Tax Reform Update

This week Congress secured their first major legislative win of the new administration – passage of their tax reform bill on Wednesday, December 20, followed by passing temporary short-term spending legislation on Thursday, December 21, that averted an end-of-year government shutdown. Within this sweeping $1.5 trillion-dollar tax cut legislation are several key healthcare provisions that will affect the landscape in early 2018 and beyond.

Repeal of the Affordable Care Act (ACA) Individual Mandate: The conferenced bill—passed by both houses of Congress earlier this week—includes repeal of the ACA’s individual mandate, effective January 1, 2019. Independent experts estimate that repealing the individual mandate will increase premiums by 10 percent and leave 13 million more Americans uninsured by 2026.

• What to expect in 2018: The ACA Exchanges will still function as planned through 2018, but stay tuned for insurers’ reaction to the individual mandate repeal. Expectations are that healthy people and some insurers may decide to exit the marketplaces.

Potential Triggering of Sequestration: Ultimately Congress did not include language in the final tax reform bill that would forgo “PAYGO” rules and avoid across-the-board cuts to federal programs, including an estimated $25 billion cut to Medicare in 2018.

• What to expect in 2018: The temporary short-term spending legislation passed by Congress on Thursday, December 21, includes language to briefly delay sequestration and subsequent Medicare cuts until January 19, when an omnibus appropriations bill is expected to be passed to continue to fund the government. Temporary funding for the Children’s Health Insurance Program (CHIP), $2.85 billion, is also included in the short-term spending bill, as well as funding for community health centers, National Health Service Corps, as well as the Teaching Health Center Graduate Medical Education Program and the Special Diabetes Program. This temporary funding was secured after cutting $750 million from the ACA Prevention and Public Health Fund.

Medical Expense Deduction Expanded: Instead of eliminating the medical expense deduction, as outlined in the House version of the tax bill, the final legislation expands the deduction for two years.

• What to expect in 2018: Any taxpayer itemizing their deductions will be able to write off qualifying medical expenses that exceed 7.5 percent of their income.

Tuition Taxation of Graduate Student Benefits: Unlike the provision included within the first iterations of the tax bill, the final legislation will not end tax breaks on student loans or levy a tax on tuition waivers for graduate students.

• What to expect in 2018: Graduate students across the United States will not be liable to include tuition waivers as income when filing taxes in 2018.

Congress listened to some concerns and not others, as outlined in ACCC’s letter to Congress before the final tax bill was conferenced.

It was a busy end to 2017, and we hear more is in store for oncology in the new year. Stay tuned for an update from ACCC’s advocacy team on what we expect in 2018.