About that Tax on Veterans’ Prosthetics….

I hate even more to put up two shared posts, but since it started here, I wanted to keep you guys updated on this issue. Bear in mind that “Mothax” and “TSO” are different persons trapped in the same body. As TSO I agree even more with ATR, although not with the language they use. I hate taxes. All taxes are bad. So on that we agree. As Mothax though my first, last, and only interest is in our veterans. But I fear this is using Veterans to effect a political change, when veterans play only a very ancillary role in this. Either way, have at it ye brethren o’ mine.

Less would be twice as nice.

Saw this over at This Ain’t Hell, and started looking into it. TAH got it from WIBW, who claim they got it from Examiner.com, which is NOT the Washington Examiner. Turns out the sole source on all of these articles is, in fact, a press release from Americans for Tax Reform. Let’s look at what they say, and then go through it. I’m going to split it in two, and go through each portion, so we all know what is in fact going on.

Wounded Warriors Face New Tax This Independence Day

Senate Democrats Tax Prosthetic Limbs and Other Vital Medical Devices, Refuse to Exempt Veterans

WASHINGTON, D.C. — As the nation prepares to celebrate Independence Day with parades and barbecues, America’s veterans face a new tax on prosthetic limbs and other vital medical devices.

The health care overhaul passed by Congress and signed into law by President Obama earlier this year contains a new tax on medical devices such as prosthetic limbs, pacemakers, and wheelchairs. This tax, which its proponents claim will raise $20 billion over the next ten years, contains no exemption for the nation’s 22 million veterans. In fact, Senate Democrats specifically refused to exempt veterans from the tax.

On March 24 2010, Senate Democrats rejected an amendment offered by Senator Orrin Hatch (R-Utah) to the healthcare bill. This amendment (SA 3644) would have prevented the medical device tax from hitting veterans covered by the Veterans Healthcare Program or TRICARE for Life. This amendment was rejected by a vote of 44-54. All but five Democrat senators voted in favor of retaining the tax for veterans.

The medical device tax was one of over twenty new or higher taxes in President Barack Obama’s healthcare overhaul. This permanent new tax is being collected now.

OK, let’s start with the headline (that wounded warriors will face a tax this Independence Day) and the last sentence (that the tax is being collected now.)

First off, the tax in question is actually applied to the manufacturers, not the end user. In discussions with the ATR folks this morning they keep pressing that the tax will be passed along to the end user in terms of higher prices. True, as any ECON 101 class would show you. However, two things bear pointing out.

1) The tax does not actually go into effect until 2012. ATR apparently missed HR 4872, the reconciliation bill, wherein Section 4191 governs the tax on medical devices, and states “Effective Date- The amendments made by this section shall apply to sales after December 31, 2012.” (ATR admitted in an email to me that they had missed the change in effective date.) So, I guess they will “face” it, in the sense that it is over 2 years away, but take heart, the Mayan Calendar runs out 10 days before the tax kicks in, and there haven’t been any regulatory hearings on how this would be effectuated.

2) “Wounded Warriors” won’t pay the direct cost anyway. If you are wounded in service, and require one of these devices, the cost is $0. If the manufacturer decides to pass along a 7 percent tax to the veteran, the cost would be $0, plus a 7 percent tax of $0.

Now, ATR responds to that by asserting, quite truthfully, that:

And what happens when the higher costs to the VA and DOD get squeezed out in a budget crunch? Eventually, the beneficiaries will have leaner benefits due to the higher cost inputs on medical devices. Some of that will be paid for from taxpayers (including veterans), but some will be paid for by restricting benefits for veterans.

This has always been the problem. VA (or DoD) does not operate in a vacuum. If the cost of medical devices goes up, then the cost to VA goes up, the amount of post-purchase money the VA has available goes down, and then Joe Q. Veteran either gets less, or fewer Joe and Jane Veterans are allowed in. And this extends well beyond just Medical Devices, or the cost of other equipment, or even the cost of staffing. If the cost of oil goes up, then the cost of transporting goods goes up, such costs are passed along, and voila (!), VA has less to spend on other items. These are supposed to be taken into account each year by the budgeting process. One would hope that VA would account for this increased tax when they formulate their budget request, and so in order to purchase X number of wheelchairs, prosthetics and other medical devices, VA would add in the increased costs. Congress in turn should look at the increased costs, realize that these items are needed, and increase the budget accordingly.

Now, will that happen? I’m less sanguine that it will. Several years ago the VA budget was off by so much that Congress demanded an answer as to why they under calculated so much. The answer, they used pre-Iraq war numbers to figure out how many folks would be entering the system. Not surprisingly, they were way off, and the veterans paid with fewer services and fewer veterans gaining access.

