Healthcare Business News

Gearing up

Industry groups take aim at ACA's funding

By Jaimy Lee and Rich Daly
Posted: November 17, 2012 - 12:01 am ET

The Nov. 6 election appeared to eliminate doubt that the Patient Protection and Affordable Care Act is here to stay, but industry groups are gearing up to lobby against provisions that help pay for the rest of the law.

The medical device industry wants to kill a provision that will require manufacturers to pay a 2.3% tax on the sales of devices starting Jan. 1.

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Health insurers and an alliance of business groups want to kill a tax on health insurers' net premiums that is expected to go into effect in January 2014.

Hospitals want to roll back cuts to Medicaid disproportionate-share payments now that it's uncertain whether states will expand Medicaid eligibility as the law envisions.

The provisions were considered the industries' contributions to financing the Affordable Care Act. “It was the grand bargain,” said Curtis Rooney, president of the Healthcare Supply Chain Association. “It was part of healthcare reform.”

HSCA, as well as several groups representing hospitals, have expressed concern that the device excise tax will be passed through to hospitals and purchasers of medical devices and would lead to higher healthcare costs. They requested that the Internal Revenue Service require manufacturers to certify that they have not included the tax in the price of their products. The IRS has yet to issue the final regulations.

The Advanced Medical Technology Association last week released a new industry-funded report that found devicemakers will have an additional excise tax liability of $2.5 billion next year. About 800 companies, meanwhile, sent a letter to Senate leadership urging repeal, and executives from 52 medical technology device companies flew to Washington to lobby lawmakers.

“The device tax no longer has anything to do with the debate over the Affordable Care Act,” AdvaMed President and CEO Stephen Ubl said in a news release.

During a call with reporters, an AdvaMed official said the organization is seeking to attach repeal language to budget deficit legislation, calling it “tax policy, not healthcare policy.

It's a strategy that the groups fighting the insurance premium tax are also taking.

During an investor event last week, Heidi Margulis, Humana's senior vice president of public affairs, cited bills in the House and Senate that would repeal the tax, as well as new opportunities in the lame-duck session and during budget deficit discussions.

“The premium tax would be on the table,” Margulis said. “There are a number of things that could be considered, both legislatively and through executive discretion with regard to the tax. In a grand bargain, everything's on the table.”

Employer groups are also continuing to push for changes to the premium tax, according to a spokesman for Stop the HIT, a coalition of employer groups that was formed in May 2011 to repeal the premium tax and is planning a campaign. The National Federation of Independent Business, which led one of the legal attacks that landed the reform law before the U.S. Supreme Court, is a leading funder.

Neither tax is likely to be repealed, said Paul Van de Water, senior fellow with the Center on Budget and Policy Priorities, a liberal research and policy institute. “If you get rid of either or both of these taxes, you need to make up for it somewhere else,” he said.

The Obama administration has not indicated it would support a repeal of either provision, which would create a funding shortfall for the law.

The healthcare law's cuts in Medicaid disproportionate-share hospital payments remains a major focus of hospital advocates, although a major legislative push may not come until next year.

Hospitals—especially safety net facilities—have long opposed the cuts but accepted them with the understanding that the healthcare law would reduce the number and costs of uninsured patents they treat by requiring states to cover millions of more Americans under Medicaid. The number of states that will do so became unclear after the Supreme Court concluded HHS can't penalize them for declining the expansion.

Hospital leaders said they plan to launch a legislative push to reverse DSH cuts next year if states go through with their threats not to expand their Medicaid enrollments. In the meantime, hospital lobbying efforts on Medicaid will target state governments.

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