Legislative Alert: Congress Passes Government Funding, Tax Reform Bill Before Adjourning untilJanuary

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Before adjourning for the rest of the year, Congress passed a tax reform package and legislation to fund the government through January 19, 2018. Congress will reconvene on January 3, 2018. President Trump has signed the tax bill into law. Possible additional short-term funding bills may be used to provide additional time for lawmakers to reach a consensus on a number of issues and pass a spending bill for the remainder of FY 2018.

Republicans Secure Key Victory with Tax Reform, Repeal Individual Mandate Penalty

On Dec. 20, the House and Senate passed

H.R. 1, the Tax Cuts and Jobs Act, representing the first major legislative victory for President Trump and the Republican congressional leadership. In addition to lowering corporate and individual tax rates and modifying a number of tax credits and deductions, the legislation includes several significant changes to health care.

The bill repeals the Affordable Care Act’s tax penalty for individuals who do not have qualifying health care coverage.  As of 2019, the penalty will not be enforced. The Congressional Budget Office previously has estimated that eliminating this requirement, referred to as the “individual mandate,” would increase the number of uninsured by 13 million.

The final tax package also addresses the medical expense deduction for those who itemize their individual tax returns. Under current law, medical expenses that exceed 10% of adjusted gross income (AGI) may be deducted. The Tax Cuts and Jobs Act would reduce this threshold to 7.5% for 2017 and 2018 and return it to 10% for 2019 and thereafter.

The bill imposes a 21% excise tax on compensation exceeding $1 million for not-for-profit executives. In addition, it includes a 1.4% excise tax on net investment income earned by private colleges and universities, effective in taxable years after Dec. 31, 2017. This may have implications for academic medical centers.

Under current law, interest on qualified private activity bonds, including 501(c)(3) hospital bonds, is excludable from gross income. Despite an effort to eliminate this advantageous tax status for private activity bonds, the final legislation did not include this provision.

Beyond health care, this legislation includes a number of changes to both the individual and corporate tax rates.  These include:

  • An increase of the standard deduction from $6,500 to $13,000 for individuals and $12,000 to $24,000 for married couples.

  • A doubling of the current estate tax exemption

  • An increase of the exemption amount from the alternative minimum tax

  • A lowering of the corporate tax rate from 35% to 21%

Shutdown Averted with Short-Term Funding Bill/Includes CHIP Funding/No Medicare Sequester in 2018

The House and Senate on Dec. 21 passed a

continuing resolution (CR) that funds government operations through Jan. 19, 2018. This package also includes a number of healthcare provisions. Most notably, the CR includes $2.85 billion to fund the Children’s Health Insurance Program (CHIP) through March 31, 2018. It also extends the expired Community Health Centers (CHCs) program until March 2018 with a $550 million authorization.

The CR also waives a Pay-As-You-Go (PAYGO) requirement that potentially would have resulted in a Medicare cut of 3.75% in 2018.

Additional provisions in the CR include:

  • $65 million for the National Health Service Corps

  • $15 million for the Teaching Health Center Graduate Medical Education Program

  • $37.5 million for the Special Diabetes Program for Type 1 Diabetes for the first and second quarters of fiscal year 2018

Outstanding Healthcare Issues

When Congress returns in January, it will need to address a number of longstanding healthcare issues.  These include a longer-term reauthorization of the Children’s Health Insurance Program (CHIP), disaster relief funding, Affordable Care Act market stabilization measures, and reauthorization of “Medicare extenders” legislation.

In the Senate, there is an effort to fund cost-sharing reduction (CSR) payments for plans on the ACA exchanges. This is particularly important for Sen. Susan Collins (R-ME), who was assured a vote on the CSR payments in exchange for supporting the tax reform bill.

Congress also must address the so-called “Medicare extenders” provisions. In November, the House Ways and Means Committee released a

package outlining programs that need to be reauthorized.  These include reauthorization of the following:

  • Medicare Dependent Hospital Program and the Low-Volume Adjustment Program

  • Home Health rural add-on

  • Exceptions process for Medicare with the repeal of the therapy caps

  • Extension of the Medicare geographic payment cost index for physician payments

  • Ground Ambulance Add-Ons

  • Special needs plans (SNPs)

  • State Health Insurance Assistance Programs (SHIPs).

Outside of health care and the government funding issue, Congress also will need to raise the debt ceiling.

AMGA will remain involved in the many pending issues before Congress and we will update you accordingly.

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