Medical Device Tax Repealed. Symbolically.

moneyThe medical device tax has been repealed. At least symbolically.

The Senate voted 70-29 on March 21 to repeal the 2.3% sales tax on medical devices that was part of the Affordable Care Act to help cover the uninsured. However, the vote came in a budget amendment in a non-binding resolution so there was no real repeal.

What was remarkable, however, was that many Senate Democrats voted in favor of the repeal. Thirty-three of the Senate’s 53 Democrats joined all 45 Republicans in voting for the repeal amendment, reports The Huffington Post. One independent Senator who normally caucuses with the Democrats joined the repeal vote as well.

The tax, which went into effect in January, was put into place to raise $30 billion over 10 years to help pay for the new health care law. The tax was charged against medical device sales, not profits. Many observers have argued that the tax hurts small manufacturers of devices and could lead to layoffs. Others have argued that the tax will be passed on to consumers and will not hurt the bottom lines of companies.

Lobbying from the medical device industry seems to have persuaded Democrats, many of whom voted for the new health care law. “The industry is being punished for its innovation and growth,” says Sen. Al Franken, D-Minn.

Says the Democratic senator from Minnesota, Amy Klobuchar:

The tax is a burden on medical device businesses but, most importantly, it is a disincentive for jobs. It stifles innovation, and it makes it more difficult for the next generation of lifesaving devices to make it to the market.

(Both were quoted in The Wall Street Journal.)

“The importance of this vote cannot be overstated,” says Sen. Orrin Hatch (R-Utah), who introduced the amendment, as reported in Politico. “For the first time, Democrats and Republicans have come together in recognizing how bad this tax is. We cannot stop here. We must continue the fight to get rid of this tax.”

The House of Representatives can take up the bill. A House version of the bill has 212 co-sponsors. Last June, representatives voted 270 to 146 to repeal the tax, close to the 290 veto override threshold.

Despite the Senate vote, some observers believe that the tax will remain in place. If the tax is to be repealed, Congress would want to find a way to replace the lost income. And that may be too difficult.

“This was an easy vote for many senators to take in response to a very powerful medical device lobby,” says Robert Laszewski, a consultant to health care companies. “Let’s see what happens when the choice is to undermine the (health care law) or come up with an alternative source of revenue. I don’t think these 33 Democratic senators have any intention to start taking the Affordable Care Act apart.”

Source: “Senate Democrats Vote To Repeal Obamacare Tax,” The Huffington Post, 3/22/13
Source: “Their Own Devices,” The Wall Street Journal, 3/22/13
Source: “Democrats join push to dump Obamacare tax,” Politico, 3/22/13
Image by 401(K) 2013.