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Opponents of Tax on Medical Devices See Hope In Fiscal Cliff Debate

Opponents of the health care law’s tax on medical devices say they are making headway in their push to repeal the provision before it takes effect next year. But some see delaying the implementation of the tax as a way to get around concerns about the cost of eliminating it if they’re unable to fully repeal it before the end of the session.

Rep. Erik Paulsen, the sponsor of the House repeal measure (HR 436), said he thinks there is a real possibility of wrapping repeal into the end-of-the-year budget negotiations. The Minnesota Republican and device industry advocates pointed to growing support among Senate Democrats, and Paulsen said there has been a bipartisan effort in that chamber to raise the issue with leadership.

Minnesota Democrats Al Franken and Amy Klobuchar oppose the tax, he noted, as do incoming Democratic Sens. Elizabeth Warren of Massachusetts and Joe Donnelly of Indiana.

“I think the chances of it being included are just as great as the chance of a final deal coming together before the holidays,” said Paulsen, whose state is home to a number of medical-device companies. “The one bright spot that sort of seems to stick out is that there’s bipartisan support in both bodies now. And that is important.”

The House passed Paulsen’s bill to repeal the 2.3 percent excise tax on medical devices in June, with support from 37 Democrats. But the effort stalled in the Democrat-led Senate, which has had little appetite for measures that repeal provisions of the 2010 health care law (PL 111-148, PL 111-152).

The tax goes into effect Jan. 1, and the IRS released the final rule for it last week.

House Majority Leader Eric Cantor indicated on Fox News last month that he sees the deficit reduction negotiations as an opportunity to address the issue. The Virginia Republican said the tax would hurt job growth and could cause individuals to lose access to certain treatments.

There has also been an energetic advocacy effort pushing Congress to clear legislation that would abolish the tax before the end of the year. On Nov. 13, more than 800 organizations, companies and others sent a letter to Senate leaders in both parties calling on the chamber to repeal the tax before it goes into effect. They said the tax “will stifle innovation and cost thousands of high-paying jobs” as well as increase health care costs.

The Advanced Medical Technology Association (AdvaMed) is running digital advertisements in Capitol Hill publications, pressing for repeal of the device tax. And last month, the group co-hosted a fly-in with the Medical Imaging and Technology Alliance and the Medical Device Manufacturers Association that included more than 60 meetings on Capitol Hill.

But even though opponents seek full repeal of the tax, AdvaMed chief lobbyist JC Scott said there’s recognition that only a couple of weeks remain in the year. If advocates are unsuccessful in the lame duck, he said, delay “may be a viable outcome” so full repeal can be considered next year as part of a tax overhaul.

Paulsen also sees that scenario as a possibility, particularly because of the cost attached to eliminating that part of the health care law. According to a Congressional Budget Office estimate released in June, repealing the tax would cost more than $29 billion over 10 years. House Republicans offset the costs of the repeal language and other provisions that were incorporated into Paulsen’s bill for floor consideration by removing limits on reclaiming overpayments of subsidies under the overhaul.

“There’s no doubt that outright repeal is much more difficult,” he said. “However, Senate Democrats are also talking about delaying the tax and acknowledging that because you know there are implications of the tax from a jobs perspective, it would make sense to delay the tax going into the new year and, you know, addressing the issue in more comprehensive tax reform. So the dollar amount becomes a lot smaller.”

In an email, a Franken spokeswoman said the senator thinks that finding a way to finance repeal will be “very difficult right now, particularly when Congress is working to reduce our federal deficit.” But he is working to stop the tax from taking effect in January, she said, emphasizing his concerns about its effect on Minnesota.

“I will continue to press Congressional leaders to eliminate the tax, and until that happens, I believe that we need to delay its implementation so that the medical device industry isn’t hurt while we find a permanent — and fiscally responsible — solution,” Franken said in an emailed statement.

Franken and more than a dozen of his Democratic Senate colleagues have sent a letter to Majority Leader Harry Reid, D-Nev., asking him to support legislation that would delay implementation of the tax.

Brian Connell, director of government relations for the medical-imaging alliance, said ensuring that taxes do not increase is a key part of the fiscal negotiations and that his group is hopeful Congress will act by the end of the year.

“We think that these are great middle-class jobs,” he said. “It’s just another area where taxes shouldn’t go up on Jan. 1.”

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