Devicemakers, others battling taxes tied to reform
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.”