Tuesday, March 27, 2012

Repeal the Bedpan Tax

Lehigh Valley Congressman Charlie Dent, along with other Republican lawmakers, yesterday advocated a repeal of a 2.3% medical device excise tax. They made their pitch at Philly's University City Science Center, an incubator for medical technology businesses.

According to a report just released by the Advanced Medical Technology Association, this new tax, which is part of the healthcare overhaul under consideration by the Supreme Court, will cost the medical device industry $3 billion, costing Pennsylvania 1,700 jobs and $346 million over seven years.

Locally, the tax will have a detrimental impact on companies like Aesculap, Boas Surgical, Biomed, B Braun, Olympus, Orasure and Precision Medical Instruments. Dent, during recent meetings with leaders at Orasure and Precision Medical Instruments, learned that productivity will be affected.

“Beyond our region, the implementation of the law’s medical device tax will stifle innovation across the country by forcing producers to divert already limited resources away from research and development," predicted Dent. "This tax will also increase the cost consumers pay for a variety of medical devices – from prosthetics to bedpans. Its repeal is incredibly important to our economy and the countless Americans who depend on medical devices.”

Dent and Congressman Jim Gerlach introduced legislation last year to repeal this excise tax. As explained by Gerlach, "It's a tax right off the top, right off the initial gross revenues of a company."

14 comments:

Anonymous said...

Bernie,

Either repeal the TAX, or repeal the BEDPAN!!!

Sam White said...

nobama and his boys will screw you and any business they can.

Anonymous said...

No bills generated by Rs are going anywhere in Harry Reid's Senate. None.

Anonymous said...

To Anon 6:51 AM

You're Exactly Right, that's why these type of Bills will be proposed.

Jon Geeting said...

The medical device industry is extremely profitable, and they are going to make money hand over fist from all the people who will now have health insurance.

Just so we're keeping score, Dent said he voted against Obamacare because it doesn't do enough to control costs (true) and that it increases the deficit (false).

But then there he goes voting to repeal the IPAB board that's tasked with controlling the cost of payments to providers, and now he's calling for repealing one of the pay-fors - which really would increase the deficit.

Bernie O'Hare said...

As the nonpartisan Politico makes clear, it's very ossible that the overhaul will increase the deficit, something I argued and you denied when this bill was under consideration. "[T]hose estimates are mostly educated guesses — and they assume Congress is actually going to let the Medicare cuts happen. For example, the law is supposed to save $157 billion over 10 years by increasing Medicare payments more slowly for inpatient hospital, home health and skilled nursing facility services. The law expects those providers to become more productive and more efficient. But watch for plenty of lobbying pressure on Congress to cancel those cuts."

Unlike you, most of the rest of us are not drinking the Kool-Aid.

Anonymous said...

1) Medicare has already been cut by the Obama administration - you know, Bernie, the administration you're voting to re-elect.

2) The regulatory cost of developing new devices is what drives costs. The federal approval process is expensive and lengthy.

3) The CBO has already doubled the estimated cost of Obamacare - a full two years ahead of implementation.

Bernie O'Hare said...

"- you know, Bernie, the administration you're voting to re-elect."

Give me a better choice and I'm with you. The ones out there are pathetic.

Anonymous said...

I dispute that figures persented.

Point

The Keystone Pipeline will create 10's of thousands of jobs

Counterpoint

500 net jobs

I'm sure the medical lobby has done their MOJO on this figure

Anonymous said...

Once again, take care of big business and fuck the people looking for jobs!

Anonymous said...

Bernie,

So let's get to the real issue here, that being the question: How do we pay for healthcare with an aging population even as we currently spent 18% of GDP on healthcare?

To simplify, the options available are:
1. Cont. to pay a larger % of GDP for healthcare services.

2. Limit (or ration) the services people can receive based on some criteria.

3. Pay less per service for the services received.

4. Some combination of 1-3.

I am of the opinion that it will be #4 as America has a limited appetite for limiting services and we can only spend so much on healthcare. As a result, we will need to pay less for services. This would include providers receiving less money for their services, and drug and device companies having tighter profit margins. That is the only way we keep the overall cost of healthcare from eating up a greater % of GDP.

This leads to the relevant question to this discussion: what will be the effect of smaller margins on the device makers? Before I give my assessment, here are some facts.

Device makers Medtronics (MDT), St Jude Medical (STJ), and Becton Dickiston (BDX) in 2011 all had operating margins of 29-33.5% and effective tax rates of 16.8%, 19.7% and 26.3% respectively. Moreover, all three have growth rates in both net income and sales greater than 8% per year for the past decade. Free cash flow for these companies has also been doing just fine. (All of this data is publicly available through a variety of sources.)

Clearly, these companies, and others like them, have been steadily growing sales and income while paying a tax rate that is much less then many would believe.

While I am not making an argument for or against the tax on these companies, it seems to be a stretch of reality to say that an additional 3% tax would force such profitable companies to contract their R&D budgets. It would be bad business on the part of the CEOs to take these actions.

On the issue of passing along the cost to consumers, that responsibility lays with the insurance companies and their ability to negotiate proper pricing, being very few people pay for healthcare solely out of pocket. And with the expanding 65+ population, device makers will be more profitable on lower margins as the net sales increase as it stands today.

The one question that was not asked, but probably should be, is how much money have the Congressmen mentioned received from device companies like B. Braun Medical and the executives of these companies? I would think that if political contributions are an important factor surrounding the NIZ in Allentown, it would be for a much larger and lucrative industry like healthcare? Wouldn't you agree Bernie?

Publius

Bernie O'Hare said...

Those are all great questions, Publius, and should have been explored before this landmark legislation was shoved down the throats of an unwilling public. That's how Ds lost the House. I believe the best way to govern is from the middle. Since I now think the Supremes are going to invalidate this law, I'd suggest we look for consensus on areas where we can agree. I think this is one such area, despite the points you make.

Now I know Dent had rec'd money from B Braun and Orasure, but $ in federal races is far less significant than locally. To run for Congress, even an incumbent must raise $2 million. A $2500 contribution is meaningless.

Locally, it's much different. You don't need as much money, and there are no limits on contributions. Maybe we could agree to reform that, too.

Anonymous said...

Bernie,

I am not sure that legislation that was discussed for more than a year through hearings, town hall meetings all Summer long in 2010, meetings with the President and Congressional leaders can be accurately portrayed as "shoved down down the throats." Truth be told, the system will get corrected either by Congress working with the President (whomever that will be in 2013) or it will change by the force of the system collapsing.

I am of the opinion that until we take money out of politics the status quo will only continue and that we need to talk about the things that really need to be reformed - mainly the effect that money has on the system. If we have real contribution limits, or better yet publicly funded elections as well as term limits on political representation at all levels, we would be better served, and could get real compromise from reps. who actually serve their districts and not the political downers.

And after a brief search on opensecrets.org, while Dent received $6,600 from B Braun Medical in the 2010 cycle (a relatively small amount for a Congressional election), he did receive $174K from health professionals and $63.1k from Phama/Health Products, which is not a paltry sum. My point is not to bash Dent, only to show that money influences on all levels and should be considered when looking at any politician.

Publius

Bernie O'Hare said...

Publius, No question it was discussed. Then it was shoved down our throats. It was an unwilling public. If we can't agree that this was unpopular, it's pretty hard to move from there.