Tax Cuts Could Threaten Physicians

Today (December 13) members of the House and Senate will meet to reconcile differences between their two tax reform proposals. Congress is expected to complete work on the bill before the Christmas recess. Although many are overjoyed by a tax cut, there are potential pitfalls to the tax cut that might adversely affect physicians.

Under a rule in the Senate known as Pay as You Go (PAYGO), legislation that increases the deficit results in automatic spending cuts. The Congressional Budget Office (CBO) estimates that tax cuts could lead to automatic cuts of $136 billion in fiscal 2018, $25 billion of which would come from Medicare. PAYGO cuts would reduce Medicare payments to physicians by 4% in 2018 according to the American College of Physicians (ACP) (1). PAYGO would also lead to cuts to graduate medical education, lab fees, and hospital payments and would cut or entirely eliminate hundreds of other federal programs, including programs within the Centers for Disease Control and Prevention, the Health Resources and Services Administration, and the Prevention and Public Health Fund, according to the ACP.

Senate Republicans want to essentially repeal the penalty that accompanies the mandate that all Americans buy health insurance. It seems likely that House Republicans will go along. The CBO estimates that this would decrease the number of people with health insurance by 4 million by 2019 and premiums in the nongroup market by about 10% in almost each year for the next 10 years. The American Association of Retired Persons (AARP) says that 64-year-olds could see their premiums increase by an average of $1490 a year (2).

The medical expense tax deduction has been targeted for elimination by the House. The Senate version, however, would keep the deduction. The AARP says that in 2015, 8.8 million Americans used the deduction and that more than half were older than 65 (2). Nearly three quarters are 50 years old or older and live with a chronic condition or illness, and 70% of those who claimed the medical expense deduction have income below $75,000, according to the AARP. However, the tax deduction seems likely to survive. Rep. Kevin Brady (R-TX) who heads the reconciliation said he's willing to consider scrapping the proposal to eliminate the deduction (3).

The House is proposing to eliminate a tax credit that has been used as an incentive for pharmaceutical companies to develop therapies for orphan diseases. The Senate is reducing that credit. Not surprisingly, the National Organization for Rare Disorders and 160 other organizations representing patients with rare conditions oppose any reduction (4). They argue that eliminating the tax cut would deincentivize pharmaceutical companies to develop therapies for orphan diseases where the market is usually small.

Hospitals are alarmed about the House proposal to eliminate tax-exempt private activity bonds used by nonprofit hospitals and academic medical centers. The Senate bill would continue to allow that tax-exempt financing. This is opposed by both the Association of American Medical Colleges and the American Hospital Association (5,6).  The AHA’s Thomas P. Nickels states, "The ability to obtain tax-exempt financing is a key benefit of hospital tax-exemption that works to make access to vital hospital services available in communities large and small across America." (6).  Locally several medical centers have large bonds and loss of the exemption might have significant consequences.

Richard A. Robbins, MD

Editor, SWJPCC

References

1. Ende J. Letter to Mitch McConnell and Charles Schumer. November 30,2017. Available at: https://www.acponline.org/acp_policy/letters/senate_tax_cuts_and_jobs_act_2017.pdf (accessed 12/13/17).
2. Strauss G. AARP opposes senate tax bill. November 30, 2017. Available at: https://www.aarp.org/politics-society/advocacy/info-2017/senate-letter-tax-fd.html?intcmp=AE-HP-FLXSLDR-SLIDE1?intcmp=AE-HP-FLXSLDR-SLIDE1-RL1 (accessed 12/13/17).
3. Ault A. Five things in the GOP tax plan that threaten medicine. Medscape. December 12, 2017. Available at: https://www.medscape.com/viewarticle/889947?nlid=119526_4502&src=wnl_dne_171213_mscpedit&uac=9273DT&impID=1507630&faf=1#vp_2 (accessed 12/13/17).
4. Letter to Congress. December 7, 2017. Available at: https://rarediseases.org/wp-content/uploads/2017/12/Orphan-Drug-Tax-Credit-Conferee-Letter-Final.pdf (accessed 12/13/17).
5. AAMC. AAMC statement on house tax reform legislation. https://news.aamc.org/press-releases/article/house_tax_reform_11092017/ (accessed 12/13/17).
6. Nickels TP. Letter to Rep. Kevin Brady. December 8, 2017. Available at: http://www.aha.org/advocacy-issues/letter/2017/171208-letter-taxbill-conferees.pdf (accessed 12/13/17).

