Monday, May 20, 2024

HCR: Reform Bill To Tax Wounded Veterans For Prosthetics? Not Really.

If you follow GOP talking points at all, you might have heard that the healthcare reform bill is imposing a tax on users of prosthetic limbs and that, despite benevolent attempts by Republicans to the contrary, Democrats even voted not to exempt veterans who lost a limb in service to their country.

Heck, you might even have heard that the tax took effect over the July 4 weekend, which would be a sad bit of irony if true.

According to Americans For Tax Reform:

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.

“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.”

When I read this, I thought to myself, “Self, this can’t be accurate, can it?” So I did a little fact-checking. Turns out that, other than the part about how certain Senators voted on the Hatch Amendment, it’s not.

First off, the whole “the tax is being collected now” thing? Either I have been lax in buying calendars for eighteen months or so, or that’s simply false. This tax comes from section 4191 of HR 4872 (the reconciliation bill), and that section says

(a) In General.–There is hereby imposed on the sale of any taxable medical device by the manufacturer, producer, or importer a tax equal to 2.3 percent of the price for which so sold.
(b) Taxable Medical Device.–For purposes of this section–
(1) In general.– The term “taxable medical device” means any device (as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act) intended for humans.
(2) Exemptions.–Such term shall not include–
(A) eyeglasses,
(B) contact lenses,
(C) hearing aids, and
(D) any other medical device determined by the
Secretary to be of a type which is generally purchased
by the general public at retail for individual use,
(2) by inserting after the item relating to subchapter D in the table of subchapters for such chapter the following new item:
subchapter e. medical devices.

(b) Certain Exemptions Not to Apply.–
(1) Section 4221(a) of the Internal Revenue Code of 1986 is amended by adding at the end the following new sentence: “In the case of the tax imposed by section 4191, paragraphs (3), (4), (5), and (6) shall not apply.”.
(2) Section 6416(b)(2) of such Code is amended by adding at the end the following: “In the case of the tax imposed by section 4191, subparagraphs (B), (C), (D), and (E) shall not apply.”.

(c) Effective Date.–The amendments made by this section shall apply to sales after December 31, 2012.1

Emphasis added.

More importantly, though, as clearly spelled out in subsection (a) above, when the tax does take effect, it will apply to manufacturers of prosthetic devices, and it will NOT be levied on the veterans themselves. So statements about how certain Senators or Representatives voted to tax soldiers or sided with President Obama’s agenda over our soldiers are, basically, lies.

I suspect that ATR knows as much, which is why the wording in their blurb above seems so carefully chosen upon closer inspection. (Note how, with one small exception, they are very careful to avoid saying that the tax applied directly to veterans or that the lawmakers voted to impose the tax directly on the soldiers. That’s not by accident.)

So what’s the truth here? Well, if a soldier is injured in combat and needs a prosthetic device, it will cost him $0, which is the same as what it costs now when the soldier receives the device through the VA or through TRICARE. If the “manufacturer, producer, or importer” passes along the tax, the soldier would then be paying 102.8% of $0, which works out to … $0. Hmm. Interesting. By my calculations, then — and let me bold this for pedantic effect — the healthcare reform bill imposes NO tax or additional costs for prosthetic devices on America’s veterans, and statements to the contrary are a bunch of Republican and/or Tea Party agenda-driven scare tactics designed to drum up support through gross fearmongering.

I know you are shocked that they would resort to such tactics. I’ll pause so that you may regain your composure in the face of this wholly out-of-character behavior.


All good? OK.

Now, to save everyone some time, let me just address what I am sure will be the inane talking-point “rebuttal” to my post: that the tax is imposed on veterans because the increased cost will be passed on to the VA, which will require cutting benefits to the veterans.

(A) That’s not the argument you made here, nor is it the point you were trying to get people to glean from your half-truths.

(B) In this sense, such an increase is no different than an increase in the cost of shipping medical equipment, the cost of staffing a VA hospital, or even the cost of Band-Aids; increased costs are going to decrease the purchasing power of the VA, ceteris paribus. Except the VA should (and almost certainly will) account for increased costs by including them in the budget that they submit to Congress, which obviates the “all things being equal” problem that your conclusion seems to assume.

(C) The VA is funded by tax dollars, so to the extent the increased cost is passed along to them and included in their budget, American taxpayers will cover it. Which means that soldiers, whether wounded or not, would bear the brunt of this cost only to the extent that every American taxpayer will. While there might be an argument that the increased tax is not wise, such an argument literally has nothing to do with wounded soldiers, and including them in your press release is a bush league move designed to rile people up. If ATR really is for tax reform, they might want to start by being intellectually honest about what taxes are actually being paid and by whom. Or they can continue twisting the facts and getting mindless Republican shills to parrot their purposefully biased press releases. Whatever.

1 Maybe the Mayans foresaw the HCR bill and this tax is the reason that this whole place is going kaput on December 21, 2012. They were wise beyond their years. And, apparently, they were Tea Partiers.

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