WASHINGTON — The House Ways and Means Committee on Thursday became the first congressional panel to sign off on Republican Rep. Erik Paulsen’s top legislative priority, a bill to do away with an Affordable Care Act tax on sales of complicated medical devices set to take affect next year.
The committee passed the bill 23-11, a largely party-line vote, with only two Democrats siding with Republicans. The bill has 239 co-sponsors in the House, the vast majority of which are Republicans, but the committee mark-up gave the first indications of where most Democrats might stand on the tax.
The 2.3 percent tax increase would apply to the sales of medical devices in the United States and those imported here. The tax would raise about $29 billion to fund the health care reform package over the next 10 years, but Republicans say it would do so at the expense of the country’s world-class medical device industry, which has 400 companies providing 35,000 jobs in Minnesota alone.
Paulsen, the co-chair of the Congressional Medical Technology Caucus, called it an “ill-conceived tax, which will increase health care costs, reduce patient access to new technologies and cost us hundreds of thousands of American jobs.”
Rep. Sandy Levin, the top Democrat on the Ways and Means Committee, established what are likely to be the bill opponents’ talking points as the bill moves forward: not only are the tax’s ill affects overblown, but Paulsen’s bill is nothing more than an extension of the GOP’s efforts to chop away at President Obama’s health care reform law as lawmakers await a U.S. Supreme Court decision on its constitutionality.
Levin called the effort “deceitful” in that it takes away $29 billion from health care reform without paying for itself. Republicans batted away the issue of payment on procedural grounds, but Democrats lambasted the bill as one that grows the deficit, while the tax was first passed to help make sure the health care reform law wouldn’t.
Some Democrats, including Reps. Richard Neal from Massachusetts and Jim McDermott of Washington, indicated they might be able to support the legislation if Republicans could find a way to off-set the cuts elsewhere.
“I think it’s a huge mistake to pass this bill without providing some idea about what pay-for is going to look like,” Rep. Mike Thompson (D-Calif.) said. “We’ve got a whole line of things we’d all like to change, we’d all like to repeal, but without paying for them, it is the height of irresponsibility.”
If Republicans choose to off-set the bill’s cost with spending cuts elsewhere in the budget, that will happen when the bill goes to the floor next week, said committee Chairman David Camp. Paulsen said he expects House leadership to do so.
Not as bad as it sounds
Another peg of the Democrats’ opposition was more fundamental: some chose to dismiss the warnings from industry and tax opponents who say the tax will cost U.S. manufacturing jobs.
Republicans have wielded an industry-funded study commissioned by AdvaMed, a medical technology trade group, warning that companies could lose $6.7 billion in revenue and cut up to 43,000 jobs after the tax takes effect. Democrats questioned whether the industry’s numbers could be trusted (McDermott pointed to this analysis poking holes in the study), and Levin said the mechanisms of the tax should prevent the kind of feverish outsourcing Republicans and industry say could come — the tax applies to imported devices but not to exported ones, he said, so it would make no sense for companies to leave the United States simply to ship the devices back. That was a critical industry demand when Congress was crafting the Affordable Care Act in 2009, Democrats said.
“The medical device excise tax is the industry’s contribution to health care reform, just as all the other health sectors contributed in recognition of the fact that they stood to benefit from the 30 million new customers,” he said.
After the hearing, Paulsen dismissed Levin’s concern.
“Common sense would just dictate that it’s going to have an impact on jobs,” he said. “Companies have already laid off people because of the tax.”
In his testimony, he alluded to three such companies: Michigan-based Stryker Corp. recently laid off 1,000 workers, or 5 percent of its workforce, ahead of the tax implementation, and two Indiana companies, Zimmer and Cook Medical, that are projecting larger tax burdens and lower earnings and are preparing to cut jobs.
Closer to home, Medtronic says the device tax will cost the company at least $125 million in 2013. Paulsen said his concern is the device tax will prove a disincentive for large companies like Medtronic to innovate.
“They won’t be producing new innovations or getting new ideas from other, smaller companies that they acquire,” he said. “It will be, just, keeping the same generation of pacemakers, for example, going.”
House could vote next week
Paulsen’s bill could come to the floor as early as next week, where it’s expected to pass. House leadership has pitched it as both a jobs bill and a part of the House GOP health care reform repeal agenda.
House Majority Leader Eric Cantor has called the device tax “draconian” and said, “regardless of the outcome of the Supreme Court’s decision on the constitutionality of ObamaCare, we should all be able to agree on Erik Paulsen’s bill to repeal the medical device tax.” A Supreme Court ruling on the Affordable Care Act could come any week.
Republicans will need Democratic support to force a vote in the U.S. Senate, where Democrats are in the majority. Both Minnesota Senators, Democrats Amy Klobuchar and Al Franken, have said they will consider proposals to reduce or repeal the tax.
Devin Henry can be reached at email@example.com. Follow him on Twitter: @dhenry