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Medical device tax makes Democrats choose between party, constituents

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Democratic lawmakers are questioning whether they should heed constituent concerns or remain loyal to their party as they decide the fate of the medical device tax outlined in the Affordable Care Act.

Constituents argue the tax kills jobs and stalls innovation, while Democratic strategists say the tax is a proverbial thread that, if pulled, could ultimately unravel the entire law.

The 2.3% levy on manufacturers and importers of devices began in 2013 and is expected to net nearly $30 billion over the course of a decade to help fund provisions of the ACA.

“For Republicans, this move is not about strengthening America's healthcare system, it is about dismantling it,” said Doug Thornell, Democratic strategist and managing director at SKDKnickerbocker, a public affairs firm. “Democrats have offered ways to make the ACA even better and cover more people. Republicans are focused on litigating fights they lost in Congress, the ballot box and the courts.”

In June, 46 House Democrats crossed party lines to vote on a bill to end the tax. The vote was 280-140. On Wednesday, Sen. Dan Coats, R-Ind., who chairs the Joint Economic Committee, released a nine-page report critical of the tax. But there hasn't been any more recent movement on the issue. There's also been no movement since January on S. 149: Medical Device Access and Innovation Protection Act, which was authored by Sen. Orrin Hatch, R-Utah.

Action is expected soon in the Senate, given the bipartisan vote in the House, according to JC Scott, senior executive vice president of Government Affairs at AdvaMed, a medical device company trade group. He said senators were also waiting for the U.S. Supreme Court ruling in the King v. Burwell case before moving forward.

The chances of repeal legislation actually becoming law is a matter of debate among insiders. All experts interviewed agreed that President Barack Obama will likely veto any such bill, but Republicans reportedly feel they have the votes to override that veto.

“There is wide bipartisan support for the repeal of the medical device tax,” said Bradley Blakeman, a Republican strategist and principal at the 1600 Group, a consulting firm.

To overturn a presidential veto, a two-thirds majority vote needs to happen in both the House and the Senate. The House may have the numbers, as at least 290 members must vote to override. The day the House voted on H.R. 160: Protect Medical Innovation Act of 2015, 11 Republican congressmen were absent because they had traveled to Charleston, South Carolina, following the church shooting. With those members present, the GOP may have enough support, assuming they maintain the Democratic backing they have already garnered.

However, there's already been some evidence that Democrats could have a change of heart on the device tax.

Rep. Michael Capuano, D-Mass., originally backed H.R. 160 as a co-sponsor. His state is home to numerous devicemakers, including Boston Scientific, and when the day came, he voted no.

“The primary reason I could not support H.R. 160 is because it doesn't do anything to address the revenue that will be lost by eliminating the medical device tax,” Rep. Capuano said in a note to constituents.

Reps. Keith Ellison, D-Minn., Joseph Kennedy, D-Mass., and Ron Kind, D-Wis., also co-sponsored the bill, but voted no when it hit the floor.

“I cannot support taking money away from the effort to make healthcare more affordable for America's families,” Rep. Ellison said in a statement.

However, other Democratic house representatives indicated they will move full steam ahead to protect the repeal as they feel the ACA can indeed survive without it. Several said they were emboldened by a CBO report that indicated the ACA will cost $142 billion, or 11%, less over the next 10 years, compared with what the agency had projected in January.

The nonpartisan agency said the downgrade was the result of health insurance premiums rising more slowly than anticipated, thus requiring less of a government subsidy.

“The ACA is costing significantly less than expected, and this excise tax hurts the development and delivery of the very products that will help us lower health care costs in the long run,” said Michael Campbell, a spokesman for Rep. Scott Peters, D-Calif.

“The tax, which was originally imposed to help pay for the ACA, is no longer necessary thanks to insurance cost reductions the ACA has helped to drive,” said Rep. Rick Nolan, D-Minn. “Repealing the Medical Device Tax is one of the best ways we can help continue to advance the health of both our people and our economy.”

Despite the Democratic support in the House, conservative Hill sources warn that's only half the battle. It's unclear if the Senate will have the 60 votes needed to override a presidential vote, according to GOP strategist Matt Mackowiak.

Sen. Hatch's bill has 38 co-sponsors, but only five are Democrats. Republicans have struggled to widened support by getting key members such as Elizabeth Warren, D-Mass. Even though she has voiced opposition to the tax, she won't back any bill that doesn't have an offset and others in the chamber agree.

“Senate Democrats who might support a repeal of the device tax would insist on an offset to cover the loss of revenue,” Mr. Thornell said.

More Republicans should also be concerned about how they would offset eliminating the tax. A CBO evaluation on H.R. 160 said repealing the tax would add $24 billion to the deficit.

“If you don't pay for it … it could come at a political cost for those who care about the debt,” said John Feehery, GOP strategist and president of QGA Public Affairs.

Virgil Dickson writes for Modern Healthcare, a sister publication of Business Insurance.