A winning long-term strategy on the medical device tax

The special tax on medical devices, which was created under the Affordable Care Act or ObamaCare, is public policy at its worst, but the solution is not the counterproductive immediate full repeal presently advancing through Congress. 

The 2.3 percent tax on medical device sales drains billions from one of our most important industries, robbing companies of resources and causing the cutting back and shifting jobs outside of the United States.  That’s bad news for the economy, and for all of us who benefit from innovation in health care. 

{mosads}Republicans understandably want to get rid of this destructive tax and prevent the harm it causes the industry, economy, and all of us.  The question is how best to achieve that goal, while also recognizing that the entirety of the law that created that tax is even more destructive, causing medical offices to close, doctors to leave the profession, and higher insurance costs for average American families, constricting our ability to access the doctors we need, making our medical system less personalized, and discouraging innovation through the medical industry.

Many Republicans, and several prominent Democrats like Sen. Elizabeth Warren (D-Mass.) with medical device companies as their constituents, are tempted to repeal the medical device tax on its own.  And, unsurprisingly, the medical device industry is pouring resources – reportedly $30 billion to date — into making the case that conservatives ought to get rid of this tax first, and worry about the rest of ObamaCare later. 

Yet Republicans ought to take a longer view of this battle and craft a smart strategy that does more than just satisfy one interest group.  If they play it right, Republicans can simultaneously mitigate the immediate damage caused by the tax—demonstrating to industry and its backers that they are committed to ultimately rescinding the tax—without either reifying the trope that Republicans care more about corporate contributors than they do about average Americans, or undermining the cause of repealing and replacing ObamaCare in its entirety in 2017 – both of which are at risk with the present approach.

This year, the priority should be to pass a moratorium on the medical device tax that would last until 2017.  That’s a vote that is in line with many GOP members’ previous votes to repeal the tax. A moratorium would spare the medical device industry from immediate and near-term financial harm, while preserving the important policy principle that no special interest should jump ahead in line and be permanently out from under ObamaCare while the law exists.  

This approach would still be a win for the industry, but unlike just repealing the tax now, also for Republicans’ long term goals. 

With a moratorium, unlike repeal, the medical device industry would still be better off, but it would have an incentive to stay engaged in working to roll back ObamaCare completely in 2017.  They would have incentive to support candidates committed to repeal, which—from Republicans’ most crass perspective—is good news in terms of campaign fundraising and also for the industry lobbyists.

In contrast, if Republicans embrace a stand-alone medical device tax repeal, they do no better at preventing the harm caused by the tax than they would under a moratorium, while creating three self-inflicted wounds:

First, doing so impairs the likelihood of repealing and replacing ObamaCare come 2017.  Repeal/replace has no deep-pocketed industry allies outside of the medical device industry.   Remove the tax and it becomes quite likely that the medical device industry will morph into yet another large, well-funded business interest looking to rig ObamaCare’s big government system to their financial benefit. 

Second, Republicans will create a terrible precedent for providing special relief to individual corporate interests.  The insurance industry, courtesy of whom we got the law in the first place, is up next with their own ACA tax relief effort, and others will follow.

Third, attending to these corporate interests will send precisely the wrong message to Americans about the seriousness of the GOP about achieving repeal, or about caring about people like them. And it is seriousness about repeal that served the GOP so well in 2010 and 2014.

Voters understand the importance of long-term strategy.  McLaughlin Associates, on behalf of Independent Women’s Voice and our Bridge to Better project, recently explained this situation as part of a survey of 1,000 likely voters.  Only 22 percent of respondents favored repealing this tax as a stand-alone measure.  The majority instead wanted to suspend the tax but make industry wait for full repeal with the rest of ObamaCare (34 percent), or to leave the tax in place (21 percent).  This preference held true for self-identified Republicans:  Just 29 percent favored a full-repeal compared to 46 percent who favored the tax delay and 10 percent wanted the tax left in place. 

Republican leaders should take note:  It’s understandable to want to make progress, show your commitment to undoing ObamaCare’s damage and to lowering taxes, which has long been a hallmark of the party.  You can achieve all this, but you ought to do so wisely, by embracing a strategy that not only works in the short-term to help just one important constituency, but which helps them without undermining the long-term cause of undoing the most damaging law in history for all Americans. 

Higgins is president and CEO of Independent Women’s Voice. Manning is the director of Health Policy for the same organization.