How Was My Health Care Affected By This Tax Law?

The tax plan recently signed into law affects the American health care system in three major ways. First, it repeals the Affordable Care Act‘s requirement that all individuals have health insurance. Second, the tax bill will grow the national deficit by $1.8 trillion, potentially triggering drastic cuts to Medicare, Medicaid, and other public health services. Finally, the tax plan also greatly benefits the pharmaceutical industry by reducing the corporate tax rate.

Repealing the Individual Mandate

The tax plan that was recently signed into law made some major changes to the Affordable Care Act. The ACA included a provision – called the individual mandate – that required every American to have health insurance. This provision was intended to ensure that the overall “pool” of people with health insurance was balanced. If mostly sicker or older Americans had health insurance, the rates would be higher for everyone, but if everyone was covered, prices would be lower. The tax law eliminated the individual mandate. The result will be both more people uninsured, and higher health insurance premiums for those who retain their insurance.

The Congressional Budget Office estimates that eliminating the individual mandate will cause 13 million people to be uninsured over the course of the next ten years. Per the CBO, five million fewer people will receive coverage through the individual insurance marketplace, five million fewer people will be enrolled in Medicaid; and, three million fewer people will have employer-sponsored insurance.

Health experts also estimate that eliminating the individual mandate will cause health insurance premiums to rise an additional 10 percent each year compared to what they would have been if the mandate remained. These increased rates are not going away: The repeal of the individual mandate is one of the few changes in the individual tax code that is permanent, and will remain in place after 2025.

Medicare, Medicaid, and Other Public Health Services

Over the next ten years, the tax plan will add about $1.8 trillion to the federal deficit. Many legislators may look to cuts to health care programs – which account for more than $1 out of every $4 that the federal government spends – to address the fiscal pressure. For example, the president’s most recent budget proposal includes roughly $675 billion in cuts to Medicare and Medicaid over the next decade. Those aren’t cuts that are going into effect right away, but they are an indication of what could be to come.

Benefits to the Pharmaceutical Industry

One clear winner from the tax plan is large corporations – including pharmaceutical companies such as Pfizer, Merck, and Eli Lilly – who will see their tax rate drop from 35 percent to 21 percent. But that’s not the only tax cut that will benefit the pharmaceutical industry. The new law includes a provision that may encourage shifting profits overseas, by taxing overseas profits at a tax rate that is half the tax rate of profits earned in the United States. The pharmaceutical industry, which already holds more of their profits overseas than other industries, may be encouraged to shift even more profits overseas in an effort to take advantage of the lower overseas rate. There is no evidence that lower tax rates for pharmaceutical companies will result in lower drug prices for you, or even increased research and development for new drugs. In fact, there have been reports of pharmaceutical companies canceling research projects mere weeks after giving their companies’ stock prices a boost.

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