House panel proposes repeal of revenue provisions used to support health reform

Republicans aim to remove a new tax on medical device sales and ease restrictions on health spending accounts.

By Charles Fiegl amednews staff — Posted June 7, 2012

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A House committee approved measures to repeal a new tax on medical devices and prescription requirements for over-the-counter medicine purchased with tax-preferred accounts.

The approvals set up action on the House floor in early June to eliminate these revenue provisions that fund national health system reforms. Following a May 31 markup session, the House Ways and Means Committee approved bills, with backing from some Democrats, that supporters said would remove an undue tax burden on the medical device industry and improve health-related spending accounts.

If not repealed, a 2.3% tax on manufacturers on the sale of medical devices would begin in 2013. Certain retail items such as eyeglasses, hearing aids and other devices available to consumers are not subject to the excise tax. But the sales of medical devices, such as orthotic implants, would be taxed. The extra costs tacked on to device sales would hurt businesses, said Rep. Erik Paulsen (R, Minn.), who sponsored the bill.

“The tax on American innovation will push research, development and manufacturing abroad and put tens of thousands of American jobs at risk,” Paulsen said. “Small startup companies will be hit especially hard, because the tax will be levied regardless of profitability.”

Democrats on the committee objected to what they said were Republican efforts to dismantle provisions in the health reform law. Rep. Sander Levin (D, Mich.) said there are more pressing issues, such as a broken Medicare physician payment system, that deserve the committee’s attention.

Patching Medicare doctor pay “would cost about $20-$25 billion for a one-year fix, which is much less — for a much more pressing issue — than the nearly $42 billion before us today,” he said.

The 33 million Americans using flexible spending, health savings and other similar tax-preferred accounts have not been able to use them as intended, said Rep. Diane Black (R, Tenn.). The reform law required that over-the-counter medicine, other than insulin, be prescribed by a physician for the medicine to be considered a medical expense eligible for purchase with the accounts. Since 2011, patients have needed prescriptions to purchase common cold and flu medicines, allergy medicines, pain relievers, and antacids using money from tax-preferred accounts.

The American Medical Association has supported repealing the health savings account provision. The accounts should improve access and save money, but the change has forced patients to schedule office visits with physicians solely to obtain prescriptions for over-the-counter drugs, according to the Association.

“Many physicians require patients to schedule an appointment before prescribing any medication, so that they can examine the patient, determine whether a medication is appropriate, and counsel the patient about possible side effects and drug interactions,” the AMA said in an April 25 statement to the committee. “This increased demand on their time means less time and attention to other patients with more urgent treatment needs and results in increased costs to patients, who are charged for an office visit.”

Rep. Charles Boustany Jr., MD (R, La.), also received support from his colleagues to remove part of the “use-or-lose” policy from flexible spending arrangements. His bill would allow account holders to cash out up to $500 of unused funds at the end of the year. Currently, patients forfeit the remaining balance.

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