House ignores veto threat, backs repeal of medical device tax

WASHINGTON – The House on Thursday easily backed repeal of a tax on the medical device industry, which has a strong presence in Indiana.

But President Barack Obama has threatened to veto the bill, which would add more than $24 billion to the deficit over the next 10 years.

The chances the bill can win a veto-proof majority in the Senate are uncertain.

With not all House members voting Thursday, that chamber's 280-140 vote fell one vote shy of a veto-proof majority to repeal the tax, which helps pay for the expansion of health insurance under the 2010 Affordable Care Act.

Indiana's two Democrats opposed repeal, and six of the seven Republicans voted for it. Rep. Luke Messer, R-Shelbyville, did not vote.

Gov. Mike Pence sent the delegation a letter Monday urging representatives to end the 2.3 percent excise tax on medical equipment, such as CT scan machines, pacemakers and artificial hips.

"This industry is vital to Indiana's economy and the health and well-being of people across the nation and world," Pence wrote. "Yet because of the medical device tax, research and development have been reduced, expansion plans have been put on hold, and some manufacturers have moved product lines out of the country."

Pence said the industry employs 20,000 Hoosiers, paying 56 percent more than the average wage in Indiana.

The fees were designed to be a portion of the new profits industries would gain under the ACA from having more customers. But device makers argue that many of the newly insured are younger and healthier and therefore unlikely to need many of their products.

The nonpartisan Congressional Research Service concluded in January the tax would have "fairly minor effects" on the industry, including on jobs. That's because the tax rate is small, about half the medical devices produced are not subject to the tax, and health services aren't as affected by prices as are other goods.

The report also said most of the tax burden would fall on customers buying the products, rather than reducing companies' profits.

Companies that move production out of the country will still face the tax for any products they sell in the United States.

Repeal has been a top priority for the industry and was one of the provisions discussed in 2013 as a way to sweeten the pot for Republicans to end the partial federal government shutdown.

When Republicans won control of both chambers of Congress in the 2014 elections, the industry appeared to gain a stronger negotiating position.

Senate Majority Leader Mitch McConnell, R-Ky., cited repeal as a priority.

Asked specifically about the tax after the election, Obama didn't rule out a change, as he did with other proposed changes to the ACA sought by Republicans. Instead, Obama said he would "take a look comprehensively at the ideas that they present."

The recent White House statement threatening a veto said repealing the tax would give the industry a costly tax break "without improving the health system or helping middle-class Americans."

Email Maureen Groppe at mgroppe@gannett.com . Follow her on Twitter: @mgroppe.