IF THE Capitol Hill impasse ever ends, it will probably be through a compromise under which House Republicans abandon their demands to delay or defund Obamacare — in return for a concession Senate Democrats can tolerate. One scenario involves Republican support for a spending bill in return for repealing one source of funding for the health-care law: a 2.3 percent excise tax on medical devices.
Republicans hate the tax, which took effect Jan. 1, because, well, it’s a tax, and because it pays for Obamacare. More than a few Democrats are against it, too, ostensibly because it’s a job-killing burden on small business. In March, 33 Democratic senators voted for a nonbinding resolution that called for repealing the tax. Among them were liberal lions such as Al Franken (Minn.) and Elizabeth Warren (Mass.), whose home states have large medical-device industries.
Given those political realities, the No. 2 Senate Democrat, Richard Durbin of Illinois, suggested Tuesday that his party “can work on something . . . on the medical-device tax,” as long as the House first passes a “clean” spending bill, with no Obamacare-related strings attached, and agrees to replace the $30 billion in revenue that the tax would raise over the next decade.
It figures that the only policy idea that might bring the two parties together is not a terribly good one.
The medical-device tax is one part of a package that was supposed to pay the $1.3 trillion cost (over 10 years) of covering 27 million uninsured people. The excise tax amounts to asking the medical-device industry to chip in 2.3 percent of the tab, just as other health-care interests, such as insurance companies and the drug industry, were also asked to pony up. We hasten to add that this is hardly the optimal financing method; a generally applicable program ought to be financed with generally applicable taxes. Still, the $100 billion-plus medical-device industry is highly profitable. While the tax might impose some pain on the business, we doubt that it would doom it. We’re also skeptical of free-market pleadings from an industry that owes much of its prosperity to federal programs such as Medicare and Medicaid. Indeed, the influx of new insured patients because of expanded coverage would, to some extent, create offsetting demand for devices.
We’re also skeptical of Congress’s ability to agree on a gimmick-free offset for the lost revenue — though, admittedly, a credible pay-for would mitigate the harm of repeal. What can’t be undone, however, is the precedent. If this interest group can lobby successfully to shed its share of the cost of expanded coverage, what’s to stop everyone else from seeking a break? There’s been a bit too much of this already — a delay in the employer mandate, for instance — as Republicans have been quick to point out.
Yes, if the choice were between a paid-for repeal of the device tax and endless government shutdown, we’d choose the former. The shame is that such a dilemma would present itself in the first place.