July 10, 2017 - Weekly Legislative Update

What's next for the Senate Health Care bill?


The Senate comes back today and will have just sixteen working days before the are scheduled to adjourn again, this time for the month long August recess.

So where do things stand with the Senate's ACA repeal/replace bill that was abruptly bumped last week when it became apparent that there weren't sufficient votes to get it over a critical procedural hurdle?

There was a clear reason why Senate Majority Mitch McConnell (R-KY) was pushing to get a vote on the Better Care Reconciliation Act (BCRA) before the Fourth of July recess - he knew that the reception that many of his members would get at home would not help his efforts to get at least fifty Republicans on board to pass the bill.  As expected, some Republican Senators faced protestors while others avoided public events altogether.  Perhaps the biggest blow that the Fourth festivities struck for McConnell's efforts was a public statement from moderate Republican Senator Susan Collins (R-ME) who said that the only issue her constituents were focused on was health care and that people were repeatedly thanking her for, and encouraging her to continue, her opposition to the current Senate and House bills.

As we have previously noted, with fifty-two Republicans in the Senate and no Democrats or Independents expected to vote for the BCRA, Senator McConnell can only afford to lose two Republican votes. Senator Collins is not the only holdout.  Also during the recess, Senator McConnell's fellow Kentuckian, Senator Rand Paul (R-KY), continued to voice his opposition to the BCRA, coming from the opposite direction as Senator Collins and asserting that the bill doesn't go far enough to repeal the ACA.  Also in play are the eight other Republican Senators who have publically expressed opposition to, or deep concerns about, the current version of the BCRA.

In an effort to try to expedite negotiations when the Senate comes back into session, Senator McConnell submitted multiple options for potential amendments to the BCRA to the Congressional Budget Office (CBO) so that they could start reviewing them during the Fourth of July break.  The CBO is expected to come out with reports on these options next week - meaning that votes on the BCRA might not occur until the following week.  The options that were submitted for review include changing the Medicaid growth rate, increasing funding for opioid abuse prevention and an amendment being pushed by Senator Ted Cruz (R-TX) that would allow states to permit insurers to offer plans that don't comply with ACA regulations so long as the insurer offers at least one ACA compliant plan. 

The Cruz amendment, which is being promoted heavily by far right groups is almost certain to create the most controversy of the new options that will be on the table next week.  In particular this is because, among the ACA regulations that the amendment would allow insurers to avoid, are essential health benefit requirements and the requirement that insurers charge the same premium for people of the same age regardless of any preexisting conditions.  This amendment may help the BCRA get the votes of Senators Cruz, Lee, Johnson and Paul, all of whom have pushed for the elimination of the preexisting condition protections.  However, picking up these four votes could cost the bill at least that many, if not more, in light of the number of Republican Senators who have spoken out in favor of maintaining the protections. 

Members of the Senate leadership have also indicated that they are seriously considering getting rid of the provision in the BCRA's repealing the ACA's 3.8% investment tax.  Doing this would provide $172 billion in revenue over ten years and help fund other elements of the bill.  Not surprisingly, a number of stakeholders are already pushing back on this proposed modification, including a number of major business groups who oppose the manner in which the tax applies to certain S corporation and partnership income. Others oppose this tax because not only is it an additional tax imposed by the Affordable Care Act but also because it effectively creates a third tax system.  As we know the alternative minimum tax layers a second system on top of the regular income tax provisions; the 3.8% net investment tax imposes a third layer on top of this entire system.  It stands as the antithesis to tax simplification.  If the provision repealing the investment tax is peeled out of, or watered down in, the BCRA, then look for it to resurface in the upcoming tax bill.  Of course, that will just add to the large price tag that will accompany the tax bill unless the Republicans are able to come up with a major revenue raiser such as the controversial border adjustment tax ("BAT"). 

The bottom line is that it is anyone's bet at this point as to whether Senator McConnell and his leadership team will be able to thread the needle and find a version of the BCRA that will garner 50 votes.  Yesterday, Senator McConnell went so far as to say that if his party isn't able to come together to pass a version of the BCRA, he will turn to work with Democrats to fix the current problems that are plaguing the Obamacare marketplaces.

Sink or swim it is becoming very clear that Republicans need to either pass or abandon their ACA repeal/replace efforts, and soon, or risk jeopardizing more of their agenda.   Specifically, the House has been working towards a 2018 budget resolution (which would include reconciliation instructions to start the ball rolling on tax reform). However, members of the moderate Republican Tuesday Group have raised concerns about proceeding on a budget without certainty on the health care side and have criticized the House leadership's single party approach calling for bi-partisan budget negotiations. 

With the federal fiscal year coming to an end on September 30 and the CBO estimating last week that the government will run out of money to pay its debts if the debt ceiling isn't raised by early to mid-October, there is no time to lose on these issues. CBO is estimating that the government will run out of money sooner than originally projected due to lower than expected tax revenue coming in to the Treasury.  This may very well be the result of Congress cutting IRS' budget over the last several years.  It's no secret that there are far fewer IRS audits taking place which means that a number of tax preparers and others may be willing to be more aggressive in the many grey areas found in the tax law than they would otherwise choose to be.

Ten Republican Senators joined in a letter to Senator McConnell urging him to shorten or cancel the August recess, but at this point that still seems relatively unlikely.  Instead, we expect to see a rapid fire sprint to the finish over the next few weeks and again when Congress returns from recess in September.  With the 2018 election season approaching, the leadership in the House and Senate is likely to be very reticent to do anything (including allowing further delay on the health care debate) that could result in another government shutdown or, worse, a default on the debt.


Senator Hatch Calls for Comments on Tax Reform


Senate Finance Committee Chairman Orrin Hatch has called for input on tax reform from stakeholders and tax professional. TIA is in the process of preparing comments to submit to the Finance Committee by July 15.  We encourage members to share with us any suggestions or concerns that they would like to see submitted on behalf of TIA.