Committee for a Responsible Federal Budget

The CR and the Medical Device Tax (Take Two)

Oct 4, 2013 | Budgets & Projections

As Congress negotiates a proposal to pass a continuing resolution and reopen the government, they may enact other policy at the same time.  One such proposal was offered by the House Republicans on the eve of the shutdown, to permanently repeal the medical device tax and delay other aspects of the Affordable Care Act. At the time, CRFB President Maya MacGuineas criticized them for putting forward a proposal that would increase the deficit, making the problem worse. At the very least, any additional costs should be offset with savings elsewhere in the budget, so the fiscal situation will be no worse than before the showdown.

There has been bipartisan talk of Congress reconsidering repeal of the tax on medical devices. We're encouraged that this time, there is a discussion about searching for ways to offset the $30 billion cost. However, as lawmakers consider proposals, they should be wary of budget gimmicks filled with short-term revenue that makes our long-term budget situation worse. We're concerned about reports that lawmakers were considering an change to pension funds as an offset that we've previously described as a gimmick because it only raises revenue in the first few years, costs money in subsequent years, and increases pension liabilities.

If lawmakers want to repeal the medical device tax, they should find a legitimate way to offset the costs. We mentioned previously that a policy of bundling payments for certain inpatient procedures  making one payment to both physicians and the hospital for a given procedure  would provide sufficient savings and would get much of its savings from the same place, medical devices, in a smarter way. Whether policymakers use this policy or find another, it should be one that generates actual long-term savings.

Congress needs to find a way to end this government shutdown, but there are far better options. We're encouraged by reports of bipartisan conversations, which will be the only way to move forward. The dialogue about funding the government should be focused on ending the shutdown, dealing with the sequester, and a method for turning to our larger budgetary challenges. That means finding ways to reduce the long-term deficit, not ways to increase it.