In an election season in which the presidential campaign “issues” have ranged from “hot mics” to emails, some down-ballot campaign ads highlight a wonky, far less racy topic: a tax on medical devices.
The tax taps into voters’ feelings about placing such levies on businesses and into opinions about the Affordable Care Act’s future. A provision of the federal health law, it was designed to tax manufacturers of some of the most expensive items on medical bills — from pacemakers to artificial joints.
The tax has rankled many business leaders and politicians in California since its inception. The medical device industry is an important employer of high-skilled labor in the state, particularly along the corridor that runs from Los Angeles to San Diego.
Revenues from the device tax were meant to help finance the Affordable Care Act, so to some it became a proxy for the health reform law itself. Congress voted to suspend it for two years — until 2018 — after intense lobbying by the industry. In states with a heavy industry presence, candidates are being asked to take a stand on whether they’ll push to have the tax repealed.
Where is the tax becoming campaign fodder?
In California, U.S. Rep. Scott Peters (D-San Diego), who faces Republican Denise Gitsham in Tuesday’s election, has a campaign mailer that touts his support for repealing or delaying the device tax. Peters, it says, “led the effort to block for two years the harmful medical device excise tax that hurts industry R&D and job creation.” Studies are mixed on whether the device tax affects jobs.
California’s medical device and pharmaceutical industries supported a combined 121,716 jobs in 2014, nearly triple the number in New Jersey, the state with the second biggest total, according to a recent report by the California Life Sciences Association, an industry advocacy group. Of those jobs, 74,553, or 61 percent, were in the medical device sector alone, and they paid an average annual wage of over $91,000.
In Virginia’s 10th Congressional District, a heated race between incumbent Republican Rep. Barbara Comstock and Democrat challenger LuAnn Bennett, the device tax is highlighted in a TV ad for Comstock. The narrator claims Bennett supports taxes on health insurance and the medical devices that “our most vulnerable need to survive,” while showing a pair of elderly legs being propelled along by what looks like a set of crutches.
And in the race for an open seat in Minnesota, the National Republican Congressional Committee has added another twist. It has an ad blasting Democrat Angie Craig, a former device firm executive who is on record as a health law supporter, for opposing the tax and “seeking a special exemption for her industry” when she held that job. The ad never mentions that most Republicans in Congress also vehemently oppose. Her GOP challenger is Jason Lewis.
What is the tax?
Projected to garner $29 billion over 10 years, it’s a 2.3 percent levy on the sale price of taxable medical devices, which include such things as artificial hips, cardiac pacemakers, tongue depressors and MRI machines. It is paid by the manufacturer, but the industry says it will have to pass the expense along to the purchaser — generally hospitals or doctors.
There are exemptions, including eyeglasses, contact lenses, hearing aids and “any device of a type generally purchased by the general public for individual use” — therefore, maybe the crutches shown in the Comstock ad. The medical device market in the U.S. is worth $150 billion annually.
How have the battle lines on the tax created strange political bedfellows?
The medical device tax has certainly blurred party lines.
Many Democrats — 166 to be exact — voted with Republicans to approve a 2015 bill that included the two-year delay. They included ACA supporters such as Sens. Elizabeth Warren of Massachusetts, Harry Reid from Nevada, Amy Klobuchar from Minnesota and Dick Durbin from Illinois — all of whom come from states with a concentration of device manufacturers. Independent Bernie Sanders voted no. Presidential candidate Hillary Clinton, who accepted speaking fees from the industry before launching her presidential bid, has hedged on whether she supports making the device tax delay permanent. Still, 95 Republicans voted against the bill, including some incumbent senators in tough races, such as Richard Burr of North Carolina and John McCain of Arizona.
Why are we seeing ads on this topic?
The use of the tax in political advertising is, at first glance, a little odd, given that many surveys show the public generally does not understand what a medical device is, let alone what the tax in the ACA involves, said Robert Blendon, a professor of health policy and political analysis at the Harvard School of Public Health.
But for candidates opposed to the health law or higher taxes in general, the ads are appealing.
“Someone is offering to buy you an ad that criticizes the ACA and uses the word ‘tax,’” said Blendon. But that would not work for supporters of the ACA, even if they don’t like one of the taxes it includes, he added.
It is also a bit of a niche issue in some districts heavy with medical device firms, Blendon said. “It won’t move the general public, but for people in the tech industry, some of them feel there is an assault on research and development…so it makes sense to say to that industry, ‘I’m protecting you against an unwarranted tax.’”
Who is making campaign contributions?
AdvaMed, the industry’s lobbying arm, gave $279,139 in this election cycle, according to the Center for Responsive Politics, which runs the website OpenSecrets. Medtronic, a big device firm, has given $502,867, while St. Jude Medical paid $357,389.