The Senate is now working on its version of reconciliation (tax) legislation, expecting to make multiple changes to H.R.1, the bill the House passed just before Memorial Day. Here are some of the issues that Republican Senators are considering.

Medicare: Some GOP Senators are pushing to tackle “waste, fraud and abuse” in the Medicare program. At the top of the list of issues currently under study is “coding,” the practice insurers use to determine Medicare payment rates for specific health care services. They say this will not be a “benefits cut,” but rather will address provider/insurer practices of coding services as more than needed (and more expensive) to pad their reimbursement rates. Also in the mix is a look at Medicare Advantage (MA)—many lawmakers think MA plans are “richer” than traditional Medicare and go beyond what Medicare is intended to cover and pay for.

The subject is very controversial, and it may or may not get included in the Senate version of the reconciliation legislation. But it is currently a hot topic among GOP Senators.

Permanence: Republican Senators want to make the tax provisions in the reconciliation bill permanent; i.e., enacted without an expiration (sunset) date. This is a “red line” for a significant number of Senate Republicans. But eliminating the expiration dates (usually after four or five years) of these provisions in the House bill comes at a significant revenue loss (the Joint Committee on Tax estimates that if all the temporary tax rules were made permanent it would add $1.4 trillion to the bill’s cost). GOP Senators have discussed this with President Trump, who they say appears to be ambivalent on the issue. It is too soon to tell how this will play out.

OT/Tips/SALT et. al.: There are significant additional issues triggering Senate Republican debate. Senators want to look at further limiting the availability of tax-free overtime (OT) and tip income, and the deduction for state and local taxes (SALT). All these modifications, if they happen, will be to lessen the cost of the provisions (and thus bring down the total the bill will add to the federal debt/deficit). There is also continuing controversy over the bill’s Medicaid provisions.

Debt Limit: There are a few Senate Republicans who insist on more spending cuts before they will accept an increase in the debt limit. An increase in the debt limit is urgently needed, before the August recess.

The House passed H.R.1 by only one vote, and leadership is calling the House package “a delicate balance.” Senate Republicans acknowledge this, and say they want to make their changes in a way that will not risk House rejection of the bill (the Senate version will have to go back to the House for a vote). However, Senators seem determined to make changes and those changes appear to be significant enough that winning near-unanimous House Republican support for a new package is likely going to be a substantial challenge.

Prospects: Washington insiders are still betting that Congress (its Republicans) will succeed in passing some kind of reconciliation legislation. “Failure is not an option” is a near unanimous battle cry among Congressional Republicans. However, the self-imposed July 4 deadline is at serious risk, and more and more problems with the legislation are emerging as the Senate continues its work on the House-passed bill. It may well take until deep into July—or even later—to resolve all the issues and come up with a final package.

NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Mike Hedge – Senior Director – Government Relations, at mhedge@naifa.org.