Medical Device, Insurer Taxes May Stay in Senate Health Bill

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By Colleen Murphy

The Affordable Care Act’s taxes on medical devices, brand-name prescription drugs, and health insurers could stay in place in the Senate’s health care bill, a lawmaker said.

Keeping some of the ACA’s taxes in place in a bill to repeal and replace the law could help the Senate achieve its goal of legislation that is more generous than what passed the House May 4. Senate Republicans say they plan to increase the bill’s tax credits, extend Medicaid funding for states that had expanded programs under the ACA, and add funding for reinsurance.

“We have members that are in favor or keeping some revenues around, at least in the near term,” Sen. John Thune (R-S.D.), a member of the Senate Finance Committee, told reporters June 7.

The House bill ( H.R. 1628) rolled back most of the taxes in the ACA, something that was a top priority for many Republicans. The ACA’s myriad tax provisions helped bring in billions of dollars to fund the law—so keeping some could help senators pay for the changes they desire.

The Joint Committee on Taxation on May 24 estimated repealing the net investment income tax, a 3.8 percent tax on high-income households that is killed in the House bill, would cost $172 billion over a decade. In total, the House bill includes $662 billion in tax cuts, the JCT said.

The future of the maligned Cadillac tax is “still fluid in terms of the discussions,” though many senators want it gone, Thune said. It sets a 40 percent tax on parts of high-cost health plans and has drawn the ire of Republicans and Democrats. The tax is currently set to take effect in 2020.

Room for Negotiation

Several Republican senators, including Senate Majority Whip John Cornyn (R-Texas), cautioned that no final decision has been reached on what taxes would stay. Some Republicans hope to vote on a bill before recess next month, though they continue to negotiate.

“Part of paying for it would be leaving some of the taxes in place and so the dial adjusting is as you decide you need to leave more benefits in place, then you decide you need to leave more taxes in place, and that will be part of the discussion,” Sen. Roy Blunt (R-Mo.) told reporters. “I’m sure senators want to get rid of as many taxes as possible also, but the House didn’t get rid of all the taxes because you can’t get rid of all the taxes if you don’t get rid of all the benefits.”

The Senate is currently in talks with the Congressional Budget Office over proposed changes. The CBO will have to issue a score of the bill, calculating its cost and the number of individuals covered, before the chamber can hold a floor vote. The House bill is estimated to lead to 23 million individuals eventually losing coverage.

As House Republicans crafted a bill, they toyed with delaying repeal dates of some taxes and left the 0.9 percent Medicare surtax as an olive branch for reticent moderates. Still, in the months leading up to the vote, lawmakers repeatedly said they planned to end all the ACA’s taxes.

But because Senate Republicans can only lose two votes and still pass a measure, negotiating now is a different animal, Sen. Tim Scott (R-S.C.) told reporters. Any changes the Senate makes to the House bill will have to be reconciled by a conference committee.

“While I certainly appreciate the perspective, I’d say the Senate is a very different animal and being able to pay for what will end up in the Senate bill is important, and how we do that apparently will be part of the conversation,” said Scott, who was in the House from 2011 to 2013.

With assistance from Alex Ruoff in Washington.

To contact the reporter on this story: Colleen Murphy in Washington at

To contact the editor responsible for this story: Meg Shreve at

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