Fight­ing back

De­vice­mak­ers, oth­ers bat­tling taxes tied to re­form

Modern Healthcare - - The Week In Healthcare - Shawn Rhea

Sev­eral in­dus­try trade groups are press­ing law­mak­ers to re­move taxes writ­ten into the Se­nate Fi­nance Com­mit­tee’s health­care re­form bill from the fi­nal full Se­nate leg­is­la­tion. The ef­fort comes af­ter med­i­cal-de­vice mak­ers and other in­dus­try stake­hold­ers failed last week to get Fi­nance Com­mit­tee mem­bers to strike some $13 bil­lion in an­nual taxes from the bill. The as­sess­ments would raise $130 bil­lion over 10 years to help pay for the $829 bil­lion re­form pro­gram.

“We think the tax is a ter­ri­ble bur­den on in­dus­try be­cause it will kill jobs, harm in­no­va­tion and hurt pa­tients,” said David Nexon, se­nior ex­ec­u­tive vice pres­i­dent of the med­i­cal-de­vice maker lobby group Ad­vanced Med­i­cal Tech­nol­ogy As­so­ci­a­tion.

In ad­di­tion to his or­ga­ni­za­tion, lobby groups from the health in­sur­ance and phar­ma­ceu­ti­cal in­dus­tries also are work­ing to elim­i­nate or min­i­mize pro­posed taxes on their re­spec­tive in­dus­tries.

“While we agree with the ob­jec­tive of the cur­rent pro­posal, we are con­cerned about its work­a­bil­ity and cost,” said Karen Ig­nagni, pres­i­dent and CEO of the lobby group Amer­ica’s Health In­sur­ance Plans, in a writ­ten state­ment. “The bill im­poses hun­dreds of bil­lions of dol­lars in new health­care taxes and pro­vides an in­cen­tive for peo­ple to wait un­til they are sick to pur­chase cov­er­age.”

Un­der the Se­nate Fi­nance bill—which was passed in an Oct. 13 vote and was sent for rec­on­cil­i­a­tion with an ear­lier bill drafted by the Se­nate Health, Ed­u­ca­tion, La­bor and Pen­sions Com­mit­tee—in­di­vid­ual med­i­calde­vice, phar­ma­ceu­ti­cal and health­in­sur­ance com­pa­nies would be as­sessed an an­nual tax on rev­enue based on their mar­ket shares. All told, the as­sess­ments seek an­nual fees of $2.3 bil­lion from drug­mak­ers, $4 bil­lion from de­vice­mak­ers and $6.7 bil­lion from in­sur­ance com­pa­nies over a 10-year pe­riod.

A spokes­woman for the Phar­ma­ceu­ti­cal Re­search and Man­u­fac­tur­ers of Amer­ica, a drug­maker lobby group, said her or­ga­ni­za­tion wanted to see the fi­nal Se­nate bill be­fore com­ment­ing on the tax. Other groups have been very out­spo­ken in fight­ing the tax, how­ever.

The med­i­cal-de­vice in­dus­try—which of three tax­able sec­tors was the only one not to strike an early deal with the Obama ad­min­is­tra­tion to con­trib­ute a spe­cific dol­lar amount to the re­form ef­fort through ei­ther cost cuts or fees—pressed law­mak­ers in states heav­ily de­pen­dent upon the sec­tor to

write let­ters op­pos­ing the tax. In Septem­ber, a bi­par­ti­san group of 20 con­gres­sional rep­re­sen­ta­tives from Cal­i­for­nia, sent a let­ter to Se­nate Fi­nance Com­mit­tee Chair­man Max Bau­cus (D-Mont.) say­ing they were con­cerned the tax would “harm our state’s econ­omy, im­pede in­no­va­tion and ul­ti­mately deny ac­cess to life-sav­ing med­i­cal de­vices to pa­tients.”

A sim­i­lar let­ter signed by 14 Demo­cratic se­na­tors was sent in early Oc­to­ber to Sen. Bau­cus, Se­nate Ma­jor­ity Leader Harry Reid of Ne­vada and chair­man of the HELP com­mit­tee Sen. Tom Harkin of Iowa.

Sen. Al Franken (D-Minn.), is among the group of law­mak­ers press­ing for ex­clu­sion of the de­vice­maker tax from the fi­nal Se­nate bill. “We’re con­cerned about that in­dus­try bear­ing an un­due bur­den, and there are other ways that we can keep cost down,” said Jess McIn­tosh, Franken’s spokes­woman. Min­nesota is home to the ma­jor de­vice­maker Medtronic, which is based in Min­neapo­lis.

But a Se­nate aide in an e-mail said that while the Fi­nance Com­mit­tee bill largely pays for the re­form mea­sur­ers “by re­duc­ing un­nec­es­sary and waste­ful spending,” the taxes are nec­es­sary to help pay for ex­panded health in­sur­ance cov­er­age and other pro­grams, and in­fra­struc­ture that will be put in place to bring down costs and im­prove qual­ity and de­liv­ery of health­care. “Every­one who ben­e­fits from health­care re­form, in­clud­ing in­dus­try, providers, em­ploy­ers and in­di­vid­u­als, has a re­spon­si­bil­ity to play a role in that re­form,” the Se­nate aide ob­served.

Still, op­po­nents of the taxes— which would fund just un­der 16% of the to­tal cost of the bill—say leg­is­la­tors should look to other sources to fund the re­form ef­fort. “Pol­i­cy­mak­ers need to bend the cost curve so we don’t need new taxes,” said AHIP spokesman Robert Zirkel­bach. He and oth­ers ar­gue that mea­sures like pay­ment re­form, tort re­form and pay-for­per­for­mance pro­grams that in­duce providers to adopt pa­tient-cen­tered care­de­liv­ery mod­els should be used in­stead of taxes to help fund re­form ef­forts.

While some of those op­po­nents con­ceded that gov­ern­ment will likely need seed money to fund such pro­grams, none would agree that in­dus­try taxes should fig­ure into that fund­ing mech­a­nism. “For us, that tax means a $30 mil­lion pay­ment an­nu­ally that would have been rein­vested in our com­mu­nity and in re­search,” said Kem Hawkins, pres­i­dent of Bloom­ing­ton, Ind.based de­vice­maker Cook Med­i­cal. “But in­stead, it will go to the gov­ern­ment to do what they see fit.”

Law­ton Robert Burns, chair­man of the Health Care Man­age­ment Depart­ment at the Uni­ver­sity of Penn­syl­va­nia’s Whar­ton Cen­ter for Health Man­age­ment and Eco­nomics, said, how­ever, that un­der the cur­rent eco­nomic cli­mate law­mak­ers may have lit­tle choice but to in­clude in­dus­try taxes as a mech­a­nism to help pay for health­care re­form. “They need the front-end con­ces­sions just to be able to con­vince law­mak­ers to vote on it by say­ing, ‘See, we can pay for it,’ ” Burns said.

“This is an old game,” Burns added. “Every­one wants the best health­care sys­tem, but wants some­one else to pay for it.”

Ig­nagni: “We are con­cerned about its work­a­bil­ity and cost.”

Franken is con­cerned the de­vice­maker tax would be an “un­due bur­den.”

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