Can A Medical Device Tax Repeal Prevent The U.S. Government Shutdown?

The U.S. government is on the verge of a historic shutdown, and the medical device excise tax just may be the key to stopping it.

In case you’ve been living in a cave for the past month (with no wireless service), you’ve probably heard that major parts of the federal government will begin shutting down at midnight tonight unless Congress can pass a temporary spending bill. The government shutdown would be the first in the U.S. in 17 years, and would place hundreds of thousands of federal workers on unpaid leave and potentially deal a major blow to the delicate economy.

Over the past several days, the much-maligned medical device tax has been at or near the center of the debate. On Saturday, the Republican-led House of Representatives passed a bill that would effectively trade funding the federal budget through December 15 — avoiding a government shutdown — in exchange for a one-year delay of the Obamacare health care reforms and a repeal of the 2.3% device tax.

Well, the Democrat-run Senate wasn’t having any of it. As promised, it rejected both measures of the House bill this morning in a 54-46 vote split along party lines. So, with just hours left before the midnight budget deadline, it’s once again the House’s move to keep the government up and running. Or is it? Have we arrived at a stalemate?

Senate Democrats are on the record as saying they will not agree to a delay of Obamacare or a repeal of the device tax under this sort of duress. And House Republicans insist that their willingness to see an automatically triggered government shutdown through is more than mere posturing.

According to an article on the Los Angeles Times website, the House is mulling several options to break the deadlock. Some members want to continue targeting Obamacare and the device tax, an approach that seems doomed to fail. Others are suggesting a proposal to do away with employer-provided subsidies members of Congress receive to offset the cost of premiums sold in online insurance exchanges (which, coincidentally, are due to launch tomorrow). Another option would be to pass a measure to fund the government for another week, essentially granting a very short stay of execution — and buying the sides another week to continue their skirmish.

Not to marginalize a potential government shutdown, but irrespective of how this one plays out, I’m sure we haven’t heard the last of device-tax repeal rhetoric.  The tax is wildly unpopular within the medical device community, and even outside it. Trade organizations like AdvaMed and the Medical Device Manufacturers Association (MDMA) have leveled a steady stream of vitriol at the tax since it went into effect earlier this year (and even well before), saying it has and will stymie innovation, kill industry jobs, and ultimately increase health care costs. (Related, former AdvaMed VP John R. Graham wrote an interesting article for Forbes recently, in which he shared evidence suggesting the tax is already causing “significant harm.”) Republicans, in general, can’t stand it. And numerous Democrats have even spoken out against the tax (yielding to the pressure of the device lobby in their states?), and said they would be open to eventually reconsidering a repeal — but not as long as the Republicans use it to hold the budget hostage.

President Obama, on the other hand, has repeatedly said he’s unwilling to budge on the device tax, under any circumstances. The tax is expected to raise nearly $30 billion in revenue for a government struggling under the weight of immense debt, and the White House maintains that the medical device industry must be patient, that it will ultimately reap the benefits of tens of millions of new “customers” expected to flood the market thanks to Obamacare’s insurance coverage.

So don’t look for the medical device tax to be repealed tonight, or even by next week (should a stopgap measure be reached). But do expect it to continue rearing its ugly head in Washington in the weeks and months to come. Stay tuned…

What are your opinions the device tax and its role in the budget negotiations. Share your opinions in the Comments section below.