House Votes to Repeal Medical Device Tax

On June 18, the U.S. House of Representatives voted 280-140 on the “The Protect Medical Innovation Act” (H.R. 160), which is an attempt to repeal the 2.3 percent medical device excise tax. The proposed legislation was introduced by Rep. Erik Paulsen (R-Minn.) earlier this year. The bill now moves to consideration by the Senate, where there isn’t as much traction for repeal as there is in the lower chamber.

Though votes like this usually are along party lines, Republicans were joined by roughly four dozen Democrats from states with concentrations of medical device companies. (Interesting fact: The House has voted more than 50 times since 2011 to void all or part of the Affordable Care Act.)

“Repealing the device tax will positively impact the future of medical technology and patient care by removing a barrier to medical progress and increasing resources for innovation, jobs, research and development, and manufacturing,” said Stephen J. Ubl, president and CEO of the Washington, D.C.-based Advanced Medical Technology Association. “Patients are depending on the next generation of breakthrough technologies to become a reality in order to improve and save their lives. With an aging population and growing incidences of chronic disease, now is the time for more—not less—resources to advance cures and treatments to help people live longer, healthier, and more independent lives.”

“The House of Representatives sent a strong, bipartisan message that it is time to put an end to this tax on innovation,” said Mark Leahey, president and CEO of the Medical Device Manufacturers Association (MDMA), also based in Washington. “For far too long, the medical device tax has stymied advancements in patient care and destroyed high-tech manufacturing jobs. Repealing this policy will provide an immediate boost for medical technology innovators to continue solving the pressing challenges in the healthcare ecosystem. MDMA and the broad coalition of stakeholders who have worked tirelessly to repeal the medical device tax will not rest until we get this accomplished once and for all.”

On Monday, June 15, the White House threatened to veto any repeal of the tax, which is part of the Affordable Care Act, should it reach the president’s desk.
 
Earlier this month, the House Ways and Means Committee marked up the bill and voted 25-14 in favor, with Rep. Ron Kind (Wis.) the only Democrat to support it. During the committee’s markup, Democrats criticized Chairman Paul Ryan (R-Wis.) for not offsetting the cost of repealing the tax.
 
“There are the laws that make no sense at all. Today, we tax medical devices—things like heart valves and pacemakers—the very things that save lives. It’s an iron law of economics that when you tax something, you get less of it. So we’ve really got our wires crossed here,” Ryan said in a statement before the committee’s vote.
 
Despite the fact that the 2.3 percent excise tax—implemented in 2013—has drawn bipartisan criticism, the White House issed a statement this week calling the bill “a large tax break to profitable corporations.” The administration argues that healthcare industries gain from new customers under ObamaCare and therefore should pay some of the cost. 
 
“Its repeal would take away a funding source for financial assistance that is working to improve coverage and affordability and would increase the federal deficit by $24.4 billion over 10 years,” the White House said in a statement, citing Joint Committee on Taxation estimates.  In addition, the White House asserted, the tax “would increase the deficit to finance a permanent and costly tax break for industry without improving the health system or helping middle-class Americans.”
 
According to a report released in January by the Congressional Research Service, the impact of the tax—despite the industry’s assertions to the contrary—is negligible.
 
“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,” Congressional Research Service analysts 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. The effect on the price of health care, however, will most likely be negligible because of the small size of the tax and small share of health care spending attributable to medical devices.”
 
Though similar bills have been introduced in the Senate and a recent hearing was held to debate the impact of the tax, there hasn’t been much action compared to House efforts.