Hart Health Strategies provides a comprehensive policy briefing on a weekly basis. This in-depth health policy briefing is sent out at the beginning of each week. The health policy briefing recaps the previous week and previews the week ahead. It alerts clients to upcoming congressional hearings, newly introduced bills, regulatory announcements, and implementation activity related to the Patient Protection and Affordable Care Act (PPACA) and other health laws.


Tax Reform Advances in the House, Commences in the Senate

The House Ways and Means Committee reported out H.R. 1, the Tax Cuts and Jobs Act, on Thursday, advancing it after four days of debate along a party line vote. No health related provisions of H.R. 1 were amended or added during the markup. Additional amendments are not expected to be allowed on the floor. The bill does not include repeal of the individual mandate. Chairman Kevin Brady (R-Texas) has said that other Affordable Care Act (ACA)-related industry taxes, like the medical device and health insurance taxes, will be dealt with before the year’s end but won’t be included in the current tax bill. House Republicans plan to send the legislation to the floor this week, with the goal of having a bill on the President’s desk by the end of the year.

A Chairman’s mark of the Senate tax bill -- a conceptual outline of expected legislative text that could still change before the bill is officially introduced -- was released last week, though Senate Finance Committee Chairman Orrin Hatch (R-Utah) has said that a lot of work remains to be done on the bill. The committee typically marks up based on conceptual language instead of legislative text. The Senate tax plan would establish seven tax brackets, instead of the four proposed by the House, lower the top tax rate from 39.6 to 38.5 percent, and fully repeal state and local tax deductions. It does not currently include repeal of the individual mandate and also leaves the medical expense deduction in place. It does provide that certain research or experimental expenditures paid or incurred beginning after 2023 are required to be capitalized or amortized over a five-year period (or 15 years for research conducted outside of the U.S.). It would also alter the rare disease tax credit, which currently stands at 50 percent for qualified clinical trial expenses. The House bill completely eliminates the orphan drug tax credit, but the Senate bill would limit it to fifty percent of qualified clinical testing expenses for the taxable year as exceeds 50 percent of the average qualified expenses for the three previous taxable years. If there are no qualified clinical expenses during at least one of the three preceding years, the credit is equal to 25 percent of qualified expenses. The credit will also be limited if the clinical research being done on the drug is for an already approved use of the product that is not for a rare disease.

The Trump Administration has reportedly prepared an executive order that would eliminate or weaken Obamacare’s individual mandate, but is waiting to see whether such a provision will be included in one of the GOP tax bills. Multiple reports indicate that the executive order would broaden the hardship exemptions to the requirement that individuals demonstrate proof of insurance in order to avoid a penalty. Hardship exemptions are currently granted in some extraordinary circumstances – such as the death of a family member, bankruptcy, natural disaster, or when a person cannot afford to pay his or her utilities. The order apparently awaits approval at the Office of Management and Budget (OMB).

According to a new analysis from the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT), repealing the individual mandate would increase the number of uninsured by four million in 2019 and 13 million in 2027, while reducing the deficit by $338 billion over the next decade. The agencies conclude that repeal of the mandate will increase premiums in the individual marketplace by approximately 10 percent, though the markets themselves would remain stable in most areas of the country.

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