Affordable Care Act Takes Hits in Spending and Tax Bills

December 18, 2015

A massive spending and tax-break package approved by Congress today will delay several taxes under the Affordable Care Act (ACA) and put a crimp on other healthcare reform outlays.

The spending portion of the package — a $1.15 trillion omnibus appropriations bill for fiscal 2016 — was more generous, though, toward the National Institutes of Health. The institute received a $2 billion raise, which included $200 million for the new Precision Medicine initiative. The Centers for Disease Control and Prevention also saw its budget increase, but only by $300 million.

"This is the most encouraging budget outcome in 12 years," Francis S. Collins, MD, PhD, director, National Institutes of Health, said in a statement released to the media. He noted that the increase is "a much needed boost" and "comes at just the right time to take advantage of remarkable opportunities to improve human health, powered by dramatic advances in scientific knowledge and technological innovation."

Passage of the spending bill averts a government shutdown and funds federal operations through September 2016.

The legislation passed by Congress also includes tax breaks costing $680 billion over 10 years.

The House approved the tax portion of the legislation yesterday in a 318-to-109 vote. Today, it voted 316 to 113 in favor of the omnibus spending bill. The combined tax and spending bills then sailed through the Senate, 65 to 33.

President Barack Obama has promised to sign the legislation.

ACA Changes

What's coming to Obama's desk suspends an ACA tax on medical devices for 2 years. ACA opponents argued that the tax, originally scheduled to take effect in 2016, would stifle medical innovation, increase the cost of care, and eliminate jobs.

The legislation also stiff-arms the ACA provision that imposes a 40% excise tax on employer-sponsored health plans deemed ultraexpensive. The start date has been postponed from 2018 to 2020.

Another casualty is an ACA tax on health insurers, which is suspended for 2017. ACA critics say the tax causes insurers to pass on the cost to consumers in the form of higher premiums.

The ACA took other hits on the spending side. Most notably, the legislation prevents the Obama administration from using discretionary funds in the US Department of Health and Human Services to offset any initial losses incurred by health insurers participating in ACA exchanges in the so-called Risk Corridor program. The Democratic drafters of the ACA created the program anticipating that some insurers wouldn't collect enough premium dollars to cover an influx of new and sicker-than-average enrollees. Congress included the discretionary-funding restriction in last year's spending bill, depriving insurers of an estimated $2.5 billion and undermining their commitment to participate in the exchanges.

The latest spending bill also prohibits the administration from using discretionary funds to bail out state-based insurance exchanges that are running out of money. And the infamous Independent Payment Advisory Board, created to curb Medicare spending, but not yet appointed, gets nary a dime in 2016.

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