Democrats Find Out What's in ObamaCare and Don't Like It

Posted: Dec 13, 2012 7:35 AM

Senate Democrats who helped pass ObamaCare are finally seeing what is in it and aren't really so sure the massive tax increases mandated in the legislation will be good for their constituents, especially when it comes to the medical device tax which is set to further increase on January 1.

With some of their most influential constituent groups facing onerous tax increases that are slated to help fund the law’s mandates and regulations, Senators like Al Franken (D-MN), Dick Durbin (D-IL), Charles Schumer (D-NY), Patty Murray (D-WA), John Kerry (D-MA), Kirsten Gillibrand (D-NY), Debbie Stabenow (D-MI), Richard Blumenthal (D-CT), and others -- all of whom voted in favor of the law -- are aiming to delay or outright repeal parts of ObamaCare.

More from Tim Carney:

First, Democrats killed the ill-conceived long-term-care-insurance measure, known as the CLASS Act. This provision, which provided government insurance for long-term care, was, amazingly, booked as reducing the deficit. This was ridiculous, and after the bill passed, Democrats realized it was a disaster, and they repealed the provision.

Another reason the bill was supposed to “reduce the deficit” was an unusually onerous tax hike on small businesses. The provision, known as the “1099 provision” would have forced small businesses to file all sorts of new paperwork for all sorts of transactions (sell a digital camera, file a 1099), in the hope of picking up transactions that are taxable. Congress also repealed that provision.

And now the health-care-industry lobbies that supported this subsidy-and-mandate-laden bill are lobbying to kill the cost-controls that offset the costs of its subsidies. All sorts of providers are lobbying to kill the Independent Payment Advisory Board. And the medical-device industry has convinced two Democratic Obamacare-backing Senators to try to kill the medical device tax.

A top Senate staffer explained (after ObamaCare passed), “This is a coverage bill, not a cost reduction bill.” David Bowen, who helped to craft the legislation, said that Senate Democrats had planned to follow in the path of Massachusetts’ RomneyCare plan by providing insurance coverage first, “knowing that that would bring on a cost battle second.”

In fact, RomneyCare’s mandates and subsidies caused health care costs to dramatically increase in the Bay state, leading the current governor and state legislature to exert never-before-seen controls on insurers and health care providers as they also raised taxes.

Not surprisingly, as Senate Democrats have gotten a look at what exactly is in ObamaCare, the parts of the law that were intended to control costs have gradually been stripped from the legislation.

As I've written before, one of the most devasting taxes long-term is the medical device tax. Medical device development requires highly specialized education and an expensive degree in bio-medical engineering. Now that medical device companies are already cutting jobs because of ObamaCare costs, many students will no longer find it worth spending money on an expensive education only to have their investment not pay off. In the future, this will cause a shortage of medical device engineers which will further snowball into an overall decay of medical device innovation, leaving Americans and the world will have fewer life saving devices.

A bipartisan outcry has been raised over the device tax, and for good reason. The tax was enacted to help fund the $1.76 trillion in new spending authorized under Obamacare, and it will actively undermine production of and improvement on medical devices which are crucial to patient outcomes.

The device tax is a tax on gross receipts (sales, essentially) instead of a tax on profits, so the tax will be imposed even if a company sells its products at a loss. This one detail ensures that the 2.3% tax is deceptively large: the medical device industry’s tax burden is expected to double because of the Taxmageddon increase; some companies (such as Zoll, which manufactures defibrillators) will see their profit margins shaved by up to 40%.

A recent study found that investment in medical research and development will fall by $2 billion per year because of the device tax—and that is a cautious estimate. R&D dollars drive innovation and innovation lowers costs, so the tax’s adverse effect on investment will keep expensive medical devices from becoming affordable and widely available in the future.

More immediately, the device tax will gouge health consumers for essential products. Taxes on companies often end up hitting consumers as higher prices, and the device tax is no different. The actuary for the Centers for Medicare and Medicaid Services made it plain that Obamacare’s “fees and the [device] tax would generally be passed through to health consumers in the form of higher drug and device prices and higher insurance premiums.” In other words, patients – many in dire need of care – may find crucial medical products out of their reach as a result of the 2.3% tax.

Whatever costs cannot be passed along to patients will be absorbed by the medical device companies, which will lead businesses to cut jobs as they tread water to stay afloat. One study found that, depending on the elasticity of the tax, the medical device industry will be forced to fire between 14,500 and 47,100 workers—up to 10% of the workforce.

Now, Democrats wanting to repeal the medical device tax is great but it doesn't change the fact that ObamaCare has to be paid for somehow if the legislation is going to stand as the law of the land.

Recommended Townhall Video