I fully understand the point ATR is trying to make, and acknowledge that folks who are trying to advocate for their position need to use a headline that grabs the attention. I simply cringe when it is in the name of “wounded warriors” because I know how effective that can be. And I take issue with the phraseology. The person replying to my queries at ATR apparently takes issue with my reading:

Veterans will face a higher tax on medical devices. They will face this not by paying it directly, but by bearing the brunt of higher costs on their healthcare plans. If we had said, “veterans will pay higher taxes,” I could see your point. But facing higher taxes is a degree removed from what we said. It’s semantics, but you’re the one deconstructing a press release headline, not I.

Regardless, the rest of their press release states:

“On March 24, Senate Democrats had the opportunity to exempt our veterans from Obamacare’s new tax on medical devices such as prosthetic limbs. But 54 Democrats voted against the measure. They chose to side with the tax-and-spend crowd in Washington over our

wounded warriors,” said Grover Norquist, president of Americans for Tax Reform. “This is one of the many reasons Harry Reid and the Democrats did not want Americans to read the 2,500 page health care bill before it was passed.”

In addition to those who served in Afghanistan and Iraq, the Department of Veterans Affairs reports the following number of veterans from America’s wars:

World War II: 2,079,000

Korean War: 2,507,000

Vietnam War: 7,569,000

Desert Shield/Storm: 2,254,000

Again, veterans will only pay the tax in the same sense everyone else will, assuming that the VA has planned for the extra costs. The tax on a prosthetic limb by the VA will be born by the taxpayers as a whole, much like all the costs prior to that.

I’m not going to go into the Legislative fight over whether this tax should or should not have “exempted veterans” which seems an odd way of phrasing it. But, just to give some context to it, I would like to include the discussion from the Senate prior to voting on this issue, so you can at least see where each side was coming from.

A FINAL NOTE: As I do regularly when I have a post like this, I just went up and discussed it with the National Adjutant. He even went a step further than I expected and agreed that as American Tax-Paying Citizens, we are ALWAYS loathe to accept the necessity of increased taxes. So fundamentally, we might agree with the position of ATR in this regard. Our only problem (as ATR noted itself) is with using “Wounded Warriors” as the clarion call for action. Wounded Warriors and other veterans will bear this burden with our fellow Americans irrespective of whether they served or not, and we simply don’t want to be singled out in this regard. And exempting the Federal Gov’t from paying a tax that would go back directly into their coffers may or may not be a bright or foolhardy idea, but that decision is left to the Congress, and ultimately the voters to decide. For The American Legion’s part, we just want the best possible medical attention to all our brave brothers and sisters.

___________________________________________

The PRESIDING OFFICER. Under the previous order, there will now be 2 minutes of debate equally divided prior to a vote in relation to amendment No. 3644, offered by the Senator from Utah, Mr. Hatch.

The Senator from Utah.

Mr. HATCH. Mr. President, there is a tax hike of $20 billion on medical devices in this bill. These taxes are passed on to patients in the form of higher prices and higher insurance premiums.

My amendment would prevent this new tax from raising costs or hurting access for American soldiers and veterans by exempting medical devices used by the TRICARE Program and the Veterans Health Program.

We need to protect our wounded warriors who rely on these medical devices for recovery and to live a normal life.

I reserve the remainder of my time.

The PRESIDING OFFICER. The Senator from Montana.

Mr. BAUCUS. Mr. President, this amendment is very similar to the past two amendments we voted on. It seeks to exempt a sympathetic group of individuals from the excise tax on medical device manufacturers. The amendment is misplaced. We already exempt retail purchases of medical devices, such as Band-Aids, glasses–all those kinds of items. The tax only applies to large manufacturers. The government negotiates with the large manufacturers. The government is large enough to exact a better price. It does not pass that on to individuals, not on our military, not on our vets who already receive prescribed health care coverage.

Second, this amendment is paid for by increasing the number of uninsured. I do not think we want to increase the number of uninsured. We want to decrease the number of uninsured.

I reserve the remainder of my 15 seconds so the Senator from Utah can finish.

The PRESIDING OFFICER. The Senator from Utah.

Mr. HATCH. Mr. President, I feel deeply about this. I do not think we should leave these wounded warriors without access to the best medical devices, and I do not think we should be assessing them extra costs. This is a simple amendment. This is one we all ought to vote for.

The PRESIDING OFFICER. The Senator from Montana.

Mr. BAUCUS. Mr. President, very simply, this will not be passed on. The government is a large payer. They will be able to negotiate for better prices.

Category: Politics