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Medical Device Tax Repeal No Slam Dunk

It flew through the Republican-run House in 2012, and a year later 79 of the Democratic-led Senate's 100 members embraced it. With Republicans now controlling both chambers of Congress, the chances for repealing the 2.3 percent tax on medical devices are better than ever.

Yet abolishing the tax won't be easy, even though Republicans rank it a top priority and are backed by Democrats from states that rely on the industry for jobs.

The upcoming battle underscores the complex politics surrounding President Barack Obama's health care law. Another round of that fight looms this week, when the House will likely vote to repeal the entire 2010 law.

The device tax repeal faces a possible Obama veto. It is also opposed by many Democrats, including some who backed eliminating the tax in 2013 but say they want to replace any lost revenue.

Created under Obama's expansion of health care coverage, the tax will raise an estimated $29 billion through 2022. So far no one has revealed a broadly acceptable alternative for raising that money.

The tax took effect in 2013 and is paid by manufacturers and importers of equipment like imaging systems and artificial hearts. Exempted are consumer items like eyeglasses, hearing aids and bandages.

Senate Finance Committee Chairman Orrin Hatch, R-Utah, the chief sponsor, says he wants a bipartisan bill and is open to finding replacement revenue but will push forward one way or another. He's introduced legislation repealing the tax retroactively to 2013, without replenishing the lost money.

"It's going to take some work, and we're going to have to bring it up at the right time," he said. "I think Democrats would have a tough time voting against it."

The repeal fight could take any of several paths.

The tax's $29 billion covers a small fraction of the health care law's overall costs. The White House and Democrats could end up accepting repeal as a battle not worth fighting, or opposing it as an erosion of Obama's treasured law.

The bill could be hampered by amendments taking other swipes at the overall law. Or it could prompt negotiations over changes both sides might accept.

Obama has been opaque. The White House threatened to veto the House-passed repeal of the tax in 2012. But asked in November if he would veto a repeal of the medical device tax, Obama said, "Let me take a look comprehensively at the ideas that they present."

The medical device industry says its 7,000 firms provide more than 400,000 U.S. jobs, and argues that the tax jeopardizes many of them. AdvaMed, the industry's top lobbying group, says that 39,000 existing and planned jobs have been lost and companies have had to slash research, development and new investments because of the tax.

"This is a tax on manufacturing," said Sen. Amy Klobuchar of Minnesota, a leading Democratic supporter from a state where the industry says it provides 27,000 jobs.

A January study by the nonpartisan Congressional Research Service said the tax's impact was far less severe. It estimated total job losses ranging from zero to 1,200 — or 0.2 percent of industry employment. It said any reductions in jobs and production "probably would be more than offset" by the added people covered by the health care law.

The measure should have no problem clearing the House in coming weeks, as it did in 2012 by a mostly party-line 270-146.

The bigger question is the Senate. When the Senate voted 79-20 to repeal the tax in 2013, 34 Democrats supported the effort. Many of those Democrats say that vote wasn't meaningful because it didn't specify how the lost money would be recouped and was on a budget resolution, which is advisory and not binding.

"The budget resolution was an easy vote. It was a statement of policy," said No. 2 Senate Democratic leader Dick Durbin of Illinois, who backed that measure. "It didn't answer the hard question — what about the loss of revenue?"

Senate supporters have a strong shot at getting the 60 votes they will likely need for initial passage. With Republicans requiring votes from at least six Democrats, Hatch's bill is already co-sponsored by five Democrats from states where the medical device industry is important.

Getting two-thirds majorities in the House and Senate to override a potential Obama veto would be much harder.

"People who support the Affordable Care Act, those of us who believe in it and shed blood for it, have to think about what's the revenue that's going to be the replacement in order to preserve" the health care law, said Sen. Robert Menendez, D-N.J., using that law's formal name.

Menendez voted for repeal in 2013.

One wild card is Sen. Elizabeth Warren, D-Mass. A leading liberal voice and strong supporter of Obama's health care law, Warren voted to repeal the tax in 2013 and represents a state that AdvaMed says has nearly 24,000 industry jobs.

Asked if Warren would back Hatch's bill, a spokeswoman said the senator has always supported repeal with a proper offset.