"I have seen all the things that are done under the sun; all of them are meaningless, a chasing after the wind." – Ecclesiastes 1:12
That’s as good a summing-up as any for the U.S. House of Representatives’ vote yesterday to kill the medical device tax.
Even though the measure passed on a 270-146 vote, a companion measure in the U.S. Senate is surely DOA and the Obama administration has already promised a veto.
In the Senate, majority leader Harry Reid (D-Nev.) and Sen. Max Baucus (D-Mont.), who chairs the powerful Senate Finance Committee, appear dead-set on keeping the device tax – and the rest of Obamacare. Not a single Democrat in the Senate has signed on to a companion repeal measure sponsored by Sen. Orrin Hatch (R-Utah).
"Can’t the Republicans find a new script, rather than trying to attack the healthcare bill? That’s all that is," Reid said last week, according to Bloomberg. "So the answer is I’m not looking forward to doing this."
And the White House Office of Management & Budget is already recommending a veto of the House bill, H.R. 436, sponsored by Rep. Erik Paulsen (R-Minn.).
"If the President were presented with H.R. 436, his senior advisors would recommend that he veto the bill," according to a letter from the OMB.
There’s still hope still wafting on the breeze for proponents of repeal, however, should the U.S. Supreme Court strike down the healthcare reform law. And if the Supremes uphold the law, a win by Mitt Romney in the November election would spell almost certain death for the med-tech tax.
"I am encouraged that the House has done the right thing and voted to repeal the medical device tax," Romney said in prepared remarks after yesterday’s House vote. "The ill-considered medical device tax is only one of many fatal flaws in Obamacare. As president, I will work from my first day in office to dismantle Barack Obama’s federal healthcare takeover and replace it with real reform that strengthens our healthcare system and puts patients first."
But the Supremes could leave Obamacare intact, or rule that the law’s individual mandate is unconstitutional while leaving the rest of the act intact – including the 2.3% levy on U.S. sales of medical devices. And it’s far from certain that Romney will win the election.
So now what? As things stand today, the tax looks almost certain to go into effect Jan. 1, 2013. That would be a disaster for the vast majority of companies in the medical device space, which is driven by smaller firms that don’t have the deep pockets needed to absorb the tax. Those companies will be forced to lay off workers, scale back R&D and find ways to pass the cost of the tax along to their customers – who are already moving to block attempts to do just that.
The industry and its Beltway allies should turn their attention to mitigating the impact of the tax on that constellation of small med-tech firms by advocating for a floor to the tax. Excluding companies that post annual revenues of $250 million or less would insulate that sector from the tax.
Then again, given the state of things on Capitol Hill these days, I might just be chasing the wind myself:
“I applied myself to the understanding of wisdom, and also of madness and folly, but I learned that this, too, is a chasing after the wind. For with much wisdom comes much sorrow; the more knowledge, the more grief.” – Ecclesiastes 1:17-1:18