Cite as: Robbins RA. Tax cuts could threaten physicians. Southwest J Pulm Crit Care. 2017;15(6):280-1. doi: https://doi.org/10.13175/swjpcc153-17 PDF 

Mortality Rate Will Likely Increase Under Senate Healthcare Bill

Today (6/27/17) an article was published in the Annals of Internal Medicine by Steffie Woolhandler and David Himmelstein from New York University on the effects of health insurance on mortality (1). The article has special significance because of pending healthcare legislation in the Senate.  

The Annals article concludes that the odds of dying among the insured relative to the uninsured is 0.71 to 0.97. However, the authors acknowledge that this is a very difficult study to conduct because of the nonrandomized, observational nature of the studies and lack of a strict separation between covered and uncovered Americans. For example, many people cycle in and out of insurance diluting differences between groups.

Of course, what is needed is a randomized trial, and surprisingly, one does exist which is discussed in the Annals article (1,2). In 2008, Oregon initiated a limited expansion of its Medicaid program for about 6,000 poor, able-bodied, uninsured adults aged 19 to 64 years through a lottery to win the opportunity to apply for Medicaid and to enroll if they met eligibility requirements. Compared to uninsured adults, mortality was 13% lower in the insured. However, the trial was underpowered and the mortality differences did not reach statistical significance.

Another study mentioned was one examining the mortality rates in New York, Maine, and Arizona after expansion of Medicaid (1,3). Compared to neighboring states that did not expand Medicaid, a significant decrease in all-cause mortality in the expansion states was observed (−25.4 deaths per 100,000 population; p = 0.02; Figure 1).

Figure 1. Unadjusted mortality and rates of Medicaid coverage among nonelderly adults before and after state Medicaid expansions (1997–2007). The vertical line represents the year during which the Medicaid expansions were implemented, meaning that year 1 was the first full year after the expansions.

Figure 1 shows roughly parallel death rates before Medicaid expansion, and a gradually widening split after Medicaid expansion. From this data, the authors calculated that Medicaid expansion to 176 adults would prevent one death per year.

On Monday (6/26/17), the Congressional Budget Office (CBO) concluded that the pending Senate healthcare bill, known as the Better Care Reconciliation Act, will result in 22 million fewer people having health insurance by 2026 (4,5). The bill would cut $772 billion in Medicaid spending and $408 billion in subsidies for individual enrollees. The net effect of these spending reductions is partially offset by $541 billion in tax cuts mostly to corporations and wealthier Americans. These numbers all approximate the effects under the similar House version of the bill that passed on May 4.

If Medicaid expansion prevents one death for each 176 enrolled (4), presumably dropping Medicaid for 176 Americans would result in one additional death per year. Given that the CBO estimates 22-23 million Americans will lose coverage under either bill, the potential increase in deaths is staggering. If either bill is passed, an increase in the death rate among the Medicaid population seems the likely consequence of the politics of reducing the Federal deficit and billions in tax cuts for corporations and the richest Americans.

Richard A. Robbins, MD

Editor, SWJPCC

References

1. Woolhandler S, Himmelstein DU. The relationship of health insurance and mortality: is lack of insurance deadly? Ann Int Med. June 27, 2017. Available at: http://annals.org/aim/latest (accessed 6/27/17) [CrossRef]
2. Baicker K, Taubman SL, Allen HL, Bernstein M, Gruber JH, Newhouse JP, Schneider EC, Wright BJ, Zaslavsky AM, Finkelstein AN; Oregon Health Study Group.The Oregon experiment--effects of Medicaid on clinical outcomes. N Engl J Med. 2013 May 2;368(18):1713-22. [CrossRef] [PubMed]
3. Sommers BD, Baicker K, Epstein AM. Mortality and access to care among adults after state Medicaid expansions. N Engl J Med. 2012 Sep 13;367(11):1025-34.  [CrossRef] [PubMed]
4. Congressional Budget Office. H.R. 1628, Better Care Reconciliation Act of 2017. June 26, 2017. Available at: https://www.cbo.gov/publication/52849 (accessed 6/26/17).
5. Frieden J. Senate GOP's ACA repeal bill would knock 22 million off insurance: CBO. MedPage Today. June 26, 2017. Available at: https://www.medpagetoday.com/PublicHealthPolicy/repeal-and-replace/66275?isalert=1&uun=g687171d5575R5764210u&xid=NL_breakingnews_2017-06-26 (accessed 6/26/17).

Cite as: Robbins RA. Mortality rate will likely increase under Senate healthcare bill. Southwest J Pulm Crit Care. 2017;14(6):318-9. doi: https://doi.org/10.13175/swjpcc084-17 PDF