First came the medical device makers and now the plastic surgeons. Both groups have a problem. You see, Congress wants to slap a tax on medical devices—things like insulin pumps and heart valves. Senate bill drafters expected the tax to produce some $40 billion in revenue over ten years to help fund subsidies for the uninsured. But thanks to successful lobbying by the industry, obliging members of Congress lowered the tax so it will produce only $20 billion over the next decade. A five percent tax on cosmetic surgery for procedures like tummy tucks, breast augmentation, and Botox injections could add about $5 billion to the kitty for the uninsured.
What do you do when you have a problem like this, especially one that has a built-in outrage factor? You go to the press, and see if you can stir up even more fury among those who will be affected by the tax—users of insulin, those needing wheelchairs, and hearing aids, workers who might lose their jobs, and of course, those ladies needing tummy tucks and shots of Botox to make their bodies more youthful-looking.
The device makers went on the offensive earlier this fall. USA Today reported that the industry had launched a lobbying blitz to kill the tax, and all of a sudden stories started appearing in hometown papers where device makers are located. A story in the Post-Star, which covers the Adirondack region in upstate New York, led its story this way:
A proposed new tax on the medical device industry to pay for health care reform is excessive and would stifle innovation and could threaten local jobs, industry officials said.
The CEO of Navalyst Medical, which employs some 700 people and operates a plant in the paper’s home base of Glens Falls, said the tax would eliminate “thirty percent of the income of the industry in one stroke of a pen.” Those sentiments were shared by others quoted in the story, which clearly represented the industry’s point of view. There were threats to raise prices, move operations overseas, cut back on R and D, and a quote from Congressman Scott Murphy, who didn’t think “this is the right place for us to go to fund health insurance reform” and vowed “we’re going to work to make sure it doesn’t happen.”
The Warsaw Times-Union, in northern Indiana, reported the story from the viewpoint of the Warsaw/Kosciusko County Chamber of Commerce. The news: the Chamber’s board of directors voted unanimously to send a letter to federal officials from the local area opposing the tax. It turns out that three of the five major U.S. manufacturers of hips, knees, wrists, shoulders, and other devices are located in Kosciusko County.
Minneapolis-based Medtronic also took to the streets with its tax-will-kill-jobs message, and it worked. The company issued a news release praising Minnesota senators Amy Klobuchar and Al Franken: “Senator Klobuchar, in particular, has worked tirelessly with her colleagues in the Senate to advance healthcare reform and minimize the negative effects such as a tax could have on the medical device industry.” The threat to jobs has “resonated with people,” Medtronic CEO Bill Hawkins told The Wall Street Journal. It always does.
The plastic surgeons are hoping to do the same. Kaiser News Service gave them some ink—a story with the headline “Plastic Surgeons Cry Foul Over ‘Botax’ Proposal In Senate Health Bill”—and then featured this quote from the president-elect of the American Academy of Cosmetic Surgery: “You’d be surprised how price sensitive people are to this. It’s a tax against women and the baby boomer generation having these procedures.”
The Kaiser piece may have inspired a similar story in The New York Times, which seemed to give the plastic surgeons all they could hope for. The Times reported that the proposed tax “has outraged plastic surgeons,” who think they are being singled out because of an outdated perception that people who have cosmetic procedures are rich—when in fact, the paper said, internal surveys done by the American Society of Plastic Surgeons show that sixty percent of their members’ patients earn less than $90,000 a year.
The Times went on, letting Dr. Phil Haeck, president elect of the Society, argue that the recession has caused fewer people to seek liposuctions and tummy tucks and that “a tax might exacerbate those declines.” Dr. Haeck raised the specter of ladies crossing the border to Mexico or even going to Thailand for their procedures and taking business away from American doctors. The jobs thing again!
The paper of record added a new twist to the discussion by bringing in the discrimination-against-women argument from the president of the National Organization for Women. She argued that many women who have lost their jobs might be considering cosmetic surgery in order to impress potential employers. Said NOW President Terry O’Neill: “And now they are going to put a tax on middle-aged women in a society that devalues them for being middle aged?”
Okay—so what’s the real story? If revenue from a tax on devices has already been sliced in half, the cosmetic surgeons may yet win, and we know that the soda tax is dead, where will the replacement revenue come from—and who will bear the burden of the tax? Ordinary citizens who don’t have big lobbyists and media organizations to help them out? And if that lost revenue isn’t found to help finance the subsidies, does that mean that people required to buy health insurance will have to pay more of the premiums themselves?
This is the money story to watch in the next few weeks as interest groups, some special and some not so special, will be working the backroom deals. We already know there may be a further push to reduce the tax on medical devices. In return for going along with the House version of the reform bill, Rep. Baron Hill of Indiana and Rep. Dan Maffei of upstate New York got a promise that Democratic leaders would work to reduce the House’s 2.5 percent tax on the devices. Just where the tax ends up—if it ends up anywhere at all—is a good lobbying story for reporters to follow. But please make sure to answer the question: Where will the money come from?