Despite indications of bi-partisan support in both the House and Senate, the 2.3 percent tax on certain medical devices, included in the Affordable Health Care legislation (PL 111-148, PL 111-152), is unlikely to disappear in this Congress.
Although seventy-nine senators, including 33 Democrats and Maine independent Angus King, voted to March to abolish the tax as an amendment to the nonbinding fiscal 2014 budget resolution (S Con Res 8), and at least 250 Representatives have signed on as sponsors to bills that would repeal the tax, that is unlikely to happen outside of a major tax reform effort. While the House passed a measure to repeal the tax last year, and a new repeal measure (HR 523) by Rep. Erik Paulsen, R-Minn., already has 212 co-sponsors, including 25 Democrats, the Senate never took it up and a Senate bill introduced this year by Sen. Orrin Hatch (R-Utah) (S232) with bi-partisan support, was read twice and referred to the Committee on Finance, where it remains.
Now, representatives of the medical device industry are asking the Ways and Means panel to fully repeal the provision in a comprehensive tax overhaul package. In statements to the House Ways and Means Committee, industry groups, such as the Medical Device Manufacturers Association (MDMA) said the tax “directly and indiscriminately penalizes one of the world’s leading manufacturing industries” and the Advanced Medical Technology Association (AMTA) called elimination of the tax “a prerequisite for making the code more competitive for our industry”.
In a June 4 hearing before the House Education and the Workforce Committee on President Obama’s Fiscal 2014 Budget Proposal for the Health and Human Services Department, Rep. Representative Larry Bucshon (R-IN) told HHS Secretary Kathleen Sebelius that the tax on medical device sales is hurting Indiana’s 300+ medical device companies. The Secretary pointed out that implementation of the Affordable Healthcare Act, which is only now beginning, will mean many new patient patients seeking medical devices and that the administration does not have plans to repeal the tax, which Congress enacted as part of the health care law. A Statement of Administration Policy issued by the White House Office of Management and Budget on last year’s House-passed repeal bill said “this excise tax is one of several designed so that industries that gain from the coverage expansion will help offset the cost of that expansion.”
An earlier analysis put forward by CQ (Congressional Quarterly) Roll Call’s John Reichard indicates that it will not be easy to get a stand-alone measure repealing the 2.3 percent excise tax. Although the House supports the measure, Republicans do not trust the Senate to repeal the tax without changing other provisions of the law. Committee Chairman Dave Camp, R-Mich., has said he wants to avoid stand-alone tax measures and focus on a sweeping tax overhaul package. On the other hand, says Reichard, if the House does pass a stand-alone bill, Senate Majority Leader Harry Reid, D-Nev., won’t want to embarrass a president of his own party and will drag his heels about calling it up when it might have the votes to pass. Even if Reid did call up the bill and it passed, it wouldn’t have the votes needed to override a presidential veto. Reichard points out that more Democrats might be inclined to vote for repeal if they knew it were offset in a way that didn’t undermine funding for the health law. The tax provides significant financing for the law and its coverage provisions: an estimated $29 billion in the next nine years (2013-2022).
Reichard also suggests that although there may be talk of an overhaul, a broad tax overhaul may not happen and that, “lawmakers will be under great pressure to use whatever revenue is raised through an overhaul to pay for a permanent fix that avoids Medicare payment cuts to doctors, leaving little behind to wipe away the device tax.” At best, the tax might be reduced. On the positive side, “the tax won’t shift jobs overseas because it applies equally to imported and domestic devices, and devices produced in the U.S. for export are tax-exempt. Reichard concludes that “while the industry downplays the effect of coverage gains on sales by saying most device customers are older and covered by Medicare, health benefits for up to 30 million previously uninsured Americans will mean more medical procedures and the sale of more devices used in those procedures.”