Hatch Applauds House Action on Bill Repealing Job-Killing Medical Device Tax, Restrictions on Flexible Spending, Health Savings Accounts

Utah Senator Pushing Companion Legislation in Senate

WASHINGTON –In a speech on the Senate floor, U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, today applauded House action on the Health Care Cost Reduction Act of 2012, legislation repealing the medical device tax and restrictions on the use of Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) in the purchase of over-the-counter medications which were both included in the President’s $2.6 trillion health spending law.

“The [President’s health] law created a web of unconstitutional, misguided, unrealistic, and costly regulations, taxes, fees, and penalties,” said Hatch. “That web must be pulled down in its entirety, whether by the Supreme Court, or by a Republican Congress and President Romney. There are few policies more emblematic of that law’s failures than the medical device tax and restrictions on the purchase of over-the-counter medications, and I commend my friends in the House for repealing them today.”

The Health Care Cost Reduction Act of 2012 includes two provisions championed by Hatch in the Senate. Hatch has fought to put an end to the 2.3 percent excise tax imposed on medical device manufacturers to help pay for the health law. The Hatch bill, S. 17 would immediately repeal the job-killing medical device tax (S. 17) which is set to take place in January 2013.

“With this excise tax, even unprofitable firms will be responsible for a 2.3 percent tax on devices,” Hatch said. “It is difficult to overstate the damage to patients and our economy that this tax will wreak. According to one analysis, this Obamacare tax will kill between 14,000 and 47,000 jobs.”

Hatch has also introduced the Family and Retirement Health Investment Act (S. 1098), which includes a provision to repeal the limitations on the purchase of over-the-counter medication.

“When President Obama and his allies touted the virtues of this law, they mentioned increased access and lower costs,” Hatch noted. “Yet to pay for the law’s coverage expansions, they included this medicine cabinet tax, which will do nothing but burden medical providers, undermine access to health care, and increase costs for patients and businesses.”

This Congress, Hatch has also supported legislation to repeal the law in its entirety as well as introduced legislation to repeal the unconstitutional individual mandate (S. 19) and the job-crushing employer mandate (S.20).

Below is the text of Hatch’s full speech delivered on the Senate floor today:

Mr. President, today the House of Representatives will vote on the Health Care Cost Reduction Act of 2012.  I want to say a few words about this bill, which repeals two of the more counterproductive — of many — components of the President’s health care law.

Specifically, it repeals the restrictions on the use of FSAs and HSAs in the purchase of over-the-counter medications, as well as the medical device tax.

I want to thank my colleagues in the House for advancing this legislation.  Repeal of the onerous OTC restrictions and the device tax are priorities of mine.  I have introduced legislation that specifically repeals the medical device tax, and my bill — the Family and Retirement Health Investment Act — includes a repeal of the limitations on the purchase of over-the-counter medication. 

Others in the Senate, including my friend and colleague, Senator Hutchison, have also been working to repeal the OTC restrictions.  And my friends from Massachusetts and Pennsylvania, Senators Brown and Toomey, have been strong advocates for repeal of the medical device tax.  I appreciate working with them, and all members, who are committed to repeal of the President’s health care law.

I appreciate the hard work of Chairman Camp and Speaker Boehner in moving the Health Care Cost Reduction Act through committee and to the floor.  And I want to thank in particular the hard work of my friend Congressman Erik Paulsen of Minnesota.  We have partnered on both the OTC repeal and the medical device repeal, and he has been tireless in fighting not only for his constituents but for all Americans who are burdened by these misguided policies.

Despite some weak protestations to the contrary from the White House, neither of these provisions serve any health policy purpose.  They exist for one reason — to bankroll the $2.6 trillion in new spending that is the real soul of Obamacare.

There is no good that can come of Obamacare. 

The bad and ugly are plenty, however.

The restriction on the purchase of over-the-counter medications — what some have called a medicine cabinet tax — inconveniences patients and busy families, increases burdens on primary care providers, reduces patient choice, and may actually increase health care utilization and spending.

So much for bending the cost curve down.

And the medical device tax, in addition to harming patients, is a job-killer at a time when our country needs all the good jobs it can get. Together, they are also clear violations of the President’s pledge not to raise taxes on families making less than $250,000 a year.

With respect to the restrictions on the purchase of over-the-counter medications, Obamacare now requires the holders of Health Savings Accounts and Flexible Spending Arrangements to obtain a physician’s prescription before using those accounts to purchase over-the-counter medicine.

