Wintery Knight

…integrating Christian faith and knowledge in the public square

Obamacare’s new tax on medical devices trickles down to hospitals and patients

From the Wall Street Journal.

Excerpt:

Small medical-device makers have little choice but to pass their new 2.3% excise tax— meant to pay for the health law —on to hospitals and other customers, said the chief executive of one manufacturer that began surcharging hospitals for its wares on Jan. 1.

“The government thinks we’re just going to absorb these costs, but for a company like us, it’s a lot of money,” said Kevin Rudolph, the chief executive of the family-run respiratory valve maker, Hans Rudolph Inc. Instead, he said, device makers will be raising prices or adding surcharges to bills— just like other companies that faced excise taxes in the past.

In a December letter to several thousand hospital customers, Mr. Rudolph told hospitals his company would add a new line item for the tax beginning on Jan. 1. Hospitals and group-purchasing organizations began protesting last week as similar warnings from other device makers began piling up, the Wall Street Journal reported Saturday.

The tax is meant to raise $30 billion to help cover the health law. The device industry has lobbied to repeal the tax, which applies to sales, rather than profits. The recent clashes between hospitals and device makers underscores the breadth of the tax: It applies to companies that make big ticket items such as pacemakers and hip implants, as well as smaller firms selling surgical tools or making the plastic tubes, clips and valves that are ubiquitous in hospitals and nursing homes.

Mr. Rudolph said his firm had opted to tell hospitals upfront they’d be charged for the tax, rather than sneaking it into price increases. “I think it’s better for the customer to know what’s going on, even if they don’t like it,” he said Monday.

Hans Rudolph Inc. typically makes a 4% to 6% profit on about $5 million to $6 million in annual sales, Mr. Rudolph said. The 53-year-old Shawnee, Kan., company was founded by Mr. Rudolph’s father, and grandfather, Hans. The two elder Rudolphs built the company out of a Kansas City, Mo., basement, where Hans devised several respiratory devices. Key products still include spirometry components, for the common breath test in which patients are asked to exhale into plastic tubes.

Though the company has done well, Mr. Rudolph said, it can’t afford the tax. “We just like people to understand that the government is imposing this tax on us, so the cost of medical devices is going up,” he said.

I think that the lesson to learn here is that big government socialism doesn’t reduce the cost of anything by raising taxes on job creators. Those anti-business taxes just get passed onto consumers. In some cases, the business moves abroad or at least expands abroad, instead of staying in high tax environments. There was a plan put forward by the Republicans to reduce the costs of health care by introducing free market forces of choice and competition. Free market forces reduce the costs of all our other consumer goods, while improving the quality. Just think of computers and cell phones that are always getting better for less money. But Americans rejected that plan for Obama’s big government plan. We thought we would escape the costs of health care by taxing and regulating the providers of health care. But we were wrong. In the end, we’ll pay for it.

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Companies announce layoffs in the wake of Obama’s re-election

The Washington Times links to this article by Freedom Works.

Excerpt:

 With 20 or so new or higher taxes set to be implemented, ranging from a $123 billion surtax on investment income, through the $20 billion medical device tax, all the way down to the $600 million executive compensation limit, Obamacare will be a nearly unbearable tax burden on the economy.

Who will pay?  The middle-class workforce, of course.

So with another four years for President Obama to look forward to, and the obvious inevitability of Obamacare that this entails, let’s examine the very real jobs that will be lost, and the very real lives that will be affected.

Here are some of the companies impacted by Obamacare:

Welch Allyn

Welch Allyn, a company that manufactures medical diagnostic equipment in central New York, announced in September that they would be laying off 275 employees, or roughly 10% of their workforce over the next three years.  One of the major reasons discussed for the layoffs was a proactive response to the Medical Device Tax mandated by the new healthcare law.

Dana Holding Corp.

As recently as a week ago, a global auto parts manufacturing company in Ohio known as Dana Holding Corp., warned their employees of potential layoffs, citing “$24 million over the next six years in additional U.S. health care expenses”.  After laying off several white collar staffers, company insiders have hinted at more to come.  The company will have to cover the additional $24 million cost somehow, which will likely equate to numerous cuts in their current workforce of 25,500 worldwide.

