Minnesota delegation opposes medical device tax

During the recent federal government shutdown, Republicans and Democrats in Congress went to war over GOP efforts to repeal or delay the Affordable Care Act.

One front in that fight was the 2.3 percent tax on medical devices such as defibrillators and stents that manufacturers, including Minnesota-based companies, say has slowed the industry's growth.

Still, U.S. Rep. Erik Paulsen said the effort wasn't fruitless.

"The silver lining is that it's really a household word because of all the media attention it's had," said Paulsen, who represents Minnesota's 3rd District, home to medical device companies.

There's so much support that it's clear a bill to repeal the tax would pass if it came before the House and Senate. But just because the votes are there doesn't mean the tax is going away.

Key Democrats in the Senate support keeping it, including Majority Leader Harry Reid, Finance Committee chairman Max Baucus of Montana and Health Committee chair Tom Harkin of Iowa. Harkin said he would fight any repeal effort.

"That medical device tax issue is one of the phoniest issues I have seen in my years here," Harkin said. "It is absolutely, totally fraudulent and phony. That small amount of tax won't hurt them one bit, and they make a lot of money on medical devices."

A House bill introduced by Paulsen has 266 co-sponsors, including six of Minnesota's seven other U.S. House members. U.S. Rep. Collin Peterson, a Democrat who represents Minnesota's 7th District, is not a co-sponsor.

Earlier this year, the U.S. Senate passed a non-binding resolution to end the tax that drew the support of 79 senators, including U.S. Sens. Amy Klobuchar and Al Franken of Minnesota. The House passed a repeal measure in the last Congress, but that bill did not receive a vote in the Senate.

J.C. Scott, senior executive vice president of Advamed, the industry's trade group, disputes Harken's notion. He said the industry can't afford the $3 billion-a-year levy that helps subsidize health insurance for the uninsured. But medical device manufacturers don't support efforts to make the tax smaller.

"Our ultimate goal is still to have the tax fully wiped from the books," he said. "The tax is having a fundamentally negative impact on companies as they try to accommodate it in their operating budgets."

That isn't a universally held assessment.

Topher Spiro, the vice president of health policy at the liberal Center for American Progress, points to analyses by banks such as Wells Fargo that suggest the flood of newly-covered patients under the Affordable Care Act will actually contribute far more to device companies' bottom lines than the device tax will subtract.

"They stand to benefit from the health law and so they should contribute to its financing," he said of the manufacturers.

The other reason not to repeal the tax, Spiro said, is that similar taxes were applied to hospitals, insurance companies and drug makers. If Congress removes the tax for the medical device industry, other industries would surely try the same playbook, he said.

"You could see a domino effect where the financing for the Affordable Care Act starts to unravel," Spiro said.

Trade groups representing the pharmaceutical and hospital industries didn't respond to requests for comment. But America's Health Insurance Plans, a trade group that represents health insurers, wants the tax on its industry repealed.

Another issue with repealing the tax is where to find the money to replace it.

House Republicans didn't offer to make up money the tax raises when they attached a repeal of the medical device tax to one of their offers to keep the government open.

Simply repealing the tax and not making up the money somewhere else would add to the federal budget deficit.

In the middle of the shutdown, a bipartisan group of lawmakers in the House proposed changing how the federal government calculates pension contributions as a way to find the money to repeal the tax.

But Harkin and other liberal Democrats shudder at that idea.

"Wait a minute, people are already in trouble because they don't have pensions and we're going to take more money out of pensions?" Harkin said. "I don't think so."

So while anything can happen on Capitol Hill, it seems that for now, the safe bet is that the tax stays in place.

It's likely a safe bet that the intense lobbying to undo the tax -- an effort that has cost an estimated $100 million since 2010 -- will continue as well, according to lobbying records collected by the Center for Responsive Politics.