The funds used as subsidies to help lower and middle class individuals purchase health insurance under the Affordable Care Act (ACA), commonly known as Obamacare, relies on a variety of revenue sources. Perhaps the most unpopular is the medical device tax. Companies which sell a variety of medical equipment to hospitals, doctors and consumers will be required to pay a tax of 2.3% of its gross sales. Medical equipment firms have conducted a vigorous lobbying campaign to get Congress to repeal the tax.
During this fall’s government shutdown, Republicans in Congress sought to repeal, or at least defund, Obamacare. They bet that they could force President Obama’s hand by either shutting down the government – which they did – or refusing to raise the debt ceiling. When the government shutdown failed to achieve either of its stated goals, the Republican Congressmen sought to achieve the less ambitious goal of repealing the medical device tax. In this regard, the Republicans were not alone. Medical device manufacturers can be found in a substantial majority of jurisdictions in the country. Although a chief author of the ACA and chair of the Senate Budget Committee, Senator Max Baucus claims the lobby agreed to the tax when the ACA was legislatively constructed, Democrats and Republicans alike have sought to undo the revenue source.
The geographically-diverse lobby asserts four main reasons why it should be repealed. First, it unduly constrains their company’s profitability. Second, it forces these companies to lay off employees. The more they pay in taxes, the less they have for payroll. Third, companies will set up shop overseas instead of operating here in the United States. And finally, it will hamper the innovation of American companies which will be less inclined to invest in R & D for new medical technology. Ultimately, this powerful lobbying effort failed because the President and the leadership of the Democrats in Congress decided they could not compromise at all when it came to significant provisions of the ACA because, if they did, the whole framework for the law would irrevocably unravel.
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