Unintended Consequences

 

 

"Oh! what a tangled web we weave"

Walter Scott
Marmion, Canto VI, Stanza 17

 1808

Fact # 1 -  With large corporate presence in companies such as Medtronic, Boston Scientific and St. Jude, Minnesota’s proportion of workers in this industry is much higher than anywhere else in the country.

Fact # 2 - Under the recently passed Health Care Law (ObamaCare), medical device manufacturers in Minnesota, as well as the rest of the country, will pay a 2.3% tax on company revenues effective January 1, 2013.

Fact # 3 - Many medical device companies have long term pricing contracts which go back years. Quite often this new unexpected cost cannot be passed on to the customer. As the profit margins are many times razor thin in this industry, a unrecoverable additional cost of 2.3% on total sales can be catastrophic.

This is really a story of unintended consequences. When this bill was cobbled together shortly after President Obama started his first term, many did not understand what is it and how exactly it was going to be funded. Shortly after the ink was drying on the paper, rumors started floating around that part of the funding for this bill would come from some kind of sales or excise tax on medical devices. I remember this well - I along with many thought this was urban legend as a tax on life saving medical devices would cause extreme hardships to patients who rely on them.

In March 2010, then Speaker of the House, Nancy Pelosi told a gathering her now infamous quote - "It's going to be very, very exciting, Congress has to pass the bill so you can find out what's in it, away from the fog of controversy." Wow! That was over 2 1/2 years ago and we are still finding out goodies that were tucked away in this 2,000 page monster of a bill.

Some of other taxes we are finding out about are the following:

• Increase Medicare tax rate by .9% and impose added tax of 3.8% on unearned income for high-income taxpayers: $210.2 billion
• Charge an annual fee on health insurance providers: $60 billion
• Impose a 40% excise tax on health insurance annual premiums in excess of $10,200 for an individual or $27,500 for a family: $32 billion
• Impose an annual fee on manufacturers and importers of branded drugs: $27 billion
• Raise the 7.5% AGI floor on  medical expenses deduction to 10%: $15.2 billion
• Limit annual contributions to flex spending accounts to $2,500: $13 billion
• All other revenue sources: $14.9 billion

As bad as this is, it get worse. According to Denny Rehberg (R-MT), "The Health and Human Services Department  was given a billion dollars of  implementation money, and that money is gone already on additional bureaucrats, information technology programs, and computerization." In fact, in the ObamaCare bill, the phrase, "the Secretary shall determine," appears 1,563 times. The net result? Rehberg continues "There's already 13,000 pages of regulations, and they're not even done yet.".  

Now I can tell you from my own experience in almost 25 years working with the Federal Government, Statutory and Regulatory additions in most ANY piece of legislation are often "cost drivers". Not only costly, but the reporting requirements are often onerous.

So what do we know? Not nearly as much as we should. I did not intent to get too "wonky" about the tax and regulatory aspect of this law. I mostly wanted to point out what it is doing to a very important state industry. Was there deception used in putting together this bill. I don't know for sure. But I do know this - it was done mostly in the dark and not with the transparency we were promised. And that, is a big, big problem we are going to have to live with for some time.

"When first we practice to deceive!"