Stryker

One of the biggest medical device manufacturers in the world, Stryker will close their facility in Orchard Park, New York, eliminating 96 jobs in December.  Worse, they plan on countering the medical device tax in Obamacare by slashing 5% of their global workforce – an estimated 1,170 positions.

Boston Scientific

In October of 2009, Boston Scientific CEO Ray Elliott, warned that proposed taxes in the health care reform bill could “lead to significant job losses” for his company.  Nearly two years later, Elliott announced that the company would be cutting anywhere between 1,200 and 1,400 jobs, while simultaneously shifting investments and workers overseas – to China.

Medtronic

In March of 2010, medical device maker Medtronic warned that Obamacare taxes could result in a reduction of precisely 1,000 jobs.  That plan became reality when the company cut 500 positions over the summer, with another 500 set for the end of 2013.

Obamacare encourages companies to limit their number of full-time employees by switching to part-time employees. Some companies are doing that to avoid having to pay Obamacare fines.

Look:

Darden Restaurants

According to the Orlando Sentinel, Darden Restaurants, a casual dining chain best known for their Red Lobster, Olive Garden and LongHorn Steakhouse restaurants, is “experimenting with limiting the hours of some of its workers to avoid health care requirements under the Affordable Care Act when they take effect in 2014″.

JANCOA Janitorial Services

The CEO of JANCOA, Mary Miller, testified to Congress that Obamacare was a “dream killer”, adding that one option she had to consider “is reducing the majority of my team members to part-time employment in order to reduce the amount that I will be penalized.”

Kroger

The American retailer in Cincinnati, Ohio recently was reported to be planning a significant slashing of their hourly workers.  Doug Ross writes:

Operative Faith (a mid-level manager with the company) reveals that Kroger will soon join the ranks of Darden Restaurants and slash the hours of its non-exempt (hourly) workers to avoid millions in Obamacare penalties.

According to the source, Obamacare could result in tens of thousands of Kroger employees being limited to working 28 hours per week.

And of course there are the layoffs by defense companies like Boeing, because of Obama’s defense cuts. The one thing that the government is actually supposed to do – that’s the thing he cuts.

The effects of Obamacare were well-known before the 2012 election took place. But the Democrat voters were just not paying attention when the voted to re-elect Obama.

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What are the consequences of insuring customers with pre-existing conditions?

Walter Williams

Investors Business Daily

What would happen if Obama succeeds in passing a law to force insurance companies to accept customers with pre-existing conditions at the same price as everyone else who doesn’t have pre-existing conditions?

Read this IBD editorial by George Mason University economist Walter Williams. (my second favorite economist)

Excerpt:

Sen. John Rockefeller, D-W.Va., chairman of the Senate Finance Subcommittee on Health Care, and Rep. Joe Courtney, D-Conn., a member of the House Education and Labor Committee, have introduced the Pre-existing Condition Patient Protection Act, which would eliminate pre-existing condition exclusions in all insurance markets. That’s an Obama administration priority.

I wonder whether President Obama and his congressional supporters would go a step further and protect not just patients, but everyone against pre-existing condition exclusions by insurance companies. Let’s look at the benefits of such a law.

A person might save quite a bit of money on fire insurance. He could wait until his home is ablaze and then walk into Nationwide and say, “Sell me a fire insurance policy so I can have my house repaired.” The Nationwide salesman says, “That’s lunacy!” But the person replies, “Congress says you cannot deny me insurance because of a pre-existing condition.”

This mandate against insurance company discrimination would not only apply to home insurance, but auto insurance and life insurance as well. Instead of a wife wasting money on costly life insurance premiums, she could spend that money on jewelry, cosmetics and massages and then wait until her husband kicked the bucket to buy life insurance on him.

Insurance companies don’t stay in business and prosper by being stupid. If Congress were to enact a law eliminating pre-existing condition exclusions, what might be expected?

Yeah, that’s why Walter Williams is awesome. And you must read the rest to see how it would apply to medical insurance. Everything sounds good to those who do not ask the most important question in economics: “and then what happens?” And that question cannot be answered with “then I feel good about myself and people like me because I care about the poor”. That question needs to be asked for the forgotten man. The nameless man who is hog-tied into supplying the wealth that gets redistributed by demagogues desperately seeking adulation from the covetous masses.

