House to Vote on $90 Billion of Tax Cuts

The House of Representatives is voting this week on three bills targeting health care-related tax provisions and expanding the use of Health Savings Accounts (HSAs). The three bills would cost almost $90 billion over the next ten years.

Yesterday the House passed a bill that would repeal the medical device tax, which was enacted to help finance the Affordable Care Act (ACA).

The two bills considered today would reverse other elements of the ACA by delaying the ACA's health insurance tax for an additional two years and allowing tax-advantaged HSAs to be used to purchase over-the-counter medications. The bills also roughly double HSA contribution limits and include various changes to the accounts, including allowing Medicare Part A enrollees to make contributions and allowing the accounts to be used to cover gym memberships and fitness expenses.

Provision 2019-2028 Cost
Additional two-year delay of health insurance tax $27 billion
Repeal medical device tax (currently suspended through 2019) $19 billion
Roughly double HSA contributions limits to match maximum deductible and out-of-pocket expenses $15 billion
Allow HSAs to be used to purchase over-the-counter medications and feminine products $7 billion
Allow Medicare Part A enrollees to make HSA contributions $6 billion
Prevent employer-offered health clinics from disqualifying HSA eligibility $4 billion
Allow high-deductible plans to offer first-dollar coverage for more services $4 billion
Allow fitness expenses & gym memberships to be eligible for HSAs and the medical expense deduction $4 billion
Allow direct primary care arrangements for HSAs $2 billion
Allow exchange customers to purchase lower-premium copper plans -$1 billion (savings)
Allow carryforward of health flexible spending arrangement account balances $1 billion
Other $2 billion
Total $88 billion

Source: JCT (1, 2). Medical device tax repeal is a CRFB estimate based on 2017 CBO estimates.

These bills are mostly a combination of the 11-bill $92 billion package of health care tax cuts that the Ways & Means Committee approved two weeks ago. The tax cuts added since the Ways & Means package include the medical device tax repeal ($19 billion) and the two-year delay of the health insurance tax ($27 billion). Both of those taxes were previously delayed in January.

Other parts of the Ways & Means package are not being considered this week, including a repeal of the employer mandate and further delay of the Cadillac tax. The original Ways & Means package of proposals would have also created "copper" plans, a form of catastrophic health insurance, and then let them be sold on the exchange, be used with HSAs, and allow those that select the plan to get ACA subsidies. The bill being considered by the full House does not allow copper plans to receive ACA subsidies. 

In a statement on these tax cuts and the tax cut extension framework also announced yesterday, CRFB President Maya MacGuineas said:

This country is drowning in red ink. It is beyond irresponsible to add even a dollar more to the debt, and anyone who cares about fiscal responsibility should dismiss further tax cuts outright.

These bills would worsen an already grim fiscal situation, particularly after a package of large tax cuts passed in December followed by additional tax cuts in January and February. If lawmakers want to pass yet more tax cuts, they should offset them with savings elsewhere in the budget, either proposing spending reductions or other revenue increases.