What Do Midterm Election Results Mean for the Medical Device Tax?

According to most experts, Republicans won’t be able to dismantle President Obama’s Affordable Care Act in its entirety, but they are likely to push for repeal of key pieces of the law, including the 2.3 percent medical device excise tax, which is blamed for exporting jobs, hurting R&D spending, and driving up the cost of devices
 
Soon-to-be Senate Majority Leader Mitch McConnell from Kentucky immediately targeted the tax in his victory speech, calling it a “big, big mistake.”
 
Many Democrats, particularly those from U.S. medical device hubs are likely to vote with their GOP colleagues, leaving the president to decide whether the tax is worth a veto.
 
“Just because we might not be able to get everything we want doesn’t mean we shouldn’t try to get what we can,” said House Speaker John Boehner (R-Ohio). “There are bipartisan majorities in the House and Senate to take some of these issues out of Obamacare. We need to put them on the president’s desk and let him choose. This is a bipartisan majority in the House and Senate for repealing the medical device tax.”
 
Political scientists say tax repeal for Republicans could be low-hanging fruit and the best shot of showing voters a little bipartisan progress.

“It’s much more symbolic than it is about the reality of repealing the tax,” Sherry Glied, dean of the Robert F. Wagner Graduate School of Public Service at New York University, told U.S. News & World Report. “This is a move they think they can win … Republicans can say they repealed a part of the Affordable Care Act and that they worked with Democrats.”

Allan Lichtman, distinguished professor of history at American University in Washington, D.C., agreed, also telling U.S. News & World Report that the device tax is a “red herring issue.”

“Not one American in 100 can tell you what a medical device tax is and why it matters … It’s the easiest shot that the Affordable Care Act that the Republicans have,” he said.

The House passed a bill in September seeking to repeal the tax. On the Senate side, repeal has support from at least 79 senators, who symbolically voted for repeal last year. Democratic Senate Majority Leader Harry Reid did not allow an actual binding vote on the legislation. With McConnell in charge, that certainly will change. 

Amy Klobuchar (D-Minn.), co-sponsored a bill in the Senate last year with Orrin Hatch (R-Utah) to repeal the tax.

“I have opposed this tax from the very beginning and will continue pushing my bipartisan legislation with Sen. Hatch to repeal it in the new Congress,” Klobuchar told the Minneapolis Star Tribune. “Sen. Hatch is expected to lead the Senate Finance Committee. With him serving in such a pivotal role, I’m hopeful it will get done.”

Republican Rep. Erik Paulsen, just re-elected in Minnesota’s Third Congressional District, told the Star Tribune that the midterm’s Republican sweep was so overwhelming that tax’s repeal could happen in a vote in the November-December lame-duck session of Congress.

“Repealing the medical device tax will be one of the earliest actions taken by the new Congress because of broad bipartisan support,” wrote Paulsen.

“We are encouraged by the commitments made by congressional leaders to get repeal of the medical device tax accomplished, as every passing day jobs and cutting-edge research are being lost,” Mark Leahey, president and CEO of the Medical Device Manufacturers Association, said in a statement.

While repeal has bipartisan support, a new report from the Congressional Research Service said economic impact of the medical device tax on manufacturers would be “relatively small.” 

“Opponents of the tax claim that the medical device tax could have significant, negative consequences for the U.S. medical device industry and on jobs,” report authors wrote. “The estimates in this report suggest fairly minor effects, with output and employment in the industry falling by no more than two-tenths of 1 percent. This limited effect is due to the small tax rate, the exemption of approximately half of output, and the relatively insensitive demand for health services.

“The analysis suggests that most of the tax will fall on consumer prices, and not on profits of medical device companies,” analysts continued. “The effect on the price of healthcare, however, will most likely be negligible because of the small size of the tax and small share of healthcare spending attributable to medical devices.”