Lawmakers Introduce Bills To Repeal ACA’s Medical Device Tax

Lawmakers in the House and Senate have proposed bills (HR 160, S 149) to repeal the Affordable Care Act's medical device tax, Modern Healthcare reports (Demko, Modern Healthcare, 1/13).

Sen. Orrin Hatch (R-Utah) on Tuesday proposed the Senate measure alongside a bipartisan group of five Democratic senators and five Republican senators (Howell, Washington Times, 1/13). Meanwhile, Rep. Erik Paulsen (R-Minn.) last week introduced the House measure (Modern Healthcare, 1/13).

Background

In order to help fund the ACA, the law established a 2.3% tax on the sale of medical devices that are primarily used by physicians and hospitals, such as CT scan machines and pacemakers. The tax went into effect in January 2013. Companies that are subject to the tax must file quarterly tax forms with IRS (California Healthline, 8/20/14).

Bill Prospects

Congress likely will approve the Senate measure this year because it has both bipartisan and industry support, The Hill reports (Viebeck, The Hill, 1/13).

According to the Washington Times, the five Democratic members in support of the Senate measure bring the chamber close to meeting the 60-vote threshold needed to avoid a filibuster on the bill (Washington Times, 1/13). The House measure also has bipartisan support, with 258 current co-sponsors, including 29 Democrats.

According to Modern Healthcare, Obama has not yet said whether he would veto such legislation (Modern Healthcare, 1/13).

CRS Report Could Present Snags

The legislation could hit snags over a Congressional Research Service report, which suggests that the tax has a "relatively modest" effect on the industry, contrary to claims made by those supporting the tax's repeal, the New York Times reports (Pear, New York Times, 1/13).

Specifically, the report noted that "[i]nnovation and research would be minimally affected" by the "relatively small" tax. According to the report, the tax could cause between 47 to 1,200 workers to lose their jobs, compared with previous research commissioned by the medical device industry that estimated job losses could reach up to 40,000 (The Hill, 1/13). The report noted that the minimal job losses would account for one one-hundredth to two-tenths of 1% of the industry's workforce.

In addition, the report suggested that industry will pass most of the tax on to consumers in the form of higher prices. Still, it concluded that "the effect on the price of health care will most likely be negligible because of the small size of the tax and small share of health care spending attributable to medical devices" (New York Times, 1/13).

Reaction

The Advanced Medical Technology Association said the report was flawed and ignored industry competition. AdvaMed spokesperson Wanda Moebius said, "Prices are actually declining in major sectors of the industry, but the CRS assumes the tax can be 'passed on' to purchasers," such as providers and patients. She added, "That's simply not the case" (Washington Times, 1/13).