The problem is that people don’t understand how insurance works. If you have to pay guaranteed claims from people with pre-existing conditions, then the premiums of all those people who don’t have pre-existing conditions will be increased to pay for those claims. Think. Beyond. Stage. One.

The Cato Institute

Consider this podcast from the libertarian Cato Institute, which explains a little more from the point of view of the medical insurance company.

The MP3 file is here.

Here a summary of what happens after stage one, to the forgotten man. Medical care costs money to produce. Forcing medical insurance companies to sell care for a pre-existing condition far below the actual cost of providing it will force insurers to drop coverage for those pre-existing conditions. (Or they may drop the doctors who treat those conditions from their network). That is worse for the people with pre-existing conditions. And this is how economic ignorance hurts the very people that the secular leftist do-gooders are trying to help.

Believe me when I tell you that this happens all the time with leftist economic policies. It’s the law of unintended consequences. They think they are helping their preferred victims, they feel better about themselves, but they actually hurt the very people they are trying to help. And by “help” I mean they steal someone else’s money/product/liberty and transfer it to their preferred victims in order to buy votes.

National Review

Now, take a look at this article that ECM sent me from National Review, which talks about Obama’s promise that you will be able to keep the medical coverage you have. Is Obama telling the truth? Can pigs really fly just by sheer belief and pixie dust?

Excerpt:

Obamacare would forbid insurers from basing rates on the individual health of their customers in any community. It also would force issuers to cover people who refuse to buy insurance until they get sick. These and Obamacare’s other complexities and contradictions would make insurance pricier, as would a $149.1 billion, 40 percent excise tax on high-value “Cadillac plans.” Thus, some employers would save money by paying fines after de-insuring employees. Workers who cherish their health plans then would find themselves dumped into the government-run Health Insurance Exchange.

“Some smaller employers would be inclined to terminate their existing coverage,” explained a December 10 memorandum by Medicare’s chief actuary, Richard S. Foster. He added: “The per-worker penalties assessed on non-participating employers are very low compared to prevailing health insurance costs. As a result, the penalties would not be a significant deterrent to dropping or foregoing coverage. We estimate such actions would collectively reduce the number of people with employer-sponsored health coverage by about 17 million.”

Even more ominously, Obamacare would require employers to provide federally approved coverage. Obama considers “meaningful” plans those at least as generous as the Federal Employees Health Benefits Program.

“Obama’s definition of ‘meaningful’ coverage could eliminate the health plans that now cover as many as half of the 159 million Americans with employer-sponsored insurance, plus more than half of the roughly 18 million Americans in the individual market,” says Cato Institute policy analyst Michael Cannon. “This could compel close to 90 million Americans to switch to more comprehensive health plans with higher premiums, whether they value the added coverage or not.”

It’s not just elective abortions that we’re going to be paying for whether we want them or not. In some countries with socialized health care you can pay for breast enlargements (UK), sex changes (Canada), in vitro fertilization (Canada), etc. And these elective surgeries take up money from the other vital services. Obama can make it such that every plan has to offer those coverages.

So, those who don’t use such elective services end up encouraging them, even if they have moral objections to those services. When the government subsidizes something, more people choose it. Won’t Planned Parenthood be pleased with all that new revenue? I’m sure they’ll think of something to do with all that money. Maybe a nice political donation?

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Obamacare and the simulus bill will increase your taxes

First, Americans for Tax Reform. (H/T Health Care BS)

Excerpt:

Individual Mandate Tax: Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax of up to $1,485.

Hike in Medicare Payroll Tax: For self-employed idividuals, the Medicare tax jumps from 2.9% to 3.8%. For businesses with employees, a firm’s “matching” Medicare tax jumps from 1.45% to 2.35% of employee salaries.

Employer Mandate Tax: If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $750 for all full-time employees.

Excise Tax on Comprehensive Health Insurance Plans: Starting in 2013, new 40 percent excise tax on “Cadillac” health insurance plans ($8500 single/$23,000 family).

Medicine Cabinet Tax: No longer allowable to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).

HSA Withdrawal Tax Hike: Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent.

