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How A Tax On Medical Devices United Political Rivals

Filed by KOSU News in Business.
September 30, 2013

As the federal government lurches toward a shutdown, there’s one thing a lot of people in Congress actually agree on.

A 2.3 percent excise tax on medical devices that took effect at the beginning of 2013 should be undone, they say. House Republicans included a provision to do that in a funding bill passed over the weekend that also sought a one-year delay in the implementation of the Affordable Care Act.

Democratic Sen. Amy Klobuchar of Minnesota said in a statement last week that “there is strong bipartisan support for repealing the medical device tax, with Democrats and Republicans uniting behind our effort. I will continue to work to get rid of this harmful tax so Minnesota’s medical device businesses can continue to create good jobs in our state and improve patients’ lives.”

Minnesota is home to Medtronic, St. Jude Medical and lots of other smaller device companies.

What’s the big deal? About $29 billion in funding for the expansion of health coverage under the Affordable Care Act is expected to come from the device tax. Hip implants, MRI scanners and catheters to unclog heart arteries are all affected. Toothbrushes, contact lenses, hearing aids and other consumer products are exempt.

As you might expect, AdvaMed, a big trade group for makers of medical devices, has been adamant about wiping the tax from the IRS’ books. “AdvaMed has consistently and strongly opposed the $30 billion medical device tax because it will harm job creation, deter medical innovation and increase the cost of health care,” the group’s website says. “Congress should repeal it before it can do more damage to American Innovation.”

Others say it’s the device industry’s consistent opposition to concessions related to the health law that got the tax slapped on in the first place.

Back in the early horse-trading days over the legislation that became the Affordable Care Act, lobbyists for the device industry made what looks more and more like a “strategic error,” as The Wall Street Journal reported in 2009.

While the legislation was taking shape, the White House looked to health-related industries to cut deals that would help pay for the law. The Journal reported that the administration went so far as to ask for pledges.

When it came time for the device makers to pony up, they demurred, suggesting instead that the government get money elsewhere, such as from the groups that buy in bulk for hospitals. It didn’t work.

“You either come to the table early, or you end up part of the dinner,” a person close to the negotiations told the Journal.

In contrast, drugmakers agreed to save the federal government about $80 billion over a decade in exchange for protection from provisions they didn’t like, such as legalized drug imports. There’s no excise tax on pharmaceuticals.

The $80 billion was a compromise, the head of the drugmaker trade group PhRMA told NPR in 2009. The president wanted more, and the drugmakers were looking to pitch in less.

Even if many people agree that the device tax should go, some important ones don’t.

Senate Majority Leader Harry Reid called the repeal idea “stupid,” through a spokesman, The Associated Press reported. “The Senate will reject any (funding bill) that includes a repeal of the medical device tax.” And, in fact, that’s just what happened shortly after the Senate convened Monday afternoon.

White House spokesman Jay Carney’s response to a question about whether the president would support a repeal: “Absolutely not.” [Copyright 2013 NPR]

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