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Al Franken: why repealing Obamacare is a dumb idea

by The Big E on September 27, 2013 · 11 comments

franken-defund-obamacare-dumb-ideaSen. Al Franken (DFL-MN) took to the floor of the US Senate to speak about repealing or defunding Obamacare. The House passed a continuing resolution (to keep the lights on at the federal government) that defunded it. The Senate passed their continuing resolution without the defunding language.
 
Obviously as a Democrat, he’s a supporter. But he makes a bunch of good points about what Obamacare will do for Minnesotans.
 
And, oh yeah, unlike virtually ALL of the Republican talking points on Obamacare, his statements are true.
 

 
Partial transcript:
 

“The fact is, if the law is repealed, a lot of things Americans like will be taken away from them. Americans don’t want seniors’ prescription drug costs to go up; and they don’t want children with pre-existing conditions to be kicked off their health plans—which are just a couple of the things that would happen if the law were repealed.
 
“Last year, more than 54,000 seniors in Minnesota got a 50 percent discount on their covered brand-name prescription drugs when they hit the donut hole. This discount resulted in an average savings of $644 per person, and a total savings of more than 34 million dollars in Minnesota alone. And we’re not done—by 2020, the donut hole will be closed completely. That would go away if we repealed the health reform law.
 
“And thanks to a provision that allows young adults up to age 26 to stay on their parents’ health insurance, 35,000 young people in Minnesota and more than 3 million nationally were able to keep their health coverage. Those young people would be kicked off their coverage if we repealed the health care law.
 
“Health reform also ended insurance companies setting lifetime limits on the amount of care that you can receive. So if you or a loved one gets sick, you can never be told by your health insurer, that’s it—no more coverage for you, go ahead and file for bankruptcy. And guess what—if Congress repealed the health reform law, that would go away too.
 
“I’m not saying the law is perfect. But if there are problems, the American people want us to work together to fix them, not to refight old fights.”

Mac Hall September 27, 2013 at 5:58 pm

“I’m not saying the law is perfect. But if there are problems, the American people want us to work together to fix them, not to refight old fights.”

Yeah, but I am concerned about the “fix” … especially when they can slip anything into a “must pass” bill.
I would rather see the Senators be held accountable … they should have held a vote on the Toomey amendment #1971 (repeal medical device tax); instead the “Christmas Tree” might have a few presents for the medical device industry … just when Forbes ran an article indicating that ObamaCare will help expand the consumer medical device industry growing from 5 to 9 percent annually “for the next few years,” reaching $10.6 billion by 2017 … based on increased spending on consumer medical devices is expected as ObamaCare will provide treat chronic conditions such as high blood pressure, diabetes and obesity.

give2attain September 28, 2013 at 9:49 am

Mac,
How again is Obamacare going to increase revenues and profits for device manufacturers?

MPP folks keep stating that Obamacare is going to control costs and profits. Which is it? Or am I over simplifying?

Mac Hall September 28, 2013 at 3:03 pm

THANKS for asking … because a lot of people do not understand the Medical Device EXCISE tax.

Excise taxes are assessed on many things with the idea that the funding will support a specific program. Thus, there is a 10% excise tax that is collected from sales of firearms which goes to a special funding source (Wildlife Restoration Trust Fund) … and the 18.4cents per gallon excise tax goes to the Highway Fund. Both are user taxes … and no one is saying they must be repealed — in fact, gun/ammo sales have been rather strong lately.

The MDET is 2.3% … payable on the medical device sales price which is not the price that the consumer probably pays. For example, my wife had an implant … the cost for the doctor/facility and device was $2100 … doing some research, I found out the device could be purchased for $209 … the MDET would be $4.81. Five dollars is not going to change anyone’s decision whether to proceed with a recommended medical procedure.

Did you read Steve Brill’s excellent report in Time Magazine featuring Steve H. and Medtronic … he was charged $89,000 for the “package” price (doctor/facility/device) but the Medtronic device was only $19,000 meaning that the MDET would be $437. It has long been reported that these companies provide “rebates” and “special discounts” … And we know that Medtronic is a profitable company …surely somewhere the MDET could be offset.

Remember this is essentially a “user tax” … if the industry sells more products, it pays the same 2.3% …

The Medical Device industry knew about this tax during the formulation of the legislation … they got the rate reduced but they are back asking for more. They are not the only ones paying taxes … okay, you can ignore the 10% tax on tanning beds, but do we have anyone protesting The Branded Prescription Drug Fee which is based on branded prescription drug sales … that will produce as much as the MDET … and the pharmaceutical industry is not complaining about more than $2.5 billion it is paying. They know they will get customers.

IMO, user taxes are perfect … if you don’t need a hip replacement, or drive a car, or go hunting, or indoor tan, then you pay no tax … however, if you do then your payment contributes to the cause.

