May 01, 2012
8:43 am
We need a better understanding of exactly why the medical device tax contained in the Affordable Care Act is so harmful to both the U.S. economy and the future of medical innovation. Advocates of the tax say it’s no big deal for multinational, multibillion dollar corporations to pay a few extra bucks toward health reform implementation (even though those companies are being forced to lay off employees, because of the tax, at a time our economy can least afford it).
But it’s also the smaller companies, those that scrap for capital to fund exciting new innovations, that are taking a beating from this tax. The fact that this tax is applied to revenues, not to profits, is particularly devastating for smaller innovators that are still trying to get to the point of being highly profitable.
Take Spectranetics, a Colorado Springs-based medical laser manufacturer, as a prime example.
At a panel discussion hosted by the Colorado BioScience Association, the CEO of Spectranetics pointed out that his company generally earns about $1.5 to $3 million on approximately $135 million in annual revenues. If the device tax was applied this year on Spectranetics’ income, the company would have to pay the government slightly over $3 million, essentially wiping out the resources that could be invested into product development, clinical research or additional hiring.
And, as the company pointed out, it can’t compensate for the tax by raising prices doctors and hospitals pay for the medical lasers because healthcare providers are also being squeezed with comparatively low Medicare and Medicaid reimbursement rates.
At a time in which our economy needs an infusion of well-paid jobs and our growing healthcare needs require new medical innovation, the Spectranetics case is just one of many examples demonstrating why Congress needs to reconsider the medical device tax.
April 23, 2012
8:23 am
In a Forbes commentary, Eli Lilly and Company CEO John Lechleiter underscores the need for new medicines and medical technologies to provide better healthcare to our aging society. While U.S. healthcare innovators have an unmatched history of success in saving and improving lives – testing more potential new medicines each year than the rest of the world combined – the challenges posed by illnesses like diabetes, osteoporosis and neurodegenerative diseases threaten millions of people throughout the world. And, unless successfully addressed, they will place unprecedented stress on our healthcare system.
In his Forbes op-ed, Lechleiter outlines four vital components that must be in place in order to have a vibrant, successful “innovation ecosystem” to tackle these illnesses. They include:
- Intellectual property protection to enable scientists and investors to stay in the business of innovation.
- Open access to healthcare markets, a component that is threatened by new public policies like the creation of the Independent Payment Advisory Board (IPAB), which could slash Medicare spending and limit seniors’ access to healthcare innovations.
- Free-market pricing, which hinges on the avoidance of real or de facto government price controls on medical innovators.
- A regulatory system that is “timely, predictable, consistent, transparent and scientifically rigorous.”
The agenda Lechleiter has outlined should be at the forefront of Washington, DC health policy discussion. As he put it, entirely correctly, “Our policymakers must do everything they can to….ensure that the dreams and discoveries of today turn into the lifesaving treatments of tomorrow.”
March 08, 2012
3:32 pm
We’re all concerned about how our healthcare workforces will keep up with an increasing patient population. Not only is Medicare growing at the rate of 7,500 new beneficiaries per day, but the Affordable Care Act will lead to millions more Americans having health coverage when fully implemented.
We’re seeing one answer in the form of technology that is helping to reduce hospital readmissions and enable health facilities to evaluate patient conditions and needs without requiring them to come to the doctor’s office.
This week, the Geisinger Health Plan and AMC Health announced the results of a two-year evaluation of a telemonitoring program developed by AMC. Geisinger found that home telemonitoring of patients with congestive heart failure reduced 30-day hospital readmission rates by more than 40 percent.
Here’s how the system works. Patients receive scheduled calls from an interactive voice response system. The patients report their symptoms, with those responses immediately stored in their electronic health record and evaluated. A determination is made whether the patient needs a follow-up with a nurse or a case manager. 96 percent of the Geisinger case managers said the system was allowing them to monitor heart failure patients more effectively.
This also bolsters our argument that there are better ways to address healthcare’s cost issues than simply axing dollars out of the system and consequently reducing patient access and care quality. There are technological solutions, as shown in this innovative work by AMC Health and Geisinger, that can make the system more cost-effective while providing even better care to patients.
February 24, 2012
7:59 am
Massachusetts received the lion’s share of attention, but one other state had also created a health insurance exchange before Congress passed the Affordable Care Act health reform law. The Utah Health Exchange (UHE) is an experiment that warrants close watching.
The Utah approach is focused heavily on the value of consumer information. As the state’s lieutenant governor Greg Bell puts it, the UHE is an Internet-based portal. In his words, “It is a single shopping point where consumers can evaluate their options, and then brokers, agents and employers can share information.” This is a consumer-centered approach that has appeal to other states. In fact, U.S. Senator Tom Coburn (R-OK) recently recommended that his state adopt the Utah model.
At the Healthcare Leadership Council, we’ve witnessed firsthand the benefits of equipping consumers with comparative health insurance information. When we launched an initiative called Health Access America a few years ago, we commissioned public opinion research that found 50 percent of uninsured Americans had no idea how or where to find information on health plan benefits and costs. By setting up web-based portals that allowed consumers to compare different plans, we saw a difference in the number of people purchasing health coverage.
It will be interesting to see statistics emerging from Utah in terms of the impact consumer-friendly information has on insurance acquisition without an individual mandate (a key difference between the Massachusetts and Utah approaches to health reform) and how head-to-head competition between plans in the web-based exchange affects coverage cost and value.
February 07, 2012
3:37 pm
Even before its implementation, for which the Internal Revenue Service issued regulations last Friday, the medical device tax is already taking a heavy toll.
Late last year, a major device manufacturer, Stryker (a Healthcare Leadership Council member) announced that it was reducing its workforce by five percent to prepare for the financial hit that comes with the new 2.3 percent excise tax. Similarly, another device maker, Covidien, said it would lay off 200 workers in the United States and move some of its production to Costa Rica and Mexico – again, to compensate for this new tax created as part of the Affordable Care Act.
So, the tally thus far is hundreds of jobs lost to a tax that hasn’t even taken effect yet. The question is, how much more damage needs to be done before Congress takes corrective action.
The logic behind the medical device tax – which is a 2.3 percent tax on revenues, not profits – has always been severely flawed. Device manufacturers, tax proponents said, would not be hurt because the money lost to increased taxes would be recouped from the millions of additional Americans acquiring health insurance when health reform takes full effect in 2014 and a commensurate increase in health services utilization.
That argument, though, doesn’t hold up against even casual scrutiny. The vast majority of newly insured citizens will be the young, healthy ‘invincibles’ who have heretofore elected to bypass health coverage. From this population group, there won’t be a heavy demand for coronary stents or artificial hips. In fact, most medical devices are used in acute care settings, where health providers are already required to provide care for the uninsured.
There is hope on the horizon. Representative Erik Paulsen (R-MN) has gained over 225 cosponsors – a majority of the House of Representatives – for his legislation to repeal the device tax, and he has indicated that he has the word of the congressional leadership that his measure will be brought to a vote early this year.
The Paulsen bill should be enacted by the House, and the Senate should swiftly follow suit, before more jobs are lost to a tax that doesn’t even possess an acceptable rationale.
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