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Q&A: Tax bill impacts on health law coverage and Medicare

Ricardo Alonso-Zaldivar, Associated Press | 12/5/2017, 5:13 a.m.
The tax overhaul Republicans are pushing toward final votes in Congress could undermine the Affordable Care Act's health insurance markets ...
In this Dec. 4, 2017, photo, part of the Republican Senate bill "Tax Cuts and Jobs Act" is photographed in Washington. (AP Photo/Jon Elswick)

WASHINGTON — The tax overhaul Republicans are pushing toward final votes in Congress could undermine the Affordable Care Act's health insurance markets and add to the financial squeeze on Medicare over time.

Lawmakers will meet this week to resolve differences between the House- and Senate-passed bills in hopes of getting a finished product to President Donald Trump's desk around Christmas. Also in play are the tax deduction for people with high medical expenses, and a tax credit for drug companies that develop treatments for serious diseases affecting relatively few patients.

The business tax cuts that are the centerpiece of the legislation would benefit many health care companies, but there's also concern among hospitals, doctors and insurers about the impact on coverage. Here are some questions and answers on how the tax bill intersects with health care:

Q: Trump has said he won't cut Medicare, and the program doesn't even seem to be mentioned in the tax bill. Why is AARP saying that health insurance for seniors could be jeopardized?

A: The tax bill would increase federal deficits by about $1 trillion over 10 years, even after accounting for stronger economic growth expected from tax cuts. More red ink means higher borrowing costs for the government, and that would reduce the options for policymakers when Medicare's long-postponed financial reckoning comes due.

Medicare's giant fund for inpatient care isn't expected to start running short until 2029. That's still more than a decade away, but a federal anti-deficit law currently in effect could trigger automatic cuts as early as next year — about $25 billion from Medicare.

House Speaker Paul Ryan, R-Wisc., and Senate Majority Leader Mitch McConnell, R-Ky., said in a joint statement last week that such speculation is unfounded. "This will not happen," the GOP leaders said. Congress has previously waived such cuts, they explained, and there's no reason to think this time would be different.

Nonetheless others see an increased risk to Medicare.

"The greater concern is even if the automatic cuts don't take place, the tax bill just exacerbates the pressure on the federal deficit and Republicans have been pressing for cuts in Medicare for some time," said Paul Van de Water, a policy expert with the Center on Budget and Policy Priorities, which advocates for low-income people.

Q: How did "Obamacare" wind up in the tax bill?

A: The Senate version repeals the Affordable Care Act's tax penalties on people who don't have health insurance. That would result in government savings from fewer consumers applying for taxpayer-subsidized coverage, giving GOP tax writers nearly $320 billion over 10 years to help pay for tax cuts.

What's more, repealing the fines would deal a blow to the Obama-era health law after a more ambitious Republican takedown collapsed earlier this year.

Q: Those fines have been very unpopular, so how could repealing them undermine the health law? Other parts of the ACA will remain on the books.

A: Premiums will go up, and that's never popular. The fines were meant to nudge healthy people to get covered. Because insurance markets work by pooling risks, premiums from healthy people subsidize care for the sick.