Push to kill medical device tax is seen as way out of shutdown

WASHINGTON – A small group of rank-and-file House members trying to break through the impasse in the government shutdown revived talks on Wednesday aimed at repealing a health care tax that falls heavily on Minnesota's medical device industry.

The effort is being led by Minnesota Republican Erik Paulsen, who has cast himself as the champion of an industry estimated to employ 35,000 in Minnesota. Paulsen said he discussed his proposal Wednesday with Republican House Speaker John Boehner hours before House and Senate leaders were scheduled to meet at the White House with President Obama.

"I said this can and should be part of the solution," said Paulsen, one of about a dozen House Republicans who have signaled their willingness to drop GOP demands of defunding or delaying the Affordable Care Act, often called Obamacare, as a condition of keeping the government open.

Paulsen sponsored a measure to repeal the medical device tax as part of a GOP government funding proposal that got 17 Democratic votes over the weekend. The Democratic-led Senate stripped the language as part of a broader dispute over Republican efforts to derail the Affordable Care Act, which rolled out this week.

Minnesotans in Congress from both parties have been pressing to undo a $30 billion medical device tax levied under Obama's health care overhaul. But the two sides have been unable to agree on a way to make up the lost revenue.

Now, with both sides looking for an end to the government shutdown, the repeal effort has been caught up squarely in the protracted politics of the standoff.

Democrats, including Minnesota Sens. Amy Klobuchar and Al Franken, have said they are unwilling to repeal the tax as part of any GOP funding measure that delays implementation of Obamacare as the price for keeping the government open.

"I continue to believe that the current continuing resolution is not the best place to work out a medical device tax repeal that the president would sign into law," Franken said. "I think the surest way to quickly reopen the government is for the House to vote on the Senate-passed bill to fund the government at its current levels. But I will take a careful look at any proposal that emerges."

Meanwhile, Republicans have used the issue to attack Minnesota Democrats who voted against the repeal of the medical device tax as part of a GOP funding measure that puts off the health care law.

Despite the discord, Paulsen said the repeal effort represents the best opportunity for compromise. "The number one provision in this entire debate that has brought the most bipartisan support is repealing the medical device tax," he said. "So we've got an opportunity to make that the linchpin as part of a solution."

Paulsen said he has been in talks with a group of Republican and Democratic House members, including Wisconsin Democrat Ron Kind, an opponent of the medical device tax. Kind, however, has been working on a way to offset any lost revenues that might result.

Industry leaders expressed guarded optimism about the new push on the medical device tax, which already has collected more than $100 million.

"There is reason for optimism that there is a critical mass and bipartisan support for repealing the tax," said J.C. Scott, chief lobbyist for the Advanced Medical Technology Association.

The House voted last year to repeal the 2.3 percent excise tax on medical device makers like Minnesota-based Medtronic, which has said the tax could cost it $175 million annually. But efforts to win passage in the Senate have been stymied by Democratic concerns about losing one of revenue streams to pay for Obama's 2010 health care law intended to cover some 40 million uninsured Americans. The repeal measure also has faced a White House veto threat.

White House officials contend that medical device makers will benefit from the new business created by the expansion of coverage to Americans who are now uninsured.

While Franken and Klobuchar have vowed to get the repeal through the Senate, they differ on a key sticking point: how to make up for the revenue.

Last year's House-passed bill would have offset the lost taxes by shrinking insurance subsidies for low- and middle-income workers under the health care law. Franken said the GOP plan would undermine the goal of affordable health care.

Klobuchar said Wednesday that she is committed to repealing the medical device tax. However, she said, "the president has made clear that he will not accept changes to the Affordable Care Act as a condition for opening the government." That doesn't prevent a repeal in future negotiations, she said, adding that "the best way to get there is for the House to take up the Senate bill to reopen the government so we can have those negotiations.

Paulsen said House members are working on new revenue measures. "It's definitely something that's being conducted by rank-and-file members looking for a way out and a solution with bipartisan support," he said.

Even if enough Democrats come on board, Paulsen's greatest challenge may be convincing other Republicans.

"I would call it a win," Paulsen said. "It would be a major accomplishment that helps the economy."

Follow Kevin Diaz on Twitter @StribDiaz.