Regardless of whether Republicans are able to re-take the U.S. Senate in the midterm elections, there’s a good chance the medical device tax will be repealed, according to former Sen. Evan Bayh.
The former Indiana Democrat told members of the medtech community yesterday in Chicago at the AdvaMed 2014 conference that he knows for a fact that the medical device tax is "not a big issue" for President Barack Obama and that Obama would be willing to sign off on a repeal provided it had some sort of offset attached.
Bayh, who now works for the Washington-based law firm McGuire Woods, gave the chances of a repeal of the tax at 50/50 following the midterm elections, no matter which party takes the Upper Chamber. The tax was enacted as part of ObamaCare in 2010 and took effect at the beginning of last year. It places a 2.3% excise tax on all U.S. sales of prescribed medical devices.
Bayh said that even if the Senate stays in Democrats’ hands, the odds for a device tax repeal are still good because the majority will be so slim that lawmakers in device-heavy states will push leadership to pass it.
If the GOP takes the Senate, Bayh said, the powers that be in the Republican party, including Sens. Mitch McConnell (R-Ky.) and Orrin Hatch (R-Utah) have already made the issue a priority. Under Republican Senate leadership, a repeal would likely play out much like the Welfare Reform Act of 1995, when the GOP was able to get then-President Bill Clinton to sign off on a bill he found politically unpalatable.
In that scenario, Bayh reasoned, a GOP-controlled Senate would repeal the Affordable Care Act outright through the reconciliation process. That would then be vetoed by the president and sent back to the Upper Chamber, which would begin to pull out unpopular pieces of the ACA like the medical device tax.
Bayh has been a longtime critic of the medical device tax. In 2012, he wrote an op-ed for the Wall Street Journal calling the tax a "raid on the medical device industry."
"Given the fragile state of the U.S. economy, Congress must move quickly to redress the harm from this tax before it becomes irreversible," he wrote. "The hit will be severe. For a typical company, a 2.3% tax on revenues equals a 15% tax on profits. When combined with a 35% corporate tax and state corporate taxes, the tax rate for the medical device industry will exceed 50% in most jurisdictions. Many marginally profitable businesses will then hemorrhage red ink, since they’ll have to pay the excise tax whether they are making money or not."