Can Device Tax Repeal Pass in the Senate? Republicans Say They’ve Got the Votes

Congressional Republicans see a repeal of a 2.3 percent tax on medical devices as their best opportunity to chip away at the Affordable Care Act after the U.S. Supreme Court’s recent decision turning away a challenge to a key component of the law.

The U.S. House of Representatives voted in June to repeal the tax, and U.S. Senate Republicans now are weighing the best timing for a vote to undo the levy, which helps underwrite the healthcare law. Legislators believe they may be close to securing the necessary votes override a presidential veto, or insist the tax be rolled back as part of a grand bargain on spending bills later this year. Senate Majority Leader Mitch McConnell (R-Ken.) took the first procedural step toward bringing a repeal to the floor after the House voted overwhelmingly to quash the levy.

“That House vote was a big deal,” said Sen. Pat Toomey (R-Pa.), who is leading the repeal effort in the Senate.
Many in the device industry have been fighting to overturn the 2.3 percent tax since it was conceived as part President Obama’s Affordable Care Act (ACA), claiming it stifles the industry’s ability to create new jobs and fund innovation.

The Washington Times published a scathing editorial in early July, which referred to the ACA as “Obama’s scheme” and called the U.S. Supreme Court’s decision to uphold the ACA a “little artful abuse of the language.” The editorial claims the device tax takes a bite out of gross sales, rather than profits, and it risks shutting down companies that are operating in the red. Citing the Advanced Medical Technology Association (AdvaMed), the piece claims the tax has killed 14,000 jobs and blocked the creation of nearly 19,000 positions.

Its proponents argue the tax is a fair fee for medical device manufacturers that have seen their markets expand as more Americans have signed up for health coverage. Other industries, such as the pharmaceutical industry, made financial concessions to help augment health benefits, Jon Kingsdale, former executive director of the Massachusetts health exchange and now a director at Wakely Consulting Group in Boston, told The Wall Street Journal (WSJ). “Medical device companies were pretty much the only major group that refused,” he said.

Senator Amy Klobuchar is from Minnesota, home of two of the biggest names in the U.S. device industry—Medtronic plc and St. Jude Medical Inc.—and is one of five Democrats to co-sponsor the Senate bill to repeal the tax. Klobuchar told the WSJ, “This is a tax on manufacturing and I’ve always been in favor of eliminating it.”

Though the $30 billion the tax would collect over the next 10 years is a small part of the ACA’s expanded coverage, many are concerned there is no plan to replace the funds, and some allege the repeal is just an attempt to chip away at the ACA.

While many Democrats could support the repeal in theory, the WSJ asserts they will be unlikely to do so unless the ACA’s funds can be replaced from another source. To overcome a filibuster, 60 senators will have to support bringing the bill to the floor.
Sen. Elizabeth Warren (D-Mass.), who voted to undo the levy in 2013, will only back the present repeal measure if there is an offset, a spokeswoman said.

It is unlikely there will be one. Sen. Orrin Hatch (R-Utah), chairman of the Senate Finance Committee, said, “It’s pretty hard to come up with a $30 billion offset.”

The Obama administration has said the tax is a key component of funding and not an undue burden on the industry. Health and Human Services Secretary Sylvia Burwell said the administration would insist that any changes to the health law improve the economy, among several standards. Repealing the tax could widen the deficit, she warned.

Kingsdale agreed, saying repeal could lead to the unwinding of other financing mechanisms. “It would be the first major chink in the armor of the ACA being scored as deficit reduction,” he said.