Those eager to find glimmers of bipartisanship in Washington may be tempted to applaud the Democrats and Republicans calling for the repeal of the new excise tax on sales of medical devices and equipment. U.S. Sen. Susan Collins, a Maine Republican, has advanced the idea as part of a compromise to reopen the federal government and raise the debt-ceiling.
In March, 79 senators expressed support for getting rid of the tax. The majority includes Orrin Hatch, a Utah Republican, and Elizabeth Warren, a Massachusetts Democrat. Hard to imagine a broader range of support.
Why not, then, start building consensus there? It is useful to recall the origin of the tax, part of the Affordable Care Act. At its core, the health-care law features its own compromise: Stakeholders in the industry will benefit from an infusion of new patients, an additional 30 million covered and seeking regular care. In return, those stakeholders have been tapped to help pay part of the cost. So, in various ways, hospitals, insurers, drug companies, indoor tanning salons and others must put up money. Included in the group are medical device manufacturers.
The medical device industry faces a 2.3 percent excise tax on the sale of its goods, from coronary stents to advanced imaging technology, generating an estimated $30 billion during the next decade. Consider that the industry currently has total sales of nearly $120 billion a year. Know, too, that during the health-care debate, the industry won a concession, the tax rate about half of what originally was proposed.
The lobbying hasn’t stopped. The Los Angeles Times reports that since enactment of the law, supporters of the repeal have contributed $39.8 million to current members of Congress.
The industry warns that the tax will send production overseas, costing jobs and stifling innovation. Independent analyses have countered effectively. For instance, the tax applies equally to devices made here and abroad. Goods manufactured in this country for export are tax-exempt. So, American companies, many in Ohio, remain in a strong position. More, analysts hold that health-care reform likely will fuel innovation as the industry seeks cost-effective ways to deliver care.
Consumers should know that if the tax applies to the likes of heart valves and artificial knees, it does not cover such retail items as eyeglasses, contacts and hearing aids.
The argument isn’t that the tax is the ideal mechanism. There are better ways to pay for the expanded coverage, say, raising the necessary funds through the widely applied income tax. Congress did take a fiscally responsible course. Repeal the medical device tax, and another source of money would have to be found, others bearing the burden an industry escaped.
What an unfortunate precedent to set. Soon enough, other stakeholders, alert to the successful lobbying campaign, would move to achieve similar results, a core agreement of the Affordable Care Act facing erosion. Medical device manufacturers argue that somehow they have been targeted for harsh treatment. That isn’t the case. They have been required to contribute as others have, the compensation arriving in the millions of new customers coming their way, the country better off for getting closer to universal health coverage.