Even liberal firebrands Sens. Elizabeth Warren and Ed Markey have spoken out against the tax. Obscure tax tops Obamacare repeal agenda

An obscure Obamacare tax on medical devices has emerged as the Republicans’ best chance of repealing part of the health care law this year.

The tax may not be what ordinary Americans who oppose Obamacare focus on — or even know about.


But a massive, sharply focused lobbying campaign, combined with a lucky concentration of medical device companies based in Democratic states like Massachusetts and Minnesota, explain why the 2.3 percent tax on the sale of devices including pacemakers and artificial joints has gained special status. It stands apart from dozens of new taxes and fees in the health law and more widely vilified provisions like the individual mandate.

“Repeal of the device tax already has strong bipartisan support,” Stephen Ubl, CEO of the industry’s largest trade group, AdvaMed, said last week, citing Democratic sponsors of repeal bills introduced last month. “House and Senate leadership have prioritized action on these repeal bills in 2015.”

An overwhelming but nonbinding bipartisan Senate vote to repeal the tax in 2013, prior House votes to scrap it and the fact that getting rid of the device tax has endured as a top anti-Obamacare priority for the new GOP majority is a testament to the lobbying campaign that began before the device tax was even enacted.

House passage under the newly expanded GOP majority is practically guaranteed. The fight has always been in the Senate — and that’s where it’s playing out. Plenty of Senate Democrats would vote for repeal in theory. But some insist on finding a way to make up for the estimated $26 billion hole that repeal would leave in Obamacare financing over the next 10 years. And there’s no agreement on whether or how to do that.

Even Sens. Elizabeth Warren and Ed Markey, liberal firebrands from Massachusetts — a device industry stronghold where Boston Scientific is based — have spoken out against the tax. But neither has signed onto a bill. Markey has proposed eliminating tax breaks for oil companies as a pay-for — a nonstarter with Republicans.

Yet the lobbying has momentum. The geography of the device industry helps. One of country’s largest medical device makers, Medtronic, is based in Minneapolis, and Democratic Minnesota Sens. Amy Klobuchar and Al Franken have led efforts to build support for repeal on their side of the aisle. They’ve sponsored a bill, along with Democrats Bob Casey of Pennsylvania, Joe Donnelly of Indiana and Jeanne Shaheen of New Hampshire and five Republicans.

“It’s one of those things — every state and every congressional district has got kind of a cool company that does really innovative things,” said Sen. Sherrod Brown (D-Ohio), who opposes repeal. “Republicans are looking for parts of the health care law they can attack, and it’s a tax, and everybody hates taxes, and I think it’s kind of the perfect storm for all that.”

If all 54 Republicans would vote for the bill, that would give it 59 votes off the bat — one shy of the 60 ultimately needed for passage in the Senate — that is, assuming there’s agreement on how to pay for it.

Franken, too, says he wants “a responsible offset,” according to his office, and the pay-for challenge has proponents considering whether it should be part of a larger package of legislation, not a focused quick hit against an Obamacare provision. Klobuchar suggested it might fit into a bigger tax bill.

“My colleagues and I are continuing to work on finding a way to pay for the repeal, and I also continue to believe this could be done as part of comprehensive tax reform,” Klobuchar said in an emailed statement.

The medical device industry was just one of several health care sectors that were tapped to fund Obamacare, along with drug companies, hospitals and health insurers. The rationale was that they all stood to benefit from massive health coverage expansion and closing the Medicare prescription drug “donut hole.” But the device industry contribution is the only one that Congress has put on the table.

Initially, the medical device tax was proposed to bring in $60 billion over 10 years. The industry fought it from the outset, and resistance from its Democratic allies effectively cut the total in half, changed it from a set amount to a percentage of sales — and allowed the device companies to deduct the Obamacare-related fees from their taxes.

But unlike the hospitals and insurers, for instance, which have a host of priorities when it comes to Obamacare, the medical device industry has remained single-mindedly focused on repealing the tax.

Health insurers have been complaining about a far larger tax on their plans that began this year — one expected to raise about $100 billion over 10 years. They are a powerful voice in Washington — but their campaign hasn’t gained as much traction.

“The insurers, the hospitals, they have so many issues that they have to balance,” a Republican lobbyist said. “It’s simpler for the device industry.”

The medical device lobbyists argue that unlike other sectors that were included in Obamacare negotiations and received explicit benefits from the insurance expansion, device manufacturers don’t stand to gain from it because they sell primarily to seniors who are already insured by Medicare.

On Wednesday, AdvaMed estimated that 39,000 jobs over five years would either be lost to slower growth or eliminated due to the tax. A survey of its members found that research and development has suffered at over half of manufacturers, too.

Some policy experts and fact-checkers have sharply challenged the industry claims, and the Congressional Research Service predicted the tax would have “fairly minor effects,” with output and employment in the industry falling no more than 0.2 percent.

But AdvaMed has been adept at getting out that job-killer message. The group spent about $2.4 million in 2013 and again in 2014, about 60 percent more than the roughly $1.5 million spent in each of the two years before that.

“It’s been just straight up educating policymakers about the fundamental flaws of the policy and the impact that it’s had on the industry,” J.C. Scott, the top lobbyist at AdvaMed, said of the effort.

David Nexon, AdvaMed’s domestic policy director, is the former Democratic staff director for the Senate Health, Education, Labor, and Pensions Committee and was a longtime health adviser to the late Sen. Ted Kennedy. Republican and Democratic lobbyists said Nexon has played a major role in shaping the bipartisan strategy.

And AdvaMed is by no means the only voice for medical device companies on the Hill. In fact, the trade group represents a small fraction of the industry’s lobbying. The industry as a whole has spent over $30 million on lobbying in each of the past four years, according to the Center for Responsive Politics. Medtronic alone spent more than $5.3 million last year — small change given what’s at stake. In 2012, the company estimated it would pay $125 million to $175 million a year because of the tax. Medtronic did not respond to calls for comment.

Because the tax is just a mechanism for paying for Obamacare and not essential to its broader aims, repeal is an easier sell. Democrats who back the Affordable Care Act couldn’t tolerate repealing any core component, like the individual mandate, that would undermine the goals of covering millions of Americans and making the insurance market work better. But they can dislike a tax that hurts industries back home.

“It’s very easy for proponents of the Affordable Care Act to support medical device tax repeal but still be for the primary aims of the law,” said Larry Levitt, senior vice president at the Kaiser Family Foundation.

But some Obamacare advocates bristle at the idea that the device industry should be exempt from contributing. They worry it will embolden other industries to try to recoup their contributions — unraveling the fiscal foundation of the health law.

Erin Mershon contributed to this report.