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Ways and Means Committee Considering $92 Billion of Tax Cuts

Jul 11, 2018 | Health Care| Taxes

The House Ways and Means Committee today is marking up a package of 11 tax bills related to health care. The Joint Committee on Taxation (JCT) estimates these bills would cost a combined $92 billion over ten years, and the ultimate cost could be much higher since a few of the more costly policies are temporary. If continued, these policies would cost close to $200 billion. These bills would worsen an already grim fiscal situation, particularly after large tax cuts passed in December, followed by additional tax cuts in January and February.

The largest of the bills temporarily rolls back two Affordable Care Act policies – the employer mandate to provide health insurance and the Cadillac tax on high-cost insurance plans – eliminating the employer mandate penalty retroactively from 2015 through this year and delaying the Cadillac tax from 2022 to 2023. These policies will cost $39 billion over ten years, but the cost could be even higher if these policies are made permanent (particularly likely for the Cadillac tax that has already been delayed twice). The employer mandate and Cadillac tax are projected to raise $150 billion over ten years, so continuing the delays or permanent repeal would cost roughly another $100 billion.

Several other policies would expand Health Savings Accounts (HSAs) and other tax-preferred savings accounts. Most notably, the plan would increase contribution limits from $3,450 for single coverage and $6,900 for family coverage to the deductible and maximum out-of-pocket costs that a person could pay under a high-deductible health plan ($6,650 and $13,300), costing $15 billion over ten years. This policy was previously included in last year's Affordable Care Act "repeal and replace" bills. It also expands items an HSA can be used for ($7 billion cost); allows Medicare enrollees to contribute to HSAs ($6 billion); prevents employer-offered health clinics from disqualifying someone from HSA eligibility ($4 billion); allows high-deductible health plans (which are linked to HSAs) to offer little or no deductible ($4 billion); and allows primary care retainers to qualify for HSAs ($2 billion).

A few other policies would affect plans offered on the health insurance exchanges. One policy, which actually saves $1 billion, would allow insurance companies to offer copper plans with catastrophic coverage that is less generous than plans currently offered on the exchanges. Another policy would allow premium subsidies to apply to catastrophic plans and change the definition of a qualified health plan to exclude plans that cover abortion at a cost of $12 billion.

The final major policy would allow fitness expenses like gym memberships to qualify as medical expenses for HSAs and the medical expense deduction at a cost of $4 billion over ten years.

Provision 2019-2028 (billions)
Remove employer mandate for 2015 through 2018 $26 billion
Roughly double HSA contributions limits to match maximum deductible and out-of-pocket expenses $15 billion
Delay Cadillac tax from 2022 to 2023 $14 billion
Allow premium subsidies for catastrophic plans and prevent premium subsidies for any plan that covers abortions $12 billion
Allow HSAs to be used to purchase over-the-counter medications and feminine products $7 billion
Allow Medicare Part A enrollees to make HSA contributions $6 billion
Prevent employer-offered health clinics from disqualifying HSA eligibility $4 billion
Allow high-deductible plans to offer first-dollar coverage for more services $4 billion
Allow fitness expenses & gym memberships to be eligible for HSAs and the medical expense deduction $4 billion
Allow direct primary care arrangements for HSAs $2 billion
Allow exchange customers to purchase lower premium copper plans -$1 billion (savings)
Other $2 billion
Total $92 billion

Source: Joint Committee on Taxation. Totals do not add to sum due to rounding.

This package of bills would be costly, especially coming on the heels of grim news from the Congressional Budget Office (CBO) about the budget outlook. The costs would increase further if the employer mandate and Cadillac tax continued to be delayed permanently. Lawmakers should offset these costs or leave the bills on the back burner.