Thus, the tax is appropriate.

Now, to the second part of your question … will they get more business ?
According to a recently published article in Forbes (not exactly a fan of the Affordable Care Act or the MDET), revenue expansion of the consumer medical device industry will grow from 5 to 9 percent annually “for the next few years,” … which is being attributed to the expanded coverage through ObamaCare as “spending on consumer medical devices is expected to surge thanks to an increase in chronic conditions such as high blood pressure, diabetes and obesity.” Here is the link https://ilibrary.isuppli.com/445937/consumer-medical-devices-production-yearbook—2013#!ia=110513&g=&o=

There have been other studies suggesting the same thing … remember that previously insurance companies dictated what procedures they would cover — for example, BlueCross BlueShield exclude spine fusion surgery … that is one area that has been mentioned as a growth market for the medical device industry.

Don’t know your age or medical condition, but I know people that complain constantly about the knee/hip that still bothers them from high school sports … today, the insurance company would say that is a pre-existing condition and when faced with a $25,000 bill, you might struggle along until you are eligible for Medicare. With pre-existing conditions no longer a problem and affordable insurance, you would have years of pain-free life (assuming that the medical device is not currently tangled up in lawsuits). Remember the $25k bill is based on doctor/facility/device … the device may have a cost of $8,000 meaning a $184 … and the manufacturing cost for that device is well under a thousand dollars (some as low as $350).

While Klobuchar/Franken/Paulsen all back the industry’s plea for tax relief, the industry seems to be doing just fine … the top six medical device companies had revenues in the first half of 2011 at $13,460M compared to the first half of 2013 at $14,078M … and the industry has been reducing prices to hospitals. Their businesses are fine … check their dividend payment records and not how many have increased it … and check how many are acquiring other companies.
BTW, I am an investor in the Medical Device industry … enjoying all those dividend checks.
Paulsen likes to talk about killing small business … yet it’s the big boys that set the prices and would get the most relief. If he wanted to exclude collecting the excise tax on the first $X in sales, that is one idea that would help start-ups but this monies would help out the large corporations.

Paulsen likes fear-monger of job losses … writing an OpEd last December listing companies and how many jobs they announced would be cut … except, I reviewed those companies and actually found that they INCREASED employment.

Regarding the question of controlling costs, I think it would be better stated as providing more information so that consumers can make better decisions. The Affordable Care Act has already released information on costs of procedures at various hospitals … that report illustrated the vast differences in price for the same type of procedure at various hospitals across the country. People will drive an extra mile to find a lower pump price before they buy gasoline … as this information becomes more public, people will be more informed healthcare consumers.

Long response … but not enough people seem to understand the Medical Device Excise Tax … visit the mnpoliticalroundtable where I have written many stories on the industry and tax.

Regards,
Mac

give2attain September 28, 2013 at 5:09 pm

Response swallowed. It may show up soon.

give2attain September 28, 2013 at 5:09 pm

The challenge is that revenues for most “user” taxes are ear marked to fund that activity. That is why people support them and it works. Gas taxes help improve our roads. Gun taxes improve our hunting / DNR. Unfortunately it seems this is just another tax that will be used to subsidize the costs of others. (ie like sales & income taxes)

And I think tanning, liquor, cigarettes, etc fit better into the category of “sin” taxes. I don’t think anyone wants to call getting new knees a sin tax.

One more question, if Obamacare is to save us money and the premiums are competitive why does it need so much money so badly?
http://firstread.nbcnews.com/_news/2013/09/28/20732222-shutdown-odds-spike-as-gop-unveils-new-funding-bill?lite&ocid=msnhp&pos=1

I have no problem with medical device taxes as long as they can be applied to all suppliers world wide. (ie keep US suppliers very very competitive and dominant, which is good for all of us) However I think everyone needs to remember that we are just voting to raise our insurance premiums and taxes. Because if more procedures are done and more is paid per procedure due to taxes, the money is coming from us consumers and going to someone.

Mac Hall October 7, 2013 at 7:35 am

I have no problem with medical device taxes as long as they can be applied to all suppliers world wide. (ie keep US suppliers very very competitive and dominant, which is good for all of us)

BTW, repealing the MDET could actually cost American jobs. Under current law, imports of medical devices are subject to the MDET same as domestic production.
Smith and Nephew Inc. is the U.S. subsidiary of a British firm that specializes in orthopedics, wound management, sports medicine and trauma related medical devices.

Repealing it will encourage foreign corporations like Smith & Newphew to produce more product overseas and import into the US instead of domestically producing them here.

The same thing is true with Medtronic who is expanding in China … they could make devices there and export into the US instead of employing people here.

