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Repeal the device tax? Sure, but what's your plan B?

When the House of Representatives voted on Thursday to repeal the medical device tax, it wasn't the first time. It also voted to repeal the 2.3% excise tax, which is part of the Affordable Care Act, aka Obamacare, in 2013. The House has also voted more than 50 times to introduce changes to the ACA since it became law. Meanwhile, nothing changed. So why should this time be any different? Well, the Republicans took control of both houses of Congress in the 2014 elections, and at the time the incoming Senate Majority Leader Mitch McConnell vowed to make repeal of the device tax a priority.

When the House of Representatives voted on Thursday to repeal the medical device tax, it wasn't the first time. It also voted to repeal the 2.3% excise tax, which is part of the Affordable Care Act, aka Obamacare, in 2013. The House has also voted more than 50 times to introduce changes to the ACA since it became law. Meanwhile, nothing changed. So why should this time be any different? Well, the Republicans took control of both houses of Congress in the 2014 elections, and at the time the incoming Senate Majority Leader Mitch McConnell vowed to make repeal of the device tax a priority. Following the midterm, the Washington Post declared medical device makers opposed to the tax among the five big winners of the election. And this is not a strictly partisan issue: 46 House Democrats, especially those who count medical device manufacturers among their constituency, voted alongside 234 Republicans on Thursday to repeal the device tax.

The Massachusetts Medical Device Industry Council (MassMEDIC), an association that represents more than 300 medical device manufacturers, suppliers and associated groups in and near Massachusetts, applauded the vote, as did a number of other industry associations and medtech manufacturers. "The tax unfairly penalizes one of Massachusetts' most innovative industries and its repeal will allow for more research, innovation and new jobs in the Commonwealth," said Thomas J. Sommers, President, in a widely distributed statement. "We will continue the dialogue with our Massachusetts representatives in Congress about the benefits of the medical device tax repeal and how it will have a minimal impact on the future of the Affordable Care Act but a big, positive impact on the future of the jobs in this sector in our state. We look forward to another ‘yes' vote in the U.S. Senate," he added.

Likewise, AdvaMed, which promotes the interests of the medical device industry on a national stage, heralded the announcement. "Passage of this bipartisan legislation in the House is great news for patients worldwide, who will have greater access to the life-changing innovations produced by America's medical technology companies, and for our industry, one of the drivers of the U.S. economy," said President and CEO Stephen J. Ubl.

These and similarly minded associations along with some of the most recognizable names in medical manufacturing have pushed hard to repeal the tax. The most compelling argument against the tax, in my opinion, is its impact on R&D and innovation. As it taxes sales, not profits, the levy disproportionately hurts startups and smaller companies that often spearhead innovation but may be years away from turning a profit. Whether or not it will result in widespread job losses in the medical sector and lead to skyrocketing costs for consumers, as some opponents claim, is a matter of debate.

The bill now moves to the Senate, "but it's far from clear whether backers can prevail in the Senate and gain enough votes to override an expected presidential veto," writes the Boston Globe. The only way to get at least grudging approval from President Obama and avoid a veto is to identify a feasible alternate source of revenue. I have not seen any reasonable suggestions brought forth indicating where the projected $2.3 billion that the device tax is supposed to bring in would come from. (The actuals fell far short of projections in 2013, by the way, with only $1.3 billion collected.) To be fair, Senator Edward Markey (D-MA) has proposed replacing the lost revenue "by ending more than $29 billion in tax breaks and subsidies for the oil and gas industry over the next decade," reports the Boston Globe. His bill has drawn no co-sponsors, perhaps because it's nonsensical. Why should that sector be singled out to bear the burden of subsidizing healthcare?

While I agree that the ACA is flawed, let's not forget that it stopped the reprehensible practice of denying coverage to people with preexisting conditions and that it has provided health insurance to more than 15 million Americans who did not have coverage prior to the ACA becoming law. That statistic comes from the White House and has been challenged, but the fact of the matter is that a whole lot of people now have health insurance who didn't have it before. All of that costs money, and it's going to have to come from somewhere.

Personally, I don't want to see the medical technology industry hit with what Sommers has called a punitive tax. Medical innovation is too important both in economic and human terms, and if the device tax stifles that, it should be repealed and an alternative revenue source should be found.

But, let's be honest: There are many opponents of the device tax who view repeal simply as the opening salvo of a larger battle to degrade and destroy Obamacare. To them, here is my question: What do you intend to replace it with? The old model was broken and unsustainable, so it would be foolhardy to try to resurrect it, and you clearly don't want to move forward in the direction of a single-payer system. So, where do we go now?

Full disclosure: I lived in France for 13 years in the 1970s and early part of the 1980s, and was, by and large, very satisfied with the healthcare I received. Being a starving student and later a starving wage slave, I appreciated being able to go to the doctor when necessary and not have to fork over francs I did not have. So, for me, Obamacare falls well short of what I would like to see. But that's just me. What about you?

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