GOP plan would ax two health care tax breaks

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House Republicans’ Tax Cuts and Job Act would repeal two tax breaks related to health care: one that allows patients to deduct some particularly expensive health care bills, and another designed to spur the development of new drugs to treat rare diseases.

The bottom line: Both of these changes would affect relatively small — but also especially vulnerable — groups of people. Although Republicans spared the most widely used and most expensive health care-related tax provisions, don’t be surprised if Democrats seize on the deduction for medical expenses as a key point in their criticism of the bill.

How it works: Current law allows you to deduct certain health care expenses, if those expenses add up to more than 10% of your income. The GOP bill would repeal that deduction.

  • This is an especially big deal for people with chronic diseases or who need long-term care, according to the Kaiser Family Foundation’s Larry Levitt. It would also affect families who pay for a relative’s care, particularly for expensive conditions like Alzheimer’s.
  • The deduction costs the government roughly $10 billion per year, according to figures from the Joint Committee on Taxation.
  • Existing law also provides a tax credit to drug companies that develop “orphan drugs” — new products to treat rare diseases. The House bill would eliminate that credit, for a savings of roughly $54 billion over a decade.

What they’re saying: The Biotechnology Industry Organization yesterday praised the larger attempt at a tax overhaul but said Congress should retain the credit for orphan drugs “to ensure that our nation’s tax code most effectively encourages innovation.”

What they’re not saying: For all the anticipation, the bill ended up treading pretty lightly in the health care world. It wouldn’t touch any of the ACA’s taxes or penalties, nor would it change the tax exclusions for employer-provided insurance — one of the most expensive tax breaks in the entire code.

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