In some respects this policy more than any other represents the incredible arrogance and wrongheadedness of the President’s signature domestic achievement.

When President Obama and his allies touted the virtues of this law, they mentioned increased access and lower costs.

Yet to pay for the law’s coverage expansions, they included this medicine cabinet tax, which will do nothing but burden medical providers, undermine access to health care, and increase costs for patients and businesses.

It is worth noting that in yesterday’s Statement of Administration Policy announcing President Obama’s opposition to the House bill, they did not even describe this provision in detail, much less defend it.

It seems clear to me that the Administration is embarrassed by this tax on patients. And they should be.

A study from the Consumer Health Products Association determined that 10 percent of office visits are for minor ailments, and 40 million medical appointments are avoided annually through the self-care enabled by over-the-counter drugs.

According to a study by Booz and Company, the availability of these over-the-counter medications saves $102 billion annually in clinical and drug costs.

Yet, Obamacare deliberately restricts their availability.

With respect to the medical device tax, we all know how bad this policy is. 

I am sure that the President knows how bad this policy is.

But he and his allies continue to defend it.

Beginning next year, Obamacare imposes a tax on the sales of medical devices makers. 

Not the profits.

The sales.

With this excise tax, even unprofitable firms will be responsible for a 2.3 percent tax on devices.

It is difficult to overstate the damage to patients and our economy that this tax will wreak.

According to one analysis, this Obamacare tax will kill between 14,000 and 47,000 jobs.

According to another analysis by Benjamin Zycher, it will reduce research and development by $2 billion a year.  The resulting collapse in innovation will undermine care for not only the elderly, but all patients.  Zycher has determined that the effect of this tax will be one million life-years lost annually.

Between 1980 and 2000, new diagnostic and treatment tools, such as improved scanners, catheters, and tools for minimally-invasive surgery, helped increase life expectancy by more than three years. Medical devices helped to slash the death rate from heart disease by a stunning 50 percent and cut the death rate from stroke by 30 percent.

From 1980 to 2000 the medical device industry was responsible for a 4 percent increase in U.S. life expectancy, a 16 percent decrease in mortality rates and an astounding 25 percent decline in elderly disability rates according to a study by MEDTAP International.

Why on earth would anyone vote for a targeted tax on an industry that provides such enormous value and security to patients? For those who vote against repealing this tax today, and stand against its repeal in the Senate, it is worth recalling last week’s jobs report.

In the month of May, our economy created only 69,000 net new jobs. That is pathetic.  It is barely keeping up with population growth, much less digging us out of our jobs deficit.

I think there is little doubt that the mere threat of this tax on medical devices is contributing to these paltry numbers.  In other words, this tax is undercutting a key industry, creating deep uncertainty, and hindering job creation.

Since President Obama signed this tax into law, the dollar amount of venture capital invested has declined more than 70 percent.  The $200 million raised last year is the lowest level of medical device start-up activity since 1996.

This industry is one of the engines of our economy.  According to the Lewin Group, the medical technology industry contributes nearly $382 billion in economic output to the U.S. economy every year.  In 2006, it shipped over $123 billion in goods, paid $21.5 billion in salaries to 400,000 American workers, and was responsible for a total of two million American jobs.  

It pays its employees on average $84,156 — 1.85 times the national average.  And more than 80 percent of medical device companies are small businesses employing 50 people or less. 

Yet this is the industry that President Obama decided to target? This is the industry that every Senate Democrat voted to tax when Obamacare passed the Senate? There are over 120 medical device companies in Utah, and let me tell you, they know what is going to happen if this tax goes into effect.

And it is not going to be pretty. I think that the President must know this.  He and his advisors must know what a disaster the medicine cabinet tax and the medical device tax are as both fiscal and health policy.

But yesterday, they doubled down on them. Their Statement of Administration Policy threatened a veto of the House bill. It is clear to everyone that the USS Obamacare is a sinking ship. But the President seems committed to going down with it. Obamacare needs to go. All of it.
 The law created a web of unconstitutional, misguided, unrealistic, and costly regulations, taxes, fees, and penalties. That web must be pulled down in its entirety, whether by the Supreme Court, or by a Republican Congress and President Romney.

There are few policies more emblematic of that law’s failures than the medical device tax and restrictions on the purchase of over-the-counter medications, and I commend my friends in the House for repealing them today.

 I yield the floor.

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