The House Ways and Means Committee has passed legislation repealing the tax on medical devices included in the health care reform law and allowing health savings account holders to pay for over-the-counter drugs without a prescription.

Following a markup session Thursday, the committee voted 23-11 to send the Protect Medical Innovation Act, introduced by Rep. Erik Paulsen, R-Minn., to a vote before the full House next week.

The 2.3 percent excise tax on medical devices was intended to help pay for the cost of the health care reform bill and is estimated to raise $2.9 billion a year to help pay for health care reform. Proponents of the tax have argued that the excise tax on medical devices is justified as health care reform would benefit the industry by allowing millions more patients to afford health insurance to pay for the rising cost of devices such as heart stents. The medical device industry has argued that the tax would hurt the industry and has lobbied to have it repealed.

“Our country is a leader in medical technology innovation,” Paulsen said in a statement. “But this new excise tax would force many companies to lay off workers, move jobs overseas, or worse yet, close their doors altogether. Today, a bipartisan group of representatives took a stand to protect American innovators from a disastrous tax on an industry that accounts for over 432,000 jobs in our country. I appreciate the support from my colleagues on Ways and Means and look forward to seeing its successful passage on the House floor next week.”

The legislation does not specify how the cost of the repeal would be offset, Democrats complained. “I am deeply concerned that these bills cost nearly $42 billion,” said Rep. Sander Levin, D-Mich., the ranking Democratic member of the Ways and Means Committee. “It is simply unacceptable for the majority not to pay for them. It is equally unacceptable that they have not told us how they plan to pay for these bills if they intend to do so. I also am troubled that the committee is considering these four bills before we focus on fixing the pending nearly 27 percent cut to Medicare physician payments.  The ‘doc fix’ would cost about $20-25 billion for a one-year fix, which is much less—for a much more pressing issue—than the nearly $42 billion before us today.”

Levin noted that repealing the medical device excise tax would cost almost $30 billion over 10 years. “The medical device industry is quite profitable and stands to gain millions of new customers through health reform,” he pointed out. “In 2009, the industry stood with President Obama at the White House and pledged ‘to do our part to make reform a reality.’ Along with other industry trade associations, they committed to working to find $2 trillion in health care savings. The medical device excise tax is the industry’s contribution to health reform, just as all the other health sectors contributed in recognition of the fact that they stood to benefit from the 30 million new customers. Some have charged that the excise tax will encourage device manufacturers to ship job overseas. This is not true. Devices made in the United States and exported for use abroad will not be subject to the excise tax. Similarly, devices made abroad and imported for use in the United States will be subject to the excise tax. All devices used in the United States will be subject to the excise tax even if they are made abroad."

The Ways and Means Committee also passed several other pieces of legislation to improve health savings accounts and flexible spending accounts. The committee voted 24-9 to repeal the provisions of the Affordable Care Act that barred the use of health savings accounts to pay for over-the-counter medications without a prescription. Another bill, the Medical FSA Improvement Act, which the committee voted to approve on a 23-6 margin, would permit the holders of flexible spending arrangements to cash out the remaining balance as taxable income at the end of the year, instead of forfeiting the balances, as they must now be forced to do. Paulsen is a co-sponsor of both, and also introduced similar legislation last year.

Another bill passed by the committee would increase the tax deductibility of contributions by employees and employers to health savings accounts. That bill passed on 21-7 margin, according to ModernHealthcare.com.

“Given that the most recent HSA census shows over 13.5 million Americans were enrolled in an HSA in 2011, an increase of nearly 2 million in the last year, it is clear that HSAs are becoming increasingly attractive to consumers,” said Ways and Means Chairman Dave Camp, R-Mich. “Additionally, with more than 33 million people enrolled in an FSA, there is more reason than ever to ensure that consumers have the utmost flexibility in using these accounts to meet their health care needs.”

Levin accused House Republicans of continuing their attempt to repeal the health care reform law without a replacement.  “If their solution is expanded access to flexible spending accounts and health savings accounts, then it falls far short of the needs of American families,” he said. “Neither flexible spending accounts nor health savings accounts provide comprehensive health coverage to participants. They are not real solutions to the problems facing our health care system. In contrast, the Affordable Care Act will expand comprehensive health coverage to over 30 million Americans and will guarantee access to affordable, comprehensive coverage for the tens of millions of Americans who currently have no health coverage.”

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