House votes to ax medical device tax

  • Article by: KEVIN DIAZ , Star Tribune
  • Updated: June 7, 2012 - 9:42 PM

The levy is opposed by lawmakers from Minnesota, home of several medical device firms. Prospects in the Senate are doubtful.

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Rep. Erik Paulsen

WASHINGTON - Laying down a marker in the political battle over President Obama's health care overhaul, the House voted Thursday to repeal a pending tax on medical devices, a top priority for Minnesota Republican Erik Paulsen and the state's $34 billion medical technology industry.

The 270-to-146 tally included 37 pro-repeal Democrats, among them all four Democrats in the Minnesota House delegation. But the result fell 20 votes short of what would be needed to override a threatened White House veto.

The bill still faces long odds in the Senate, where leaders in the Democratic majority see it as an election-year attack on Obama's signature health care law.

With a Supreme Court ruling on the health care law looming later this month, Senate Majority Leader Harry Reid of Nevada is considered unlikely to put Paulsen's bill to a vote, although a Reid spokesman said after the House vote that "nothing has been decided."

Paulsen called the 2.3 percent levy on medical device makers, scheduled to start in January, a "tax on innovation" that could threaten workers at major Minnesota medical device makers such as Medtronic, St. Jude Medical and Boston Scientific, as well as at countless smaller start-ups.

"Jobs are clearly at risk," Paulsen said on the House floor Thursday. "This is an opportunity to protect jobs."

The vote was the third time this year that House Republicans have passed legislation that would weaken or undo the Affordable Care Act, which they have dubbed Obamacare. Though Paulsen opposes the health care law, he has said that is not the reason for repealing the medical device tax, which is projected to generate $29 billion over the next decade. Under Paulsen's bill, the lost revenue would be offset by cutting insurance subsidies to low- and middle-income families.

Unlike previous GOP repeal measures, Paulsen's effort to cancel the device tax has the support of a number of Democrats from states with large medical technology sectors, including Sens. Amy Klobuchar and Al Franken of Minnesota.

But how to backfill the $29 million hole the repeal would create is a politically sensitive question for Democrats.

Klobuchar congratulated Paulsen after the House vote and indicated she could support his bill even with the reduced insurance subsidies. But, she added, a presidential veto would mean "changes will likely need to be made."

Franken was more critical of the GOP funding mechanism. "Based on his reading of the House-passed bill, Sen. Franken feels that the offset would undermine families' access to affordable health care, one of the primary purposes of health reform itself," said spokeswoman Alexandra Fetissoff.

Caps lifted

The White House and most House Democrats balked at the GOP funding provision, which is estimated to increase the number of uninsured Americans by 350,000.

Minnesota House Democrats were divided on the plan to trim insurance subsidies. Rep. Tim Walz, whose First District includes Rochester's Mayo Clinic, called the GOP funding provision "fiscally responsible."

Rep. Betty McCollum, whose Fourth District includes St. Paul, said she voted to send the repeal bill to the Senate, "where I know a responsible offset can be found that will not hurt any citizen."

Obama's Office of Management and Budget, which issued the veto threat the eve of the House vote, said the bill would "fund tax breaks for industry by raising taxes on middle-class and low-income families."

The GOP plan would recover $43 billion over 10 years, mainly by requiring people who get the subsidies to fully refund overpayments if their financial situation improves. Under the 2010 health care law, those reimbursements are capped.

Republicans say lifting the repayment limits means nobody gets more money than they should. They note that many Democrats have voted before to raise caps -- once to avoid cuts in Medicare reimbursement rates to doctors.

But in Paulsen's bill, lawmakers are being asked to eliminate the caps altogether, which could deter some people from using the tax credits.

Backers of the health care law say the GOP provision would penalize people who get raises, go through divorces, or unexpectedly lose their eligibility for other reasons. In some cases, the repayments could exceed the penalties for foregoing coverage.

Framing the debate

The House bill also would loosen restrictions on buying over-the-counter drugs through tax-privileged accounts and let taxpayers recoup more of whatever money is left in those accounts at year's end.

But much of the congressional debate is focused on the medical device tax and its possible affect on jobs and the economy. Backed by a well-funded lobbying effort and armed with industry-funded studies, Republicans say the devices tax would cost more than 40,000 U.S. jobs in a $130 billion-a-year industry that employs 423,000 workers across the nation -- including 35,000 in Minnesota. Industry critics have challenged the job-loss numbers.

Medtronic issued a statement after the House vote saying that "There's no question that this is a heavy burden on innovation and remains ill-advised tax policy."

Stephen Ubl, president and CEO of AdvaMed, the industry's main trade group, thanked Paulsen, saying that without repeal of the tax, American leadership in the industry is at risk.

Industry critics say the fears are exaggerated and they ignore the benefits that could spring from an additional 30 million potential consumers who will gain health coverage under the White House health care reforms.

But lawmakers in states with strong medical technology hubs, like Minnesota, were able to frame the debate in terms of jobs. Rep. Michele Bachmann, one of the most outspoken critics of the health care law, said, "I refuse to see a single job lost in Minnesota, or any other state ... due to the legislation known as Obamacare."

Staff writer Jim Spencer contributed to this report.

Kevin Diaz • 202-383-6120

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