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How House and Senate Tax Legislation Affects Seniors

Tax legislation approved by the U.S. House of Representatives and Senate[i] would result in an immediate $25 billion cut in Medicare spending and will inevitably lead to the unraveling of working and middle-class programs to pay for massive tax cuts for the very wealthy and profitable corporations.  To follow is a summary of how this legislation would undermine the retirement and health security commitments made to generations of Americans:

Tax Bill Results in Immediate $25 Billion Cut in Medicare Spending

Under House and Senate tax bills, $1.5 trillion of the legislation’s tax cuts are not paid for. Since this legislation would increase the budget deficit by over $1.5 trillion, the Congressional Budget Office (CBO) says that the tax bill would trigger an automatic $25 billion cut to Medicare, as required by the Statutory Pay-As-You-Go Act of 2010 (PAYGO).  In response, the President’s Office of Management and Budget would be required to cut Medicare payments to health care providers, which would cause some physicians to leave the program.  As a result, seniors would lose access to doctors they trust.

A separate bill – subject to a filibuster in the Senate – could be enacted to waive the Medicare cuts required by the PAYGO law, but there is no guarantee Congress will approve this legislation.

Exploding the Budget Deficit Will Lead to Middle-Class Benefit Cuts

The tax legislation would leave Medicare, Medicaid and Social Security vulnerable to benefit cuts because of its dramatic $1.5 trillion increase in the public debt an increase that will have to be offset in the future.  Inevitably, older Americans and people with disabilities will be forced to pay a heavy price for this irresponsible legislation.  On November 29th, Senator Marco Rubio (R-FL) said that the tax bill is just the first step before "…instituting structural changes to Social Security and Medicare…" benefits to reduce the federal deficit.

  • Medicare beneficiaries cannot afford to pay more for less coverage – particularly when half of them have incomes of less than $26,200 a year and spend 25 percent of their Social Security check to pay for Medicare Parts B and D out-of-pocket costs for premiums and cost-sharing amounts.

  • Regarding Medicaid, middle-class Americans often rely on the program for long-term services and supports when they exhaust their savings.  Nearly two-thirds of all nursing home residents’ care is financed in whole or in part by Medicaid.  In addition, Medicaid provides home and community-based services that allow seniors to stay in their homes.  The fiscal crisis created by the tax bill is likely to result in a trillion-dollar cut to Medicaid that will limit seniors’ access to long-term care services.

Repealing the Individual Mandate Undermines Health Security, Particularly for Older Adults

The Senate tax bill would undermine the health security of seniors not yet eligible for Medicare by repealing the Affordable Care Act’s (ACA) individual mandate.  This would raise ACA marketplace plan premiums for older adults age 50-64 by an average of $1,500 in 2019, destabilize the individual health insurance market – prompting some insurance carriers to stop offering coverage – and, according to the CBO, increase the number of uninsured by 13 million people.

Repealing the Medical Expense Deduction Would Make Health and Long-Term Care Costs Unaffordable

The House tax bill guts important deductions and tax incentives currently used by middle-class families, including the repeal of the medical expense deduction.  Presently, the medical deduction allows individuals to deduct the costs of very high out-of-pocket health care and/or long-term care costs.  The House bill repeals that provision.  About three-quarters of the 8.8 million taxpayers who claim the medical expense deduction are 50 or older, and more than 70 percent have incomes of $75,000 or below.

Chained CPI Hikes Taxes and Makes Social Security Vulnerable to COLA Cuts

The House and Senate tax bills would move to a slower growth "chained" Consumer Price Index (CPI) to calculate increases in tax brackets and the standard deduction.  Replacing the current Consumer Price Index (CPI-U) with the chained CPI would result in higher taxes for all Americans, including seniors.

What’s more, if tax legislation requires that the chained CPI be used to index increases in tax brackets and deductions, supporters of cutting Social Security are likely use this precedent to demand that the chained CPI is also used to determine Social Security and Military and Federal Civilian Retirement cost-of-living adjustments (COLA).  As a result, the COLAs of current and future beneficiaries would be cut. 

  • According to the Chief Actuary of the Social Security Administration, three years after becoming law, calculating the COLA based on the chained CPI would decrease Social Security benefits by about $130 per year (0.9 percent) for a typical 65-year-old.  By the time that senior reaches 95, the annual benefit cut would be almost $1,400, a 9.2 percent reduction from currently scheduled benefits.


The House and Senate tax bills would result in cuts to Medicare, and inevitably Medicaid and Social Security.  That’s why the National Committee urges Congress to oppose this irresponsible legislation, which would cause misery for millions of Americans.

[i] Senate passage of the Majority’s tax legislation was anticipated on December 1, 2017.

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