DCMedical News: December 12, 2017
DCMedical News
Washington, D.C.
Healthcare, Medical Education
December 12, 2017
Every American Will be Affected by Tax Bill
Conference tomorrow 2:00 p.m., HC-5 Capitol Bldg. Joint Committee on Taxation comparison of the House and Conference rules from CRS here.
Agenda: “Comparison of the House- and Senate-Passed Versions of the Tax Cuts and Jobs Act,” Joint Committee on Taxation (JCT), December 7, found here.
Hospital and Medical Literature Showing Concerns
The American Hospital Association (letter here) summarized concerns widespread in the hospital field.
Hospitals, health providers generally and the individuals involved will lose with elimination (reduction of the tax to $0) of the “individual mandate” to obtain health insurance. This provision appears in the Senate Amendments, but appears to be favored by House conferees, as well. (Sec. 11081 of the Senate amendment and sec. 5000A of the Code.)
For hospitals, patient accounts receivable are usually the largest sum on the balance sheet under current assets. The current ratio (current assets divided by current liabilities) is frequently an important “security” issue in bond indentures, a quick index of liquidity. Deterioration of accounts receivable (A/R) is already underway, courtesy of “high deductible/consumer choice” health plans, and more generally the increase in copayments, deductibles, uncovered services, out-of-network and other rising out-of-pocket payments. The problem is, in general, patients without pockets deep enough. Some hospitals report A/R already at 30-35% of their total accounts as “patient responsibility,” often instant (but unrecognized, from an accounting standpoint) bad debt. Further assault on the integrity of A/R will tip over some current ratios, triggering events of default. With more than 90% of hospital capital formation dependent on debt, default is financial death. One result will be more hospital consolidation.
Loss of tax exemption for hospital long-term revenue bonds will also attack independent hospitals. “Private activity” bonds (termination of private activity bonds, sec. 3601 of the House bill and sec. 103 of the Code) include non-profit hospital revenue bonds, a recognition of the “public” work done by “private institutions” in de Toqueville’s America. Access to public credit markets for hospitals took off with the passage of Medicare and Medicaid, assurance that payment would be made to hospitals for the care of the indigent and the aged. Led initially by Mike Hernandez of (the now defunct) firm Kidder Peabody, states created bond issuing “authorities” for health facilities.
Access to public credit markets loosened the grip of conservative private lenders (banks, insurance companies), as well as the grip of philanthropic hospital trustees. The “managerial” era began, hospital executives unbound by banks or trustees in the era of cost-based reimbursement (1965-1983) for hospital care.
Medicare under cost-based reimbursement provided dollar-for-dollar reimbursement for every dollar spent on interest, reimbursement for depreciation (a surrogate for principal), and a return on equity (even for non-profits). This was fuel for the creation of the modern American hospital, and through that capital investment, fuel for the employment monolith which health care has become. But independent hospitals, not strong enough to attract conservative lenders, or to issue taxable bonds, will again become grist for the consolidation mill if public credit markets are not available to them.
Hospitals and health care organizations as “charities” will also suffer. With the financial incentive for charity gone, virtue will be its own (but also its only) reward. Some forty four million households now itemize, projections under the bill are for 6 million to itemize.
Finally, there is the “big one,” the threat of the Tax and Jobs Act to undermine Medicare payments to providers. Mr. Ryan has sounded the attack, now that we (that Tax Act!) have big deficits coming.
MACPAC Packs A Lot into December 14 Meeting
The MACPAC (Medicaid and CHIP advisory body to Congress) will meet all day this Thursday. Several sessions (agenda here) focus on drug costs, two on Medicaid managed care authorities, others on the status of CHIP, DSH and 1115 Waivers.
Documents, New and Old
CBO takes a look at “Issues and Challenges in Measuring and Improving the Quality of Health Care,” thank goodness, found here. Actual text of House Joint Resolution 123, including CHIP detail, found here.
Finally, for truth-telling and humor, the late Uwe Reinhardt (“A Brief History of Price Controls by Annoyed Republican Administrations”) cannot be beat. He explains why the Ds, faced with financing health care, will dance around with readmissions reduction fines, for example, while the Rs will go straight to price controls, here.
Notes to: Fred Hyde, MD, JD, MBA; fredhyde@aol.com