The Republican Tax Overhaul in Healthcare

My Best Guess
Dennis Slater, MD

The Republican tax reform bills were finalized for the House of Representatives in late November 2017, and for the
Senate in early December 2017, approved by the House and Senate within one week, and then co-jointly approved
by the full Congress on December 23, 2017. There was no formal assessment of the economic impact of the tax
overhaul by the United States Treasury Department and no discussion or deliberation at the state and local levels. In
contradistinction, the Reagan tax reform bill of 1985 and the Affordable Care Act of 2010 were debated in Congress
for 3 years and 9 months, respectively, allowing ample time for state and local elected officials, focus groups and
lobbyists to voice opinion and implement revisions. The Reagan tax bill was bipartisan; a few Republicans voted for
the Affordable Care Act. No Democrats (0!) in the House or Senate voted for the Republican Tax Reform Bill of
2017, alias Tax Cuts and Jobs Act of 2017.

The major thrust of the Republican tax bill applying to healthcare may be distilled down to two features:

1. Reduction of the corporate tax rate from 35% to 21% and reduction of the
progressive income tax rate for the upper echelon from 39% to 36%. This fulfills
the holy grail of conservative economic policy, i.e., the supply side theory. Lift the
tax burden on businesses and the wealthy, and the economic benefits (increase in
economic growth and the GDP) will trickle down to the middle class and poor.

2. The Affordable Care Act mandate for all adults above age 26 to purchase health
insurance or pay a tax penalty will be eliminated.

The four pillars of the Affordable Care Act – minimum provisions for health insurance policies, expansion of
Medicaid, government sponsored healthcare insurance exchanges for individuals without employer-based insurance,
and the mandate – are interrelated, perhaps indispensably. Elimination of the mandate will obviously remove a
younger, healthier population from the universal insurance pool, potentially driving up insurance premiums for a
smaller, older, and more infirm insured population.

The Affordable Care Act may not survive without the mandate. Nevertheless, the Republicans will surely target two
other provisions of the Affordable Care Act in the guise of reducing cost, namely relaxing regulatory requirements
for minimal insurance coverage and defunding Medicaid expansion. The former will allow insurers to charge higher
deductibles and provide skimpier coverage policies. Without federal funding to support insurance exchanges the
nonpartisan Tax Policy Center and the Office of Management and Budget predicts a loss of 10 million of the 30
million newly insured within 1-2 years of the loss of the mandate.

What about the political repercussions? On the most basic philosophical level, why are we caring for the poor,
disabled and elderly? One argument is moral: our ethical obligation to care for the needy. Another argument is
economic. If ultimately we must care for people who are critically ill (an EMTALA requirement for all hospitals),
it will be cheaper to provide healthcare for the prevention of hypertension, hyperlipidemia, diabetes and smoking

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rather than treatment of acute myocardial infarction, congestive heart failure, stroke, peripheral vascular disease,
chronic kidney disease and cancer.

The Affordable Care Act is a needed reform of wealth distribution and as such an anathema to Republicans and
conservatives. Since 1980, wealth is increasingly concentrated in the upper 10% of the American population (who
garner 60% of wealth), potentially leading to greater economic inequality and social instability. Redistributing wealth
for education and healthcare, with policies promoting universal education and with policies promoting universal
education and healthcare will preserve social mobility and expand the middle class.

But a more abstract and often forgotten argument for universal healthcare is political: The Declaration of
Independence (1776) guarantees that the government will promote life, liberty and the pursuit of happiness. In its
narrowest interpretation the pursuit of happiness was equal access to property (land), the primary source of wealth
in pre-industrial America. However, the Founding Fathers chose not to restrict pursuit of happiness to the acquisition
of property, but a more expansive view to include well-being. Although a limited social contract – Medicare and
Medicaid – was inscribed by the United States government 189 years later, universal federal healthcare is a political
norm in all other Western industrialized countries in the latter half of the 20th century.

The Republican Tax Reform Bill will expand the federal deficit by 1.5 trillion dollars over 10 years, according to the
OMB estimate. Note that the ceiling deficit beyond 1.5 trillion over 5 years would have required a two-thirds vote in
the Congress. This forced the Republicans to scale back the reduction in the corporate tax rate to 21% from 15%
and to abandon the simplified progressive income tax. So much for confidence in their bizarre and discredited supply
side economics and the previous insistence on budget neutrality to avoid expanding the deficit during the Obama
administration. Capping and reducing the deficit will be the responsibility of the next administration and, if again
Republican, will surely target entitlement programs, specifically Social Security, Medicare and Medicaid.
The populism of Trump and his elite minions is a total sham, but proves an old aphorism –
you can fool some of the people all of the time. g

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