Government shutdowns aren't typically a productive time, but health-care industry players notched a few big wins out of three days of uncertainty — with the suspension and delay of key health-care taxes.
The popular Children's Health Insurance Program became the well-publicized football in the political blame game over the shutdown. The continuing resolution provides federal funding for another six years. But the deal to end the shutdown also delivered a win to the health-care industry, to the tune of $31 billion as it suspends or delays three taxes imposed by the Affordable Care Act: a tax on medical devices, the “Cadillac tax” on generous employer-sponsored health plans and a tax on health insurance companies.
The medical device tax is a 2.3 percent excise tax that has long been fought by the industry, which has argued that the tax hinders medical innovation and stifles job growth. The tax has been temporarily suspended for the past two years, but that reprieve was set to expire starting Jan. 1. The spending bill provides another two-year moratorium, but the industry is preparing to push for longer delays and a full repeal.
“Congress' action — just days before medical technology innovators were set to start cutting checks to the IRS — means funds will not be diverted from current investments in jobs, capital improvements and research into new treatments and cures,” Scott Whitaker, president of the Advanced Medical Technology Association, said in a statement. “We look forward to continuing to work with the Hill on a bipartisan basis to drive towards permanent relief.”
The spending deal also includes a two-year delay for the Cadillac tax, an Affordable Care Act tax on generous health plans offered by employers. The Cadillac tax is intended to discourage employers from compensating workers through generous health insurance plans that can lead to overuse of the health system. It has support from economists, but has been vigorously opposed by employers and unions. Now, Congress has kicked the can down the road — it won't go into effect until 2022.
Brian Marcotte, president of the National Business Group on Health, called it a “win-win for both employers and employees.”
Health insurer tax
Industry also won the one-year suspension of a tax on health insurers, beginning next year. Health insurance companies have pushed back hard against this tax, arguing that it will cause some families to see their premiums go up $7,000, on top of typical inflation, over a decade.
“These are the kind of solutions that will improve the affordability, availability and value of health insurance coverage for millions of Americans,” Kristine Grow, a spokeswoman for America's Health Insurance Plans, said in an email, referring to the tax suspensions and delays.
What's the downside? For companies and industry groups, these are temporary relief, not full repeal — which will remain the goal. But they also represent a sizable chunk of revenue to the government. The Joint Committee on Taxation found that the suspension of the medical device tax would mean lost revenue of $3.8 billion. The Cadillac tax delay would leave another $14.8 billion foregone. And the one-year suspension of the health insurer tax would mean $12.7 billion.