WASHINGTON, D.C. — Tucked into a draft of the health-care reform bill (PDF) before the Senate Finance Committee are billions of dollars in fees that would hit one of Minnesota’s largest industries: medical device manufacturing.
The bill calls for device makers to pay $40 billion in fees over 10 years. The payments would vary based on each company’s market share.
Medical device makers like Medtronic and Boston Scientific are among Minnesota’s largest employers.
“We are very concerned about the Finance Committee proposal, which would raise costs, stifle innovation and threaten jobs in Minnesota,” Boston Scientific spokesman Paul Donovan said in a statement. “There are better ways to pay for health care reform than this misguided proposal, which would wind up hurting patients and medical-device industry workers, thousands of whom are currently employed in Minnesota.”
The Advanced Medical Technology Association (AdvaMed), the main device-industry group, warned that the measure would raise the cost of care for those in need of advanced treatments and diagnostics.
“Moreover, the tax will fall most heavily on the small and emerging companies that are the backbone of our industry, often driving development of cutting-edge treatments and cures, and are least able to pay new taxes,” Stephen J. Ubl, president and CEO of AdvaMed, said in a statement.
Klobuchar, Franken oppose tax
GOP Gov. Tim Pawlenty has asked Minnesota’s U.S. senators, Democrats Amy Klobuchar and Al Franken, to oppose the tax. The senators are lobbying to change the measure.
In a letter Tuesday, Klobuchar and Franken called on Finance Committee Chairman Sen. Max Baucus, D-MT, to reconsider the proposal, arguing that the provision would harm economic development and health care innovation.
“The proposed fee will seriously threaten thousands of American jobs and deter innovation in the industry,” wrote the senators, who were joined by Sens. Evan Bayh, D-Ind., and Dick Lugar, R-Ind. “At a time when every effort is being made to promote small business and growth industries of the future, the proposed medical device tax would harm economic development and health care innovation nationally and in our states.”
The senators said other parts of the bill could also hurt the industry, including a proposed reduction in reimbursements to hospitals.
“While we support efforts to ensure that any health care reform bill does not add to our country’s deficit, this industry should not be forced to pay more than its fair share,” the senators wrote.
The cost of the health care bill is of even more importance in light of President Obama’s pledge last Wednesday to veto a bill that is not deficit neutral.
The version of the House health care legislation that passed the Ways and Means Committee would cost more than $1 trillion. The expected cost of the Senate Finance Committee bill is projected to be less than $880 billion.
“I don’t think anybody from the clinical labs to the device manufacturers ought to be stunned by this,” said Norm Ornstein, a Congressional expert at the conservative-leaning American Enterprise Institute in Washington, D.C. “But, obviously, it is tough.”
Ornstein pointed to Finance Committee’s increasingly difficult task of finding money to pay for reform.
With the bill’s mandate that everyone have health coverage, there will need to be fines for those who don’t purchase health insurance — resulting in revenue for the government. But there will also need to be government subsidies for those who do can’t afford health insurance, raising the bill’s price tag.
“You will come down to whether you are going to stick it to the guy making $15,000 a year… or you are going to try to make their lives a little easier by hitting up the device manufacturers,” Ornstein said. “I think in the end they don’t have any better option.”
In addition, Ornstein said, the 30 million new customers that will be brought into the health care system under the reform plan will be a boon for the medical device industry.
“The effects of the fee will be mitigated,” Ornstein said. “But, if I was part of the industry, I still wouldn’t be happy about it.”
Cynthia Dizikes covers Minnesota’s congressional delegation and reports on issues and developments in Washington, D.C. She can be reached at cdizikes[at]minnpost[dot]com.