Health Care Companies Benefit From Tax Cut Package

Health care companies are going to rake in a lot of extra money thanks to savings from the Republican tax cut package. But, unfortunately, patients won’t.

Even though one could expect a lower corporate tax rate to free up extra money, patients probably won’t be seeing lower prices anytime soon.

21 companies are collectively going to gain about $10 billion in tax savings in 2018 alone. Most of the money is going toward share buybacks, dividends, acquisitions and paying down debt — not towards saving patients money.

The tax law is unlikely to lead to significant savings for patients. The reason that companies lower prices on merchandise is to lure you in or the buy. Health care pricing doesn’t work that way. So there’s no pressure to use the tax code to lower pricing.

Even healthcare companies that didn’t forecast specific tax savings nevertheless made it clear Wall Street will get its fill.

  • Shareholders will see earnings rise before patients will see bills drop.
  • Several corporations, including Johnson & Johnson and Abbott Laboratories, also said they’ll use their billions in tax savings to pay down debt.
  • Dave Denton, chief financial officer of CVS Health said CVS is spending at least half of its $1.2 billion tax benefit this year on debt reduction.

“Lucky for some patients, some insurers will be forced to issue rebates to their consumers because of a provision of the Affordable Care Act”, announced Joe Garza of Garza Legal Group.

“If you subsidize something, you get more of it,” said Chris Jacobs, a conservative health policy analyst. “Companies using tax reform to lower prices would yield out-of-pocket savings to consumers, but it would also encourage consumption — some of which would be necessary and useful, and some of which probably wouldn’t.”

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