U.S. House committee approves device tax repeal without alternative revenue

WASHINGTON – Republicans on the House Ways and Means Committee on Tuesday voted to kill a medical device tax that helps pay for the Affordable Care Act without naming an alternative source of revenue.

In its present form, passage of a device tax repeal, spearheaded by Rep. Erik Paulsen, R-Minn., would blow an unfilled $26 billion hole in the federal budget over 10 years.

Tuesday's vote was a victory for device makers, including hundreds in Minnesota, who have made getting rid of the tax job No. 1 on their political agenda.

"Only in Washington would you place a tax on lifesaving devices and think you're going to cut health care costs," Paulsen said.

The bill goes to the House floor, where it should pass easily with Republicans holding the majority and Paulsen having 280 cosponsors, including 40 Democrats.

But the lack of an alternative revenue source could scuttle the bill in the Senate. If not, President Obama seems likely to veto the bill because it undermines the health care law he sees as a hallmark of his presidency.

Device industry advocates ­welcomed the Ways and Means vote.

AdvaMed, the device industry's principal national trade association, praised the committee members who voted for repeal. Stephen Ubl, the group's president, cited "their leadership in moving forward bipartisan legislation to eliminate a significant obstacle to the development of next-generation advancements in medical technology."

But the 25-14 committee vote was along party lines except for Democrat Ron Kind of Wisconsin, who co-sponsored the bill with Paulsen. Democrats voted against the bill because it stipulated no way to make up for lost revenue. Several Democrats accused their Republican colleagues of using the repeal as a step toward repealing the entire Affordable Care Act "piece by piece."

"It would let one sector out of its commitment to contribute to overall reform," ranking minority member Sander Levin of Michigan said. "This creates a dangerous precedent for other sectors."

Paulsen purposely did not include an alternative revenue source in the bill when he introduced it in January. His earlier version foundered in the Senate over a "pay-for" that proposed to fill the revenue void by clawing back health insurance premium subsidies from low income people whose pay rose during the course of their coverage.

Senate Democrats, including Al Franken of Minnesota, found that solution unfair in that it targeted poor people to pay for a tax break for rich medical device companies.

Levin countered with an Ernst & Young report that he said showed that medical device makers' revenue jumped $8 billion in 2013. Research and development spending is up 6 percent, Levin claimed, and employment is up 23,500.

Whatever the tax's impact, its future seems to rest heavily on finding a way to pay for its repeal.

Kind reminded his colleagues: "I still believe we have to find an acceptable, bipartisan offset."