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Minnesota Democrats Want to Repeal Medical Device Tax

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ST. PAUL, Minn. (AP) — Democrats in Minnesota’s congressional delegation are in a bind over a bill by Republican U.S. Rep. Erik Paulsen to eliminate a tax on medical devices like those made by Medtronic and other Minnesota companies.

The 2.3% tax on devices such as pacemakers and stents would provide $29 billion over the next decade for implementation of the Patient Protection and Affordable Care Act of 2010 (PPACA).  Democrats justify the tax on the grounds that PPACA would expand insurance coverage to 30 million people who were previously uninsured, and with all those new patients, the industry is likely to see demand for its products expand.

But Paulsen said the tax endangers 35,000 jobs in Minnesota and thousands more elsewhere. His bill to repeal it has 240 co-sponsors, including 11 Democrats, and it’s expected to get a vote later this week.

House leaders appear to be preparing to send the bill to the floor in a package that will include several bills that would affect flexible spending accounts (FSAs) and health savings accounts (HSAs). One of the bills, H.R. 1004, could eliminate the requirement that FSA holders forfeit any account balances that remain unused at the end of the plan year.

“A lot of Democrats, they’re fearful to acknowledge that the new health care law has a lot of imperfections, and privately they’ll tell you there’s a lot of problems with it,” Paulsen told Minnesota Public Radio.

Democratic U.S. Sens. Amy Klobuchar and Al Franken support repealing the tax.

“I realize that cutting the tax would mean less money for the health care bill,” Klobuchar said at a medical industry event last week. She said the medical device tax was added to PPACA.

But that’s not quite what happened back when Congress hammered out the plan, said Paul Van de Water, a fellow at the liberal-leaning Center for Budget and Policy Priorities.

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“The industry was negotiating for a form of the tax which they thought was better, and they in fact got one,” Van de Water said. He said the industry now wants a better deal: No tax at all.

Democratic Rep. Tim Walz said he’s sensitive to the industry’s opposition, but he considers the tax a key funding mechanism for PPACA.

“My concern on this is, OK, so you repeal this, but no one has health care — who’s going to buy the devices?” Walz said. “How are you going to make any money if no one has health care or can afford them? It doesn’t make any sense.”

Democratic Rep. Betty McCollum opposed the tax before the bill passed, but she now wants to know how Republicans will pay for the $29 billion cost of repealing it. She said she would support repealing the tax if Republicans offer an offsetting budget cut she could support.

Late last week, House Republican leaders proposed to pay for the tax cut by trimming some subsidies designed to make health insurance affordable for middle- and low-income residents.

Staffers for the House Ways and Means Committee, which first examined the plan in April as a potential budget-saving measure, testified that it could result in 350,000 fewer people gaining insurance under PPACA. But Republicans argue that the measure does nothing more than make sure people don’t get benefits to which they’re not entitled.

It remains to be seen how the new GOP plan will be received in the Democratic-controlled Senate. Spokepeople for Klobuchar and Franken said they hadn’t seen draft language but were reviewing the plan over the weekend.

Klobuchar spokesman Linden Zakula told the Star Tribune that the senator “will look at any and all proposals to get this done.”