The U.S. Supreme Court voted to uphold the healthcare reform law this morning, meaning the medical device tax is likely to stand.
The Supremes’ decision comes as a shock to observers who’d predicted that they would rule the Patient Protection & Affordable Care Act’s mandate unconstitutional. Chief Justice John Roberts joined the high court’s liberal wing in deciding that the mandate, which requires the uninsured to purchase health insurance or pay a penalty, qualifies as a tax.
The decision means that the medical device tax will go into effect Jan. 1, 2013, unless repeal efforts underway in Washington succeed.
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Early readings of the decision are that the court upheld almost all of the law’s provisions, except for the ACA’s provisions governing the expansion of Medicaid.
The ruling has "ZERO effect on the device tax," Prof. Kevin Outterson of the Boston University Law School, whose brief was cited by Justice Ruth Ginsburg in today’s decision, told MassDevice.com via email.
For medical device companies, that means they’ll pay a 2.3% excise tax on U.S. sales of medical devices next year. Beltway Republicans are pushing a repeal bill, but that effort is likely D.O.A. in the Democrat-led Senate.
AdvaMed, the Washington-based med-tech industry’s lobbying arm, said it will continue to work on repealing the medical device tax.
"We have consistently opposed the $29 billion medical device tax because of its damaging effects on economic competitiveness, jobs and the research and development needed to find tomorrow’s treatments and cures. The House has already voted to repeal the device tax, and we are heartened by the number of senators who have said they oppose the tax," AdvaMed CEO Stephen Ubl said in prepared remarks. "We will continue to work with policymakers on both sides of the aisle to achieve this goal."
The U.S. House of Representatives repealed the medical device tax in a contentious 270-146 vote June 7.
That vote, however, was mostly symbolic, as senior White House advisors vowed to block the bill, H.R. 436, should the measure reach the President’s desk. That gesture may have galvanized Democratic opposition to the bill’s offset, which would take a stronger hand in recouping over-paid tax subsidies from low- and middle-income households.
In the Senate, where repeal efforts will turn next, Sen. Orrin Hatch’s (R-Utah) S.17 "Medical Device Access and Innovation Protection Act" currently has 29 co-sponsors, but is unlikely to garner the votes necessary to pass.
The ruling
The justices split 5-4 along ideological lines, with the exception of Roberts, who wrote that "the mandate can be regarded as establishing a condition – not owning health insurance – that triggers a tax – the required payment to IRS," SCOTUSblog reported.
Justice Anthony Kennedy led the dissenters, telling court observers today that, “In our view, the entire Act before us is invalid in its entirety,” according to SCOTUSblog.
The majority, led by Ginsburg, ruled that the requirement to buy insurance is effectively a tax, meaning that Congress can use its taxing power to enforce it, according to SCOTUSblog’s Amy Howe.
"The Affordable Care Act, including its individual mandate that virtually all Americans buy health insurance, is constitutional. There were not 5 votes to uphold it on the ground that Congress could use its power to regulate commerce between the states to require everyone to buy health insurance. However, 5 Justices agreed that the penalty that someone must pay if he refuses to buy insurance is a kind of tax that Congress can impose using its taxing power. That is all that matters," according to Howe. "Because the mandate survives, the court did not need to decide what other parts of the statute were constitutional, except for a provision that required states to comply with new eligibility requirements for Medicaid or risk losing their funding. On that question, the court held that the provision is constitutional as long as states would only lose new funds if they didn’t comply with the new requirements, rather than all of their funding."
