How do tax reform changes impact patient health care?

The Tax Cuts and Jobs Act will have a real impact on patient health care.

When the Tax Cuts and Jobs Act (TCJA) was signed into law late last year, organizations across an array of different industries knew that changes would be on the horizon – potentially impacting the way they help customers as well as their own internal staff members.

However, few institutions were bracing themselves for change as hard as health care providers. The new standards put in place by the TCJA don't only affect health care practitioners, but patients as well.

Let's examine a few of the ways in which the health care industry and patient services will be shifted in the wake of TCJA:

Reduction in corporate tax rate

As Ken Perez, Omnicell Vice President of health care policy and Electronic Health Reporter contributor noted, some of the changes brought by the new tax code have organizations celebrating. The decrease in the corporate tax rate in particular is good news for for-profit hospitals, health care providers and pharmaceutical companies, as it reduces the previous rate of 35 percent to 21 percent.

This could potentially provide these organizations with more capital in the coming years, which may be put toward updating internal systems, investigating emerging health care strategies and more.

Stethoscope wrapped around a rolled up paper with the words, "Health Insurance Policy" printed on the outside. The Tax Cuts and Jobs Act could have a significant impact on patient health insurance.

Impact on the Affordable Care Act: Repeal of individual mandate penalties

The Affordable Care Act was mentioned numerous times during President Trump's campaign, so it's no surprise that the TCJA affects this previous legislation. However, this change could have considerable and potentially severe impacts on the health care industry and uninsured patients in particular.

One of the biggest changes here is the repeal of the individual mandate penalties that came as part of the Obama administration's ACA. While these were put in place to encourage Americans to have the support of health insurance, the TCJA repeals the former penalties that individuals had to pay if they did not have insurance. While this will mean that uninsured Americans don't have to pay the associated fine, it could also result in more individuals choosing not to purchase insurance, Harvard Business Review contributor David Blumenthal noted.

Overall, this could translate to an additional 13 million Americans going without health insurance, including 5 million who previously purchased insurance under the ACA. But the impact doesn't end there.

"This could translate to 13 million Americans going without health insurance."

"Others, especially higher-income individuals who don't qualify for subsidies under the ACA, will drop insurance because of increases in average premiums predicted by the CBO," Blumenthal wrote. "These premium increases will occur because, with the repeal of the mandate, many young, healthy people will exit markets, leaving a sicker, more costly insurance pool behind."

Potential cuts to Medicare

While this has yet to be seen, many health care industry experts are predicting that, due to TCJA's impact on the federal debt level, eventual cuts to Medicare could become inevitable. Some estimate that the TCJA would add over $1 trillion to the federal debt over the next decade. If this level surpasses $1.5 trillion over 10 years, mandatory spending cuts would have to take place, according to congressional "pay-as-you-go" rules, Perez explained.

Overall, as the TCJA impacts individuals inside and outside of the health care industry, it's imperative that businesses are able to keep up with its changes. This is especially important when it comes to ACA-related shifts.

To find out more, connect with the experts at Secova today.