Excise Tax on Charitable Hospitals: $50,000 per hospital if they fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by HHS.

Tax on Innovator Drug Companies: $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

Tax on Medical Device Manufacturers: $2 billion annual tax on the industry imposed relative to shares of sales made that year.

Tax on Health Insurers: $10 billion annual tax on the industry imposed relative to health insurance premiums collected that year.

But that’s not all – there’s a marriage penalty in there, too. (H/T Jennifer Roback Morse at RuthBlog)

Excerpt:

“The Senate bill stipulates that two unmarried people, 52 years of age, with private insurance and a combined income of $60,000, $30,000 each, will pay a combined cost of $2,483 for medical insurance,” Quist wrote.  “Should they marry, however, they will pay a combined cost of $11,666 for insurance — a penalty of $9,183 for getting married.”

The numbers are based on the government’s definition of “poverty level.”  Those above poverty level will pay higher premiums, and the excess would be redistributed to those in lower income levels.

[...]John Helmberger, CEO of the Minnesota Family Council and Institute, said the middle class will once again take the hit financially.

“This hidden marriage penalty,” he said, “hits hardest the very people that are most suffering from the pathologies resulting from the decline of marriage in our culture.”

I recommend that all my readers click through to Dr. J’s post and read her comments about Christian liberals who vote for government-run health care, thinking that it doesn’t destroy marriage and family. The left is dominated by anti-family types who think men and women are interchangeable, and that means the traditional family is in their crosshairs.

The stimulus bill will cause tax increases

Second, Hans Bader writes about the stimulus bill taxes for the Competitive Enterprise Institute. (H/T ECM)

Excerpt:

The federal government’s $800 billion stimulus package, which failed to cut unemployment, is now forcing states and local governments to raise taxes. The Wall Street Journal describes how “stimulus dollars came with strings attached that are now causing enormous budget headaches . . . At the behest of the public employee unions, Congress imposed ‘maintenance of effort’ spending requirements on states. These federal laws prohibit state legislatures from cutting spending on 15 programs,” such as ”welfare, if the state took even a dollar of stimulus cash,” even if a state’s tax revenue has since fallen due to the recession.  “So when states should be reducing” their spending ”to match. . . lower revenue collections, federal stimulus rules mean many states will have little choice but to raise taxes.”

[...]The stimulus package actually destroyed thousands of real world jobs by triggering trade wars with Canada and Mexico that killed jobs in America’s export sector (the stimulus package barred a measley 97 Mexican truckers from U.S. roads, a minor NAFTA violation that led to massive Mexican retaliation against U.S. exports of 40 farm products and kitchen goods worth $2.4 billion).  It also is wiping out jobs by inflicting costly mandates on state governments (such as repealing welfare reform, and imposing costly “prevailing wage” regulations and expensive racial set-asides).

Don’t elect a radical leftist during a recession.

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Senate Democrats contemplating new $40 billion tax on health care innovation

TigerHawk has a post about a tax being considered for medical device companies. (H/T Lex Communis)

Excerpt:

As we have long predicted on this blog, the health care “reformers” propose to finance at least part of the “savings” or new benefits — it is impossible to know which — by decreasing the rate of return on medical technology. There are many ways in which this might be done, but the Senate Democrats are proposing to do so directly, by levying a “value added tax” on medical device companies according to their proportion of U.S. sales. This tax would be without regard to profitability, so it would amount to a capital tax on start-ups and a massive income tax surcharge on profitable companies, varying as net margins do. In the case of my own mid-sized company, the tax would be the equivalent of a roughly 20% surcharge on our net income (in all likelihood raising our economic tax rate well above 50%) or 50% of our research and development budget, depending on how you want to look at it.

Any way you look at it, the proposed tax is a calculated effort to divert capital from the medical technology industry to other uses in the economy, because new medical technology drives costs that are now going to be assumed by the government (or at least will be if the Senate leadership gets its way). Of course, innovative medtech also extends and saves lives, and makes them more comfortable and more productive. Which is, after all, the point of medicine.

Know what would be great? If a bunch of silver-spoon bureaucrats invented something that might actually save lives instead of meddling in the financial affairs of medical innovators.

Some of the companies that would be affected are listed in this Wall Street Journal article.

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