White House veto threat on repeal of medical tax

AP News
Posted: Jun 06, 2012 4:39 PM

White House officials threatened a veto Wednesday of a Republican bill that would repeal a tax on the makers of many medical devices sold in the U.S., in the latest partisan clash over President Barack Obama's health care overhaul.

GOP leaders plan to push the legislation through the House on Thursday in what amounts to a symbolic vote. The Senate's Democratic leaders have no plans to even consider the measure in that chamber, and it would have virtually no chance of passage there anyway.

The 2.3 percent tax, scheduled to take effect in January, is to be paid by the producers of medical equipment, though devices typically bought by consumers like bandages and hearing aids would be exempted. It was enacted as part of the 2010 health care law to help pay for that measure.

Backed by the medical device industry, Republicans say the tax would cost jobs in the $130 billion a year industry.

"The tax would be devastating on it," Rep. Cathy McMorris Rodgers, R-Wash., told reporters.

The device industry is getting a potential 30 million additional customers who eventually will gain medical insurance due to the health care overhaul, the White House said in its letter warning of the veto.

"This excise tax is one of several designed so that industries that gain from the coverage expansion will help offset the cost of that expansion," the White House said.

Industry officials insist they won't gain extra customers, arguing that elderly people who use many of their products are already insured under Medicare.

The bill is being wrapped together with a pair of other health-related provisions. One would let people get up to $500 back from unused money in their tax-favored health flexible spending accounts. Currently, no money in such accounts is refundable if it's not spent for medical bills.

The other would let contributions to some tax-advantaged health savings accounts be used to buy over-the-counter drugs.

The device tax repeal would cost the government $29 billion of the $37 billion 10-year cost of the overall bill.

The measure would be more than paid for by language erasing current limits on the refunds individuals would have to repay the government if they get federal subsidies for health insurance that prove larger than they qualify for. That provision is expected to save $44 billion over the next decade, meaning the overall bill would reduce federal deficits by $7 billion.

Democrats say removing the limit on those refunds would in effect raise taxes on lower- and middle-income families entitled to the subsidies and result in many of them ending up losing coverage.