Doctors To Face Massive New Taxes And Fees Under Congressional Health Bill

Oct 30, 2009 22 Comments ›› Pat Dollard

WASHINGTON (AP) — The health care overhaul bill produced by House Democrats would impose an array of new taxes, fees and government mandates on major players in the health industry, including insurers, doctors and drugs and medical devices makers.

In most cases, the pain has been meted out with an eye toward raising the money needed to finance President Barack Obama’s plan for reshaping the health system but also with careful regard for gaining the votes that will be needed to pass a final bill.

Democrats hope to vote next week on the measure, which would extend health coverage to tens of millions of Americans who don’t have it, impose sweeping new restrictions on private insurers and create a government-run insurance plan to compete with them.

Among the industries targeted in the bill are medical device makers — one of the few that failed to cut an early behind-the-scenes deal with Obama and Democrats to help pay for an overhaul. The House added $20 billion in taxes on sales of medical devices like artificial hips and heart stents to the legislation Democratic leaders unveiled Thursday.

That’s more than the industry wants to pay, but it’s a substantial reprieve from an earlier plan in the Senate to slap a $40 billion fee on medical device makers. Senate Majority Leader Harry Reid, D-Nev., has agreed to slash the fee, in part to win cooperation from fence-sitting Democratic Sen. Evan Bayh of Indiana.

Bayh, whose state is home to prominent medical device makers, including Zimmer Holdings Inc., Biomet and DePuy Orthopaedics Inc., is one of a handful of wavering Democrats whose support will be vital to getting to the 60 Senate votes necessary to advance the health overhaul. That means he and other holdouts have disproportionate power to cut deals on behalf of favored industries that are bracing for major costs under the new system.

Stephen J. Ubl, the president of AdvaMed, the trade group representing large medical device makers, said the group appreciates House leaders’ decision to include the smaller version of the tax and is “grateful for the efforts” of Bayh and others to do the same in the Senate. In a statement, Ubl seemed to indicate that his group was willing to go along if Congress helped cushion the blow.

“We look forward to working with Congress and the administration on critically important implementation issues,” Ubl said, including seeking AdvaMed priorities such as delaying the tax until 2013 — which the House measure does — tying it to specific products, exempting small companies with less than $100 million in annual revenue and making it deductible.

The measure is less kind to drug makers, an industry that did strike a deal with Obama and key senators to hold down its costs. Pharmaceutical companies agreed to cough up $80 billion in the health overhaul. While precise figures were not immediately available, it appeared the House legislation would target the industry for much more. And it would give the government power to negotiate drug prices on behalf of Medicare beneficiaries.

Ken Johnson of the trade group the Pharmaceutical Research and Manufacturers of America said lawmakers were being “unrealistic in their expectations of what our industry can contribute to health care reform without triggering catastrophic job losses and driving innovation and business overseas.”

The $80 billion figure “is a huge amount of money — it’s not loose change we found sitting around in the sofa,” said Johnson, who added that the drug makers would be busy in the coming days contacting House and Senate leaders “trying to educate them” on how damaging further cuts would be.

On the other hand, the industry managed to come away with a provision worth billions: 12 years of market protection for high-tech drugs to combat cancer, Parkinson’s and other deadly diseases.

Health insurers, who would gain tens of millions of new customers under the health plan, nonetheless would be ensnared by some potentially costly new measures, including eliminating their long-standing antitrust exemption.

They voiced particular concern about Democrats’ inclusion of the government-run insurance plan. Karen Ignani, the chief of the insurers’ main trade group, America’s Health Insurance Plans, said the so-called public option would “bankrupt hospitals, dismantle employer coverage, exacerbate cost-shifting from Medicare and Medicaid, and ultimately increase the federal deficit.” She said the result would be that many people, including seniors, would lose coverage or face higher costs.

The measure also drops a reprieve for doctors from scheduled pay cuts for treating Medicare patients, which House leaders now plan to pursue separately from the broader health bill. The Senate last week turned back an attempt to pass the pay-raise on its own at a cost of $247 billion over the next decade — sidetracking what the American Medical Association has made a key priority in the health overhaul negotiations.

But doctors, hospitals and other providers won a key concession that would let them negotiate rates with the Health and Human Services Department for services provided in the government insurance plan. Key Democratic moderates whose votes were needed to pass the plan insisted on that approach, at the urging of hospitals in their districts. Liberals wanted rates to be dictated by the government, which would have been less costly.

Chip Kahn, the president of the Federation of American Hospitals, cheered the bill, saying it moves toward “a market-based health system.”