With GOP efforts to gut the Affordable Care Act on the verge of derailing, healthcare industry groups seeking repeal of ACA taxes on their members are looking to hitch a ride on a new legislative train.
Some advocates of erasing those industry taxes, such as the Advanced Medical Technology Association, still hope Senate Republicans succeed in replacing the ACA or simply repealing most of it.
Both measures Senate Republicans will consider next week would wipe out or delay the ACA's taxes on medical devices, health insurance premiums and branded drugs. The Senate's replacement bill, the Better Care Reconciliation Act, would delay implementation of the so-called Cadillac tax on high-value employer plans until 2026.
But healthcare lobbyists say if those bills fail, industry groups will try to attach the tax repeals to other legislative vehicles, such as the bipartisan Food and Drug Administration user fee legislation, reauthorization of funding for the Children's Health Insurance Program, the 2018 omnibus budget bill, the Medicare extenders package or broader tax reform legislation.
Each of those paths has its own political and procedural challenges, however. Bills that must go through congressional committees with jurisdiction over taxes are seen as a potentially more viable route under congressional rules.
“We'll let it play out for the next couple of days and see what the Senate does,” said Scott Whitaker, CEO of AdvaMed, whose group has fought for years to eliminate the 2.3% excise tax on device sales. That levy takes effect again in 2018 after a two-year delay. “But we'll pivot to any moving vehicle. We're not going to give up.”
Bipartisan legislation to stabilize the individual health insurance market is seen as a dark horse option, given the deep divide between Republicans and Democrats over the future of healthcare. Senate Majority Leader Mitch McConnell recently said he would negotiate market repairs with the Democrats if his ACA repeal bill died, and senior Democrats have expressed their willingness to work with him if ACA repeal is dropped.
As part of a market stabilization bill, Democrats might well be willing to trade elimination of some ACA taxes for funding of cost-sharing reduction payments to insurers and new reinsurance mechanisms, political observers say.
But lobbyists acknowledge that adding costly healthcare measures to any of those other bills could create political complications for those measures. “The industry taxes are a little more difficult to repeal outside of healthcare reform,” said Dean Rosen, a veteran Republican healthcare lobbyist.
“It's well within reason that one or more of these taxes could be included in a bipartisan tax reform bill a year from now, but it's a steep road,” said Billy Wynne, a Democratic lobbyist who represents healthcare industry groups. The current repeal-and-replace effort “was definitely their best chance to get this done.”
Still, there is durable bipartisan support for eliminating at least some of the ACA's healthcare industry taxes, which provide revenue for the law's coverage expansions and Medicare benefit enhancements. Democrats have backed repealing the taxes on medical devices, health insurance premiums and high-value employer health plans, which they say increase costs for consumers. The device and Cadillac plan taxes were delayed as part of a bipartisan budget deal at the end of 2015.
AdvaMed argues that the medical-device tax has contributed to the loss of 29,000 device industry jobs nationally since 2013, and has slowed the pace of product innovation. Some are skeptical of that claim, with a 2014 Congressional Research Service study concluding the financial impact of the tax on device firms would be negligible.
Whitaker said since the tax's suspension last year, device companies have used the tax savings to hire staff and restart innovations and projects that were paused due to the tax. “Clearly the tax had a major jobs impact in our industry, and we hope Congress recognizes the urgency of this before getting into the broader tax reform debate,” he said.
America's Health Insurance Plans sent a letter to Senate Finance Committee Chairman Orrin Hatch (R-Utah) this week urging Congress to repeal the health insurance premium tax and the Cadillac plan tax as part of broader tax reform. AHIP said the premium tax has raised the cost of health insurance by more than $100 billion. That tax, delayed for two years, is set to resume Jan. 1.
Repealing those industry taxes would be costly, though, and some lawmakers likely would demand that those revenue losses be offset through spending cuts or new revenue measures. That could block any tax relief.
The Congressional Budget Office projects that repealing the annual fee on health insurance premiums would reduce federal revenue by $144.7 billion over 10 years, delaying the Cadillac tax on employer plans would cost $66 billion, and wiping out the medical-device tax would cost $19.6 billion.
