Fight Over Health Law Turns to Medical-Device Tax

The House has already voted to repeal the tax, and Senate Republicans are weighing the best timing for a vote to undo the levy, which helps underwrite the health law. President Barack Obama would almost certainly veto a stand-alone repeal, but with a number of Democrats also opposed to the tax, lawmakers think they may be close to having the votes needed to override the president, or insist the tax be rolled back as part of a grand bargain on spending bills later this year.

The 2.3% levy, imposed on manufacturers or importers of devices, is expected to net nearly $30 billion over the course of a decade—a relatively small portion of the funding needed to achieve expanded health coverage. The industry argues lifting the tax would make it cheaper to produce medical devices, such as surgical tools and knee and hip replacements, and it has found support from Democrats whose states are home to medical-device companies.

“This is a tax on manufacturing, and I’ve always been in favor of eliminating it,” said Sen. Amy Klobuchar of Minnesota, one of five Democratic co-sponsors of the Senate repeal bill, though supporters expect as many as 20 Democrats may vote for it.

Now in effect for more than two years, the tax was among the duties placed on industries that stood to benefit from the health overhaul. Its proponents argue it 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, said Jon Kingsdale, the former executive director of the Massachusetts health exchange and now a director at Wakely Consulting Group in Boston. “Medical-device companies were pretty much the only major group that refused,” he said.

Senate Majority Leader Mitch McConnell (R., Ky.) took the first procedural step last month toward bringing a repeal to the floor, after the House voted overwhelmingly the week before to quash the levy. Forty six House Democrats joined a united Republican caucus in a 280-140 vote, one vote short of the number needed to override a presidential veto. Twelve Republicans were absent and didn’t vote.

“That House vote was a big deal,” said Sen. Pat Toomey (R., Pa.), who is leading the repeal effort in the Senate.

Mr. Toomey’s Pennsylvania colleague, Sen. Bob Casey, who is a Democratic co-sponsor, pointed to a vote two years ago to roll back the tax as evidence of broad support among Democrats for a repeal. That vote, 79-20, was largely symbolic, on an amendment to a budget blueprint with no chance of becoming law. It isn’t clear Democrats will come to the same conclusion when the repeal isn’t a theoretical rejection of the tax measure but rather a multibillion-dollar dip into federal financing of the Affordable Care Act, without another way to generate funds for the health law.

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.”

To avoid staking their hopes on a veto override, Republicans are looking for ways to package the measure with other, must-pass tax deals—making it difficult for Mr. Obama to veto the repeal. Mr. Toomey said maximum leverage may come in the form of an amendment during the appropriations process, when lawmakers will vote on spending bills needed to keep the government running. Doing so could also attract the support of Democrats hesitant to take on the law more directly.

The 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 told reporters recently that 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.

Mr. Kingsdale, the Boston consultant, 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.

Write to Isaac Stanley-Becker at [email protected]

Source: Wall Street Journal Health