to repeal the Affordable Care Act to concentrate on the budget and tax plan, a closer examination of the situation reveals that the ACA and tax policy are closely linked.

As former Centers for Medicare & Medicaid Services Administrator Andy Slavitt put it in a tweet earlier this month: “the healthcare bill was about hidden tax cuts. Now the tax bill is about hidden healthcare cuts.”

The ACA provided families making less than 400% of the federal poverty level with tax credits so that buying health insurance would be more affordable. President Barack Obama and the Democrats paid for these tax credits by raising taxes.

When the House of Representatives passed the American Health Care Act, it reduced taxes by more than $1 trillion. The following taxes in the ACA were abolished, according to Americans for Tax Reform:

  • The individual and employer mandate tax
  • The medicine cabinet tax
  • The flexible spending account tax
  • The chronic care tax
  • The HSA withdrawal tax
  • The 10% excise tax on indoor tanning salons
  • The health insurance tax
  • The 3.8% surtax on investment income
  • The medical device tax
  • The tax on prescription medicine
  • The tax on retiree prescription drug coverage

When the Senate was unable to pass a repeal and replace bill, Republicans were upset because this failure made the budget/tax plan process more difficult. They were counting on the tax cuts in the AHCA.

It also meant that repealing and replacing the ACA would have to wait until 2018. Trying to repeal and replace the ACA in 2018 will be politically risky because congressmen and senators facing midterm elections will not want to vote for a bill that removes insurance from tens of millions of Americans.

Instead of giving up on repealing and replacing the ACA, Slavitt believes Republicans are trying to undermine the ACA by a “synthetic repeal,” which would not have to pass Congress. By using executive orders, the budget/tax plan and sabotage of the ACA, Republicans could cripple the ACA.

On Oct. 12, President Donald Trump signed an executive order instructing the Labor, Treasury, and Health departments to come up with ways to allow association health plans to be sold across state lines, expand the use of health savings accounts, and allow short-term insurance plans that are non-ACA compliant to be sold for up to a year. If implemented, these moves would undermine the 10 essential health benefits that ACA-compliant plans must cover.

Now, the Trump administration has prepared an executive order to weaken the individual mandate, which according to the Washington Examiner, he plans to sign if a repeal of this mandate is not included in the tax plan now under consideration. Although such an executive order cannot repeal the individual mandate, it could broaden hardship exemptions to permit more people to avoid the fine for not having coverage.

The $4.1 trillion budget that the House of Representatives passed in early October includes $1.5 trillion in Medicaid cuts over 10 years and about $500 billion in Medicare cuts. It also proposes changing Medicare to a premium support voucher system. Whether these proposals survive the votes in the Senate is up in the air, but the intent to change healthcare policy is clear.

The Trump administration has made several decisions that are sabotaging the ACA, including slashing funding for marketing the ACA during open enrollment and for navigators to help citizens sign up for coverage. The open enrollment period has been cut in half.

The Trump administration denied even conservative 1332 waiver applications from states like Iowa and Oklahoma—possibly because they might prop up the ACA. And Trump has stopped funding the cost-sharing subsidies, which reimburse insurance companies for lowering consumers’ out-of-pocket healthcare costs.

Trump has even been quoted as saying about the ACA: “It’s dead. It’s gone. … you shouldn’t even mention it,” according to The Hill.  

Such actions would appear to violate the president’s legal obligation under Article II of the United States Constitution to “take care that the laws be faithfully executed.”

The ACA is the law of the land until Congress repeals it. The strategy of “synthetic repeal” should worry all Americans who believe in the rule of law and believe that Americans should have access to affordable health insurance.

Kent Bottles, M.D., is a lecturer at the Thomas Jefferson University School of Population Health and chief medical officer of PYA Analytics.