After gaining control of the Senate and upping their majority numbers in the House of Representatives during the midterm election, Republicans will likely push harder to repeal the medical device tax. Republicans are now poised to eliminate the piece of legislation that they have long fought to kill since its inception.
The election results mean that Republican Senator Orrin Hatch, one of the staunchest opponents of the tax, will become chairman of the tax-writing finance committee in the Senate, according to a Reuters report. “The senator will continue to examine and support every viable opportunity to permanently repeal Obamacare’s onerous tax on medical devices,” Julia Lawless, spokeswoman for Sen. Hatch, said in a statement cited by Reuters.
“Repeal of the medical device tax has once again become a rallying cry for the Republicans … and now they have the congressional majority to potentially do something about it,” analysts at BernsteinResearch recently said in a client note, per Reuters.
As detailed in a story by Med Device Online, the House of Representatives in September passed a repeal measure as part of an omnibus jobs bill called Jobs for America Act (H.R. 4).
“The medical device tax continues to eliminate thousands of good-paying jobs and stifle medical innovation,” said Rep. Erik Paulsen (R-Minn.), a sponsor of the tax repeal portion of the bill, in a press release cited by the MDO article. “The tax has already meant the loss of 33,000 jobs — equivalent to wiping out the entire Minnesota medical device industry — and will continue to harm our economy. Repealing this tax is the only answer for a bad idea that only gets worse.”
However, the Senate could shoot down that repeal measure, the latest in a long line of attempts in recent months that failed to go beyond the then Democrat-controlled Senate. At least 30 Democrats in the Senate joined their Republican counterparts in signing a resolution back in March for the repeal of the tax, but the document is non-binding, according to Reuters.
But after wresting control of the Senate during the election, Republicans in the House seeking a permanent repeal could easily approve another bill and send it over to the Senate. However, even with their recent gains in the upper chamber, they might not be able to muster the needed majority vote in the Senate to overcome a probable veto by President Barack Obama, according to Reuters.
The medical device tax, implemented in January 2013, imposes a 2.3 percent excise tax on products that range from surgical gloves to defibrillators. It is projected to raise $20 billion between 2013 and 2019 to partially fund the expanded health insurance coverage of Americans as mandated by the Affordable Care Act (ACA). However, the IRS is reportedly struggling to collect the tax from medical device companies, and is coming up well short of first-year targets.
In a statement, medical device industry association AdvaMed reaffirmed its position that “Congress should repeal it before it can do more damage to American Innovation. The U.S. leads the world in medical technology, but the device tax threatens that leadership because it will put an additional burden on medical device innovators already struggling under the weight of America’s uncompetitive tax system. The tax will be levied on medical device sales in the U.S. regardless of whether the company is making a profit.”
However, the Joint Committee on Taxation (JCT) said in a recent report that “it is unlikely that there will be significant consequences for innovation,” and that the tax would cost a relatively small 0.2 percent of industry jobs, even in a worst case scenario. The JCT estimates that the tax has raised $1.7 billion in fiscal year 2013, representing some 1.4 percent of medical device sales in the U.S., according to a recent MDO story.