GOP ignoring veto threat on medical tax repeal

AP News
Posted: Jun 07, 2012 3:08 AM

Shrugging off a veto threat, Republicans are ready to push legislation through the House repealing a tax on the producers of many medical devices sold in the United States.

GOP leaders scheduled a vote for Thursday, and with more than half the House sponsoring the measure its passage was ensured. Equally certain is its death in the Senate, where top Democrats say they won't even bring it up.

The 2.3 percent tax will be imposed on the makers of equipment used chiefly by doctors and hospitals, such as X-ray machines and replacement hips. Excluded would be goods easily bought by consumers like bandages and hearing aids. The tax takes effect in January.

Device manufacturers want to kill the tax before it kicks in. On Wednesday, more than 700 associations and companies, including AdvaMed and the Medical Device Manufacturers Association, the industry's chief trade groups, wrote to House leaders urging them to erase the tax.

"If this tax is not repealed, it will continue to force affected companies to consider cutting manufacturing operations, research and development, and employment levels to recoup the lost earnings due to the tax," they wrote.

The U.S. Chamber of Commerce also wrote to lawmakers in favor of repeal. They said the tax would "lead to increased health care costs, undercutting one of the primary goals of health care reform."

The tax was enacted in 2010 as part of President Barack Obama's health care overhaul to help pay for that law's massive expansion of coverage. Opposing the tax lets Republicans argue that they're trying to protect jobs and prevent a tax increase, while also attacking one of the financing legs of the health care law, which they oppose.

In their letter threatening a veto, White House officials argued that the health care law would give the medical device industry 30 million new potential customers who will gain health insurance. Industry officials deny that, saying the elderly patients who use many of their products are already covered by Medicare.

Repealing the tax would cost the government a projected $29 billion over the next decade.

The legislation has been combined with two other provisions. One would let people recover up to $500 from their tax-favored health flexible spending accounts if they don't use all the money for medical bills. They currently lose any unspent funds in such accounts.

Banning Straws
John Stossel

The other would let people use money from some tax-advantaged health savings accounts for over-the-counter drugs.

The overall bill would cost $37 billion over 10 years.

It would be more than paid for by eliminating limits on the money the government could recover if it gives lower-earning people subsidies for buying health insurance that are higher than they ultimately qualify for. When that part of the health care law takes effect in two years, the subsidies will be paid in advance and the government estimates it will end up making billions of dollars in overpayments.

That provision would save a projected $44 billion for the government over the decade, meaning that overall the legislation would save $7 billion. White House officials say removing the limits on the subsidies the government recovers is essentially a tax increase and that it would discourage people from signing up for coverage.

In its letter, White House officials wrote that the bill "would fund tax breaks for industry by raising taxes on middle-class and low-income families."