Pundits are again speculating about the future of the Affordable Care Act, more widely now referred to as Obamacare. Now that Republicans are poised to take over the Senate in January, while widening their control of the House, they are feeling emboldened to continue chipping away at Obamacare, including its 2.3% medical device excise tax provision.
The Supreme Court last Friday also agreed to hear a new case that could limit the scope of the legislation. The case, King v. Burwell, will determine whether the federal government can offer insurance subsidies to citizens of the states that preferred not to create their own insurance exchanges.
As for the medical device tax, Senators Orrin Hatch (R-UT) and Amy Klobuchar (D-MN) have long opposed the tax, and have again prioritized repealing it. When Hatch takes over as chief of the Senate Finance Committee, he is expected to begin work to repeal the tax soon thereafter.
Another factor contributing to the renewed attention given to the medical device is a recent report from the Congressional Research Service, which finds it to be an inefficient fundraising mechanism. As the report notes:
Viewed from the perspective of traditional economic and tax theory, however, the tax is challenging to justify. In general, tax policy is more efficient when differential excise taxes are not imposed. It is generally more efficient to raise revenue from a broad tax base. Therefore excise taxes are usually based on specific objectives such as discouraging undesirable activities (e.g., tobacco taxes) or funding closely related government spending (e.g., gasoline taxes to finance highway construction). These justifications do not apply, other than weakly, to the medical device case. The tax also imposes administrative and compliance costs that may be disproportionate to revenue.
Republicans are pressuring incoming Senate majority Mitch McConnell (R-KY) to push for a repeal of Obamacare entirely, after the government shutdown in 2013 failed to accomplish that goal. The next mode to push for a repeal could be the budget reconciliation process, which some Republicans are pushing for even though Obama would, of course, veto it.
Still, McConnell, has made plain his distaste for a number of provisions in the legislation and will perhaps work to repeal provisions of the legislation in a piecemeal fashion. "There are pieces of [Obamacare] that are deeply, deeply unpopular with the American people," he said. "The medical device tax, which has exported an enormous number of jobs. The loss of the 40-hour work week. Big, big mistake."
