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ACA Funding Threatened by House Committee Vote

 |  By Margaret@example.com  
   June 04, 2012

A vote by the Republican-dominated House Ways & Means Committee has set the stage for the full House to consider the repeal of provisions that would provide billions of dollars in funding for the Patient Protection and Affordable Care Act.

In votes primarily along party lines, the committee voted Thursday 23-11 to repeal the excise tax on medical devices and 24-9 to repeal ACA provisions that prohibit using health savings accounts to purchase over-the-counter remedies such as cough syrup and pain killers.

Combined, the two provisions are expected to contribute an estimated $30 billion in funding for ACA.

The debate in the House Ways & Means Committee shed some light on how Republicans and Democrats plan to make their respective cases about healthcare reform over the course of this election year.

The medical device industry launched a substantial lobbying effort to remove the 2.3% excise tax from medical devices such as stents and MRI machines used by healthcare providers. Consumer items such as eyeglasses and contact lenses were never subject to the tax. If it survives the repeal effort, the excise tax will become effective on Jan. 1, 2013.

Supporters of HR 436 (Protect Medical Innovation Act of 2011) cited familiar arguments about losing jobs, taxing innovation, reducing access to healthcare, and increasing healthcare costs. In his opening statement to the committee, Rep. Erik Paulsen (R-Minn), the chief architect of the bill, positioned the excise tax as "an attack on American innovation" that would "push research and development and manufacturing abroad and put American jobs at risk."

Opponents of the bill stressed the cost of the repeal—about $29 billion over 10 years, and the 30 million additional people healthcare reform is expected to help but wouldn't be able to if the excise tax is repealed.

They argued that the negative effects were exaggerated and nothing more than an effort to discredit healthcare reform. They also accused the medical device industry of reneging on the agreement it made in 2010 to support ACA if the excise tax was reduced from a proposed 5% to the current 2.3%.

Rep. Sander Levin (D-MI), the top Democrat on the committee, said in his opening remarks that Republicans were doing nothing more than "resurrecting a familiar foil healthcare reform." Are these bills "the best use of scarce federal dollars in times of fiscal austerity?" he asked. He called the excise tax repeal effort "deceitful" because Republicans offered no way to pay for the lost revenue.

He also challenged the contention by supporters that the excise tax would open the industry to foreign competition and encourage medical device manufacturers to shift jobs overseas. "That is not true. Imports will be taxed so foreign companies will have no advantage. It will make no sense for American companies to move abroad."

Levin quoted from a May 2009 letter in which the medical device industry pledged to "do our part to make healthcare reform a reality." He noted that the letter was signed by representatives of many of the associations now fighting the excise tax.

While Levin contended that the industry originally supported the tax because of the potential expanded market, Rep. Paulsen responded that many of the 30 million newly insured would be young workers who probably wouldn't need to use medical devices. He noted that several companies have already announced potential layoffs of thousands of workers in anticipation of the excise tax.

Rep. Paulsen, who also serves as co-chair of the congressional medical technology caucus, made the case that because the tax is on sales and not profits, start-ups in research and development would be hard hit.

Democratic efforts to force committee Republicans to identify off sets or other spending cuts were met with procedural objections. Rep. David Camp (R-MI) said there is no requirement to identify offsets at the committee level.

In the end, the bill easily passed with two Democrats, Rep. Ron Kind from Wisconsin and Rep. Shelley Berkley of Nevada, breaking ranks to support the bill.

Supporters of HR 5842 (Restoring Access to Medication Act) deftly positioned the ACA disqualification of expenses for most over-the-counter medications under HSAs as a tax. OTCs are only covered if they are prescribed by a physician.

The bill's sponsor, Rep. Lynn Jenkins (R-KS), noted that holders of HSAs now need to use after-tax dollars to pay for OTC medications and suggested that amounted to a tax increase on families.

Rep. Shelly Berkley (D-Nev) said HSAs and similar accounts enabled individuals to have more control over their healthcare decisions and where to seek care. She noted that requiring a prescription for OTC drugs increases healthcare costs for many individuals who must take time away work to obtain prescriptions. "Plan participants should have the ability to use the dollars they set aside for healthcare expenses for pay for the cost of over-the-counter medications."

Rep. Levin wondered if increasing access to health savings accounts was how Republicans planned to replace the existing ACA. "That falls far short of the needs of America families. Neither FSAs nor HSAs provide comprehensive coverage. They are not real solution to the problems facing our healthcare system."

HR 5842 gained easy approval with three Democrats—Rep. Kind, Rep. Berkley, and Rep. Joseph Crowley (D-NY)—voting in favor of the bill.

Rep. Eric Cantor (R-VA), the House majority leader, has placed HR 436 and HR 5842 on his priority list for quick votes and they are expected to hit the House floor sometime this week. As of May 31, HR 436 had 240 co-sponsors but only a handful of Democrats had signed on to the bill. HR 5842 had seven co-sponsors all Republicans. Like several bills passed in the Republican House, HR 436 and HR 5842 are not expected to see a vote in the Democratic-controlled Senate.

If a medical device bill does come to a Senate vote, it will place some high-profile Democratic senators in the difficult spot of possibly voting to dismantle part of the payment structure for ACA. Sen. Al Franken (D-Minn), for example, is on record as supporting healthcare reform. But Minnesota is home to Medtronics, the giant medical device manufacturer, which has already estimated that taxes would cost the company $125 million in 2013. The senator's website notes that he will "be fighting hard to continue to further reduce the unfair burden on the medical device industry."

Efforts to reach Department of Health & Human Services officials for comment were unsuccessful Friday.

Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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