Tax cuts will save health care companies billions — but not patients
Health care companies will add tens of billions of dollars to their bottom lines this year thanks to savings from the Republican tax cut package. But only a fraction of that money will benefit patients.
Why it matters: Even though a lower corporate tax rate frees up more cash for a health care system that more patients are finding increasingly unaffordable, patients should not expect the health industry’s windfall to lead to lower premiums, reduced prices or major industry changes.
What we analyzed: Fourth-quarter financial reports and investor calls from publicly traded health care companies. (Here’s the list.)
- This is a conservative estimate of health care companies’ tax cuts, because we only looked at a handful of companies that spelled out the savings specifically tied to the Republican tax overhaul.
What we found: 21 companies collectively expect to gain $10 billion in tax savings in 2018 alone. Most of the money is going toward share buybacks, dividends, acquisitions and paying down debt — with just a sliver for one-time employee bonuses, research and internal investments.
- UnitedHealth Group accounts for a quarter of that total, and a majority of UnitedHealth’s windfall is going to Wall Street and executives.
- Most pharmaceutical companies were not included in this analysis because their figures weren’t precise enough. But we already know they’re spending at least $50 billion on new share buyback programs.
- Many drug and medical device companies also brought back tens of billions of offshore dollars that, after the repatriation tax, will flow directly to their bottom lines this year and in future years.
The big picture: The tax law is “unlikely to lead to significant, long-lasting savings for patients,” said Erik Gordon, a health care business professor at the University of Michigan.