Device Tax Foes Seize Opportunity in Budget Impasse

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Bipartisan support exists for a repeal of the medical device tax, but only if it doesn't impede implementation of the Affordable Care Act.

This article published with permission from The Burrill Report.

A Republican Congressman and leading medical device makers are trying to find a silver lining in the dark cloud of the government shutdown by suggesting that a repeal of the medical device tax contained in the Affordable Care Act could provide a needed compromise to end the budget stalemate.

Minnesota Republican Erik Paulsen initiated the effort and sponsored a measure to repeal the medical device tax as part of a GOP government funding proposal that received 17 Democratic votes over the weekend. Paulsen’s efforts to date have brought the greatest bipartisan support to the current impasse.

As part of the funding for health care reform, the Affordable Care Act imposed the 2.3% tax starting at the beginning of 2013 on sales of medical device companies. Spearheading the effort to repeal the tax are politicians from Minnesota, where the medical device industry employs roughly 35,000 people and is home to the largest medical device company in the United States, Medtronic, as well as St. Jude Medical, Boston Scientific and many others.

While both Republican and Democratic members of Congress from Minnesota are generally in favor of repealing the tax, they differ on how to go about it, and how to supplement the $30 billion total through 2022 that would go missing should the tax be scuttled. Minnesota’s two Democratic senators, Amy Klobuchar and Al Franken, say they are unwilling to use repeal of the tax as a carrot to passing a budget that opens the government again if it involves any delay in implementing the Affordable Care Act.

Klobuchar says she is committed to repealing the medical device tax but the president has made clear he will not accept changes to the Affordable Care Act as a condition for opening the government.

House members are working on new revenue measures, says Paulsen, indicating that everyone is looking for a reasonable way out of the mess and for a solution that has bipartisan support.

Medical device industry trade groups such as the Advanced Medical Technology Association, the Medical Imaging and Technology Alliance, and the Medical Device Manufacturers Association have issued a coalition statement on the efforts to repeal the tax, stating that they are pleased with the proposed bipartisan interest and that the tax “has already resulted in lost jobs, cuts in R&D, and threatens our global leadership in the development of new medical technologies.” The industry employs more than 400,000 workers nationwide and generates approximately $25 billion in payroll and invests nearly $10 billion in research and development annually.