114th Congress, Vote 375; House of Representatives #160

Protect Medical Innovation Act of 2015

Official Title: To amend the Internal Revenue Code of 1986 to repeal the excise tax on medical devices.

HR 1190: Repealing the ACA's medical device tax
Passed by the House Jun 18, 2015, 280-140 (13 abstaining).

Synopsis: The ACA included a 2.3 percent excise tax on medical devices. The tax is levied on the manufacturer or importer of the devices, and applies to medical devices sold after December 31, 2012. It does not apply to devices that are generally sold directly to consumers (ie, it's for things like pacemakers, dentures, and artificial hips, not Band-Aids and eyeglasses), and it does not apply to medical devices manufactured in the US for export to other countries.

H.R. 160 would repeal the medical device tax, effective the first quarter that starts after the bill is enacted. But there is no provision in H.R. 160 to replace the revenue that would be lost if the medical device tax is repealed. That revenue is currently used to provide premium subsidies to millions of low and middle-income Americans who purchase coverage in the exchanges.

President Obama has promised to veto H.R. 160, but there is widespread support for repealing the medical device tax, even among some Congressional Democrats. The House voted to repeal the medical device tax in 2012 and again in 2014; in 2013 the Senate approved a non-binding resolution to repeal the tax.

In 2015, the Senate introduced their own version of legislation to repeal the medical device tax.S. 149 hasn't advanced out of committee, although it has bipartisan support - probably due in large part to successful industry lobbying.

Why supporters pushed for this bill

• The medical device tax is seen as stifling innovation, encouraging manufacturers to send jobs overseas and/or reducing manufacturing.
• The US Chamber of Commerce supports H.R. 160, noting that the medical device tax could increase the cost of health care in the US.
• AdvaMed, the top lobbyist for the medical device industry, released a study stating that in its first year, the medical device tax resulted in the elimination of roughly 14,000 medical device industry jobs. They also found that another 19,000 jobs were not created, but would have been, absent the device tax.
• Senator Elizabeth Warren (D, Massachusetts) supports repealing the medical device tax, despite being a strong supporter of the ACA. Warren's position is that the medical device tax will result in fewer manufacturing jobs in the US, and she's stated that our taxation policies should be geared towards increasing - rather than decreasing - manufacturing jobs (although Warren notes that we must find a way to replace the lost revenue if the device tax is repealed). Her position has been criticized by some progressives, but she's joined by other Congressional Democrats - including Senator Al Franken - who also support repeal of the medical device tax.
• Although the medical device tax is a revenue generator for the ACA's premium subsidies, it's a relatively small amount of revenue compared with other ACA taxes.

Why opponents tried to stop the bill

• It would be expensive. The Congressional Budget Office estimated that repealing the medical device tax would reduce revenue (and increase federal deficits) by $24.4 billion over the period from 2015 to 2025, assuming the measure is enacted starting with the fourth quarter of 2015.
• Although opponents of the device tax have stated that its negative impact on the medical device industry is profound, the Congressional Research Service predicts that output and employment in the medical device industry would be reduced by "no more than two-tenths of one percent" as a result of the tax. Industry advocates may have greatly overstated the impact of the tax.
• The ACA was written to be deficit neutral, with provisions to generate revenue that could be used to significantly expand access to health coverage for uninsured Americans. In addition to medical device manufacturers, new taxes are levied on health insurance carriers, hospitals, home health agencies, clinical laboratories, and pharmaceutical companies (in total, these taxes will generate $165 billion over the next decade). The Center for Budget and Policy Priorities warns that if the medical device tax is repealed, there would be ample motivation for those other industries to seek repeal of their taxes as well, possibly crippling the ACA's revenue stream.
• Since the excise tax is levied equally on domestically-made and imported medical devices, the Center for Budget and Policy Priorities argues that the device tax will not result in jobs being shifted overseas.
• Medical device manufacturers and importers stand to gain significant business as a result of health care reform, so it makes sense to ask them to contribute revenue to support health care reform.

06/18/2015

Status: House passed

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