Imagine you own a business. There’s a knock on the door. It’s the government, and they’re here to help. “We’re going to give everyone enough money to buy your product. We’re not going to make anyone buy it, but it won’t cost them anything if they do. Your profit is going grow 20%, but we’re going to take half of the new profit so we can afford to pay people to buy it. But you get to keep the rest.
That’s essentially what happened with the Affordable Care Act (ACA) with respect to Medical Device Manufacturers (MDM). MDM’s started paying a 2.3% excise tax on the sale of their wares in January 2013. The logic behind the compromise was as simple as the opening scenario. Prior to ACA, 30 million to 50 million people were either uninsured or uninsurable. As a practical matter, people without insurance go without hip and knee replacements and similar procedures. They just limp.
While there may well be more knee replacements, there will be many more people with insurance, and virtually everyone will have access to insurance if they need it.
Now the winds are shifting. Tea Party Republicans, ostensibly opposed to deficit spending, have shut down the government and are threatening to cause the first credit default in US history. In a particularly ironic twist, a compromise is emerging, most recently championed by Sen. Susan Collins, a Republican from Maine, to repeal the tax on MDMs.
In other words, the government will be greatly expanding the market and increasing the profits of MDMs, but will not ask for anything in return for that expanded market. The result will be an increase in the deficit of $30 billion over the next 10 years.
Continue Reading...