Effort to repeal tax on medical devices stalls

WASHINGTON – A behind-the-scenes effort to repeal a health care tax opposed by Minnesota medical device makers faltered Tuesday in Congress after a day of frantic negotiations to end the government shutdown and avert a default on the national debt.

The push included Minnesota Democrat Amy Klobuchar, who joined a bipartisan group of 12 Senate moderates led by Maine Republican Susan Collins, who discussed the repeal proposal with President Obama on Friday.

The White House reportedly expressed openness to the repeal effort, which has become a significant bargaining chip in the looming debt limit crisis. But it was not part of a tentative agreement between Senate Democrats and Republicans that would fund the government through the middle of January and put off the Oct. 17 debt ceiling deadline until early February.

In the House, where Minnesota Republican Erik Paulsen has been part of a similar repeal effort, GOP leaders initially floated, then dropped, a rival debt ceiling and government funding plan that would have delayed the medical device tax for two years.

The Senate deal, which has yet to be made final, made no substantive concessions on Obama's health care law, which started enrolling clients Oct. 1, the same day the government went into a partial shutdown.

Klobuchar said many of the points emerging from the group of Senate moderates, which includes five women, are intended to open a window on further negotiations for a long-term budget deal to rein in government spending and reform entitlements such as Medicare and Social Security.

"The idea would be to get both sides together," she said, "like in that old song, 'Schoolhouse Rock … having a bill on Capitol Hill.' "

Although the plan being considered by Senate Majority Leader Harry Reid includes no repeal of the medical device tax, Klobuchar said it is "certain" to be part of further budget talks once Congress gets past Thursday's debt ceiling deadline, which threatened to put the government into default.

"We have gained enormous momentum for repeal," she said.

Even if a deal on the medical device tax is not included in a final bargain, Klobuchar noted that 79 senators — including Minnesota Democrat Al Franken — voted earlier this year for its repeal.

Paulsen, who engineered last year's House vote to repeal the $30 billion medical device tax, also has been leading efforts to repeat the feat in the current session of Congress.

"We will still continue to push for the full repeal," Klobuchar said.

AdvaMed, the device industry's major trade association, has been looking for a way to repeal the tax since it was passed in 2010 to help pay for national health care reform. The health care law delayed collection of the tax until 2013. AdvaMed estimates that its members have paid the government roughly $2 billion since the tax took effect in January.

"There has been consistent bipartisan, bicameral support to repeal the device tax and the current focus and attention to this urgent issue reflects that," Wanda Moebius, AdvaMed's vice president for communications, said Tuesday as prospects for the repeal effort dimmed. "We urge Congress to act to repeal this onerous tax this year."

An industry-sponsored study claimed that the tax could cost 43,000 American jobs, although that figure was disputed by a Bloomberg Government report.

Medtronic Inc., the nation's largest device maker, had net sales of $16.6 billion in fiscal year 2013. For fiscal 2014, the Fridley-based company estimates the device tax will cost $120 million, less than one-tenth of 1 percent of revenue.

A spokeswoman for St. Jude Medical said the tax will cost the company approximately $50 million to $60 million this year. "Unfortunately, those funds are no longer available to support important initiatives, such as research and development of new, cost-effective products that save and improve lives," she said.

Medtronic did not say specifically whether the tax would affect hiring or how it might hurt business performance.

"The medical device tax is part of the long list of factors and business pressures we consider as we plan for our budgets and investments," the company said in a statement.

Norman Ornstein, a congressional scholar with the American Enterprise Institute, says the failure to find another source of revenue to support Obamacare has hurt device tax opponents as they try to make the tax part of the shutdown and debt ceiling negotiations.

"Every discussion has been around the tax and not how you pay for [repeal]," Ornstein said. "If you remove it, it is a sizable chunk of change."

Kevin Diaz on Twitter: @StribDiaz