Skip to main content

Tax Reform Proposals Hit Hospitals Hard

News  |  By John Commins  
   November 17, 2017

Provisions in both the House and Senate tax bills that would affect hospitals are raising alarms, as lobbyists for the hospital industry urge House and Senate leaders to reconsider.

If tax reform is a game of winners and losers, then right now hospitals – at least temporarily – occupy the losers’ column in both the House and Senate plans.

Several provisions in the sweeping tax plan approved by House Republicans this week will harm hospitals and the patients they serve, the American Hospital Association said.

The Tax Cuts and Jobs Act (H.R.1) "would eliminate hospitals' ability to access low-cost capital financing through tax-exempt private-activity bonds and advance refunding bonds," AHA said in a media release. "In addition, the bill would impose a 20% excise tax on pay for certain nonprofit hospital employees."

The bill passed 227-205 along partisan lines.

"For many communities, tax-exempt financing, such as private activity bonds, has been a key to maintaining vital hospital services," AHA Executive Vice President Tom Nickels said. "If hospital access to tax-exempt financing is limited or eliminated, hospitals' ability to make investments in new technologies and renovations in the future will be challenged."

As for the proposed 20% excise tax, Nickels said that "there is already a rigorous process prescribed by the Internal Revenue Service for setting up executive compensation."

"The process requires an impartial panel drawn primarily from the board of trustees, which is charged with setting CEO compensation based on the marketplace and documenting deliberations to attract the best talent," he said.

The House bill also strips from the tax code the ability for individuals to file an itemized deduction of medical expenses, beginning next year, and eliminate the deduction for contributions to Archer medical savings accounts.

"We are troubled that the proposal would eliminate an important deduction for people with high medical costs," Nickels said.

Meanwhile, AHA is raising concerns about the Senate Republicans’ tax bill, still in committee, which would repeal the Affordable Care Act’s mandate that individuals have health insurance.  

"The Congressional Budget Office last week estimated that repealing the individual mandate would decrease the number of individuals with health insurance by 4 million in 2019 and 13 million in 2027," AHA said. "In addition, CBO estimated that premiums in the non-group health insurance market would increase by about 10% 'in most years of the decade' relative to the agency's baseline."

AHA cited CBO estimates that the repeal would save the federal government $338 billion over 10 years by cutting federal spending on Medicaid by $179 billion and cutting Health Insurance Marketplace subsidies by $185 billion.

AHA joined a coalition of health groups this week and urged congressional leaders not to include the provision in tax legislation.

"We join together to urge Congress to maintain the individual mandate," the groups wrote. “There will be serious consequences if Congress simply repeals the mandate while leaving the insurance reforms in place: millions more will be uninsured or face higher premiums, challenging their ability to access the care they need. Let’s work together on solutions that deliver the access, care, and coverage that the American people deserve."

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

Get the latest on healthcare leadership in your inbox.