Mac Hall September 29, 2013 at 6:20 pm

I have no problem with medical device taxes as long as they can be applied to all suppliers world wide. (ie keep US suppliers very very competitive and dominant, which is good for all of us) However I think everyone needs to remember that we are just voting to raise our insurance premiums and taxes. Because if more procedures are done and more is paid per procedure due to taxes, the money is coming from us consumers and going to someone.

#1. The tax applies equally to imported and domestically produced devices, and devices produced in the United States for export are tax-exempt. Thus, this will motivate Smith & Nephew, Covidien, and other foreign-headquartered operations to keep their manufacturing plants open in America.

#2. Raising of insurance premiums is possible … although individuals who pay for their own insurance most likely will see their rates reduced. Being self-insured, my premium rose 9% last year — other years there have been double-digit increases. Because of pre-existing conditions, I am stuck with staying with my current carrier. But that’s me … others probably did better. Kaiser Family Foundation recently reported that health care premiums rose almost a full percentage point less than in 2012. That’s the lowest rate of growth in roughly 20 years. The Republicans do not acknowledge that even ideas that they say they support (for example requiring insurance to maintained for dependents until age 25 or 26) have caused premium increases.
#3. Yes, more people may because of more people getting medical care … which is part of the reason that there is no reason to repeal the Medical Device Excise Tax … if they get a new knee, they will pay.
#4. Lastly, regarding the MDET, some of the companies have simply passed the cost on to the consumer … refunding the tax will just be a windfall for these businesses.

give2attain September 30, 2013 at 7:04 am

#1 Excellent

#2 What is your rational that rates will be reduced? Pre-existing conditions, no life time cap, more taxes, more procedures, etc all add costs to the system. It may be more “fair”, however I don’t see any cost reductions. And are you adding in all the state and federal funding necessary to subsidize premiums, operate exchanges, regulate the program, support the programs, etc. These will be paid by us tax payers.

#3 They will pay if they get a new knee… If that makes sense we should add a 50% tax to all medical procedures and maybe the system will become self funding… This of course makes no sense. If they get a new knee, we all pay through our premiums. More procedures at higher costs will drive up premiums. It is not a “user tax” unless the individual user actually pays it.

#4 Or the cost will be backed out by market pressures.

Mac Hall September 30, 2013 at 9:02 am

One more question, if Obamacare is to save us money and the premiums are competitive why does it need so much money so badly?

I read the linked MSNBC article and I do not see any reference to Obamacare needing additional monies than what was requested in the original budget request but instead the article discusses that governmental operations need to be funded (or shut down).
Regarding the funding required for the Affordable Care Act (as well as other programs including Defense, Agriculture, Homeland Security, etc), the problem rests on Congress.
Specifically with funding for the programs necessary to support the Affordable Care Act, on July 11th the Senate Committee approved at the amount requested which was consistent with the Budget Control Act of 2011 … the House has not even issued a committee report on HHS funding.

That’s the problem. During the “debate” over the Continuing Resolution (H.J. 59), Republican Congressman Hal Rogers, the Chairman of the Appropriations Committee said “ We were unable to pass the appropriations bill singly on the floor because of lack of floor time , but also because the House and Senate never agreed to an overall number to which we could mark. Consequently, we were not able to bring those bills out because of that limitation.

Wait … the House which shut down for five weeks in August so that Members like Erik Paulsen could take his daughter on a lobbyist-paid trip to Africa and Sean Duffy could take his wife to earn money speaking fees on a lobbyist-paid trip to Israel … but they just ran out of time to do their job !

Give me a break … the Republicans have refused to name conferees for the House and Senate to resolve the Budget Resolution just like Speaker Boehner failed to name conferees for the agricultural reform bill. Instead they want to use CRs so that they can get tax breaks for Medical Device companies.

Lastly, when you think of the Medical Device Excise Tax, not only can you consider it a “user fee” but it can be likened to a “co-pay” … if you need a Medtronic MiniMed 530G to monitor your glucose levels, “you” will be paying the 2.3%MDET, so think of it as your “co-pay” just got increased by 2.3% … and like any co-pay, if you do not need to monitor your glucose levels, you will not be buying a monitor … but those that do will be paying into the system.

give2attain September 30, 2013 at 1:28 pm

#3 It’s not a copay unless it is a line item on the bill to be paid for 100% by the recipient. More likely the recipient may pay at most 20% and we the “insurance pool funders” will pay the 80% or more. Because if someone is having major surgery and devices installed, they will likely blow through their deductible.

#5 Why have committee meetings when the 2 sides are so far apart? Democrats passed Obamacare when they had the majority, so their was little negotiation. Now the other side has some clout and the Democrats refuse to negotiate… They just keep saying spend more and support what we passed in the past. If the Democrats had passed something that was more tolerable to the GOP initially, we may not be as grid locked as we are today. It takes 2 to have a dispute, though it seems the Left and Right have forgotten that.

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