BI-PARTISAN SELF-INTEREST
TRUMPS OBAMACARE FINANCING
The ACA, a.k.a. Obamacare, expands
insurance coverage to life-saving health care and medical technology to 32
million of some 50 million uninsured Americans. Every segment of the health
care industry has agreed that the benefits of expanding coverage far outweigh
the costs of some financial concessions they have made to achieve it, which is
usually in the form of financial reimbursement changes. The exception is the
medical device industry, which has fought making any concessions, and its
congressional proponents who are currently engaged in repealing the one
concession forced on them, an effective 1.5% profits tax for 10 years on
companies with annual sales over $5 million. Democrats in Minn. such as Senators
Klobuchar and Franken, and Congressman Tim Walz, oppose repeal of
the law they voted for but favor gutting it of the revenue required to make it
work. The StarTribune, which regularly publishes the self-serving opinions of
the industry about how the FDA is driving U.S. jobs and innovation overseas,
and only rarely digs deeply into the genuine health and safety issues
associated with a local industry that some time ago passed from real medical
innovation to iterative invention, editorializes here clearly on this bit of
congressional double-speak.
Commentary from Dave Durenberger
Wednesday, June 27, 2012________________________
Jerry Holt, Star Tribune
Editorial: If device tax is lost, special interests
win
•
June 9, 2012 - 6:00 PM
The
Minnesota-led congressional charge to repeal a new tax on the medical-device
industry that will help defray the cost of health care reform is another
example of the outsized influence of special interests in Washington.
Instead of acceding to yet another demand by the
device industry -- which has already had the tax halved, and recently won
favorable regulatory reforms -- Congress needs to tell firms the hard truth.
Hospitals, drug companies and insurers have agreed
to shoulder some health reform costs. The device industry isn't being singled
out, especially when the 2010 Affordable Care Act will likely benefit its
bottom line by expanding coverage to up to 33 million uninsured Americans. The proposed 2.3 percent device industry
excise tax, which will raise about $2.9 billion a year when it kicks in next
year, should not be repealed.
Minnesota Republican Rep. Erik Paulsen is a
champion of a U.S. House bill that would repeal the tax. Minnesota's Democratic
Sens. Amy Klobuchar and Al Franken also support repeal.
KLOBUCHAR'S VIEW"I
congratulate Representative Paulsen on this vote. While the administration's
statement that the president will veto this bill means that changes will likely
need to be made, I will continue to pursue all options to get this done. I have
long worked to get this tax reduced or eliminated, including a $20 billion
reduction from the original proposed tax in 2010."-U.S. Sen. Amy Klobuchar
Paulsen,
whose district is home to many device firms, has proposed offsetting
the lost device industry tax revenue by recovering some subsidies given to
individuals to help buy health insurance.
That proposal would result in needy people ponying
up to cover the cost of special treatment given to a wealthy industry. Last week, the White House sensibly
threatened to veto Paulsen's legislation, which passed the House on Thursday in
a 270-146 vote. It's not clear when the Senate will take up the issue.
While the
device industry trade organization is predictably predicting massive job losses
if the tax is not repealed, independent analysts have cast serious doubt on
research the industry commissioned to support its catastrophic claims.
A 2012 Bloomberg Government analysis said industry
claims of up to 43,000 jobs lost are simply "not credible." The
research "exaggerates the degree to which spending on health is affected
by price increases" and ignores "positive effect of new demand [for
devices] created by the law,'' according to Bloomberg analyst Christopher Flavelle.
There's further reason to be skeptical about the
push for repeal. A Standard and Poor's industry report noted that the 2013
start date gives the industry time to adjust to the new tax. Because the tax
can be used as an income tax deduction, the net increase is just 1.5 percent,
the report found.
The tax is also structured so that it doesn't give
companies an incentive to send jobs offshore. "The tax applies equally to
imported and domestically produced devices, and devices produced in the United
States for export are tax-exempt,'' wrote Paul Van de Water, an analyst with
the Center on Budget and Policy Priorities.
The
device industry faces many challenges -- many of them self-inflicted.
High-profile recalls of flawed devices have given the industry a black eye. The
Standard and Poor's report notes that the industry has produced "little in
the way of new products that would be considered revolutionary.'' The tax
will add to firms' challenges, but it certainly can't be blamed for all the
industry's woes.
There's legitimate concern about the tax's effect
on small- to medium-sized firms, which are developing products that aren't yet
profitable. While some of the costs can be passed along to the device's end
users -- patients, in other words -- these firms may be unduly burdened by the
new tax, which is on revenue, not earnings.
Policymakers
and the industry should have pushed for an exemption for these smaller firms
instead of a total repeal -- this revamped option deserves
consideration. It would minimize the loss of tax revenue, yet protect a
vulnerable industry sector important in Minnesota and elsewhere. A trade group estimates that the 10
largest device firms will account for 86 percent of the new tax's revenue.
Unlike the new Medicare drug coverage passed under
President George W. Bush, the Affordable Care Act at least attempted to provide
new benefits without adding to the nation's debt. The amount of money generated by the device tax is a relatively small
contribution to health reform's overall cost.
Still, it's helping to defray the cost. Given the
nation's mounting long-term debt concerns, politicians need to find more ways
to pay for promised benefits, not vote away one substantive way of doing so.
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