GOP health care fix rewards donors

Read almost any statement from victorious congressional Republicans, and you will see the same lines repeated ad nauseam about the mandate they received to change our health care system, starting with a tax most Americans have never heard about. In his postelection press conference, Senate Republican leader Mitch McConnell spoke at length about repealing the medical-device tax, a 2.3 percent excise tax levied under the Affordable Care Act (ACA) to help finance it. From House Speaker John Boehner to newly elected backbenchers around the country, press release after press release has been issued about how Americans are yearning for the repeal of a tax on companies that make medical products.

There’s no evidence that voters flocked to the polls to send a big message about a minuscule tax on ultraprofitable medical device companies. In fact, if voters are worried about health care affordability, there are plenty of free-market-oriented fixes that could be implemented to reduce costs, cut the deficit and provide better health care for Americans. These ideas — such as increased price transparency from hospitals, providers and insurers and free-trade-oriented policies that would allow Medicare to import drugs at lower prices from foreign countries — have been resolutely ignored by newly empowered Republicans.

The truth is that the GOP health care fix is not about the free market or patient-driven solutions but about the influence of big money. Rather than finding common ground and helping consumers, the Republican pitch is little more than a payback scheme to corporate donors, with many in the media more than willing to regurgitate the GOP’s donor-driven song and dance about reforming “Obamacare.”

First, let’s look at the medical device lobby. Since the enactment of the ACA excise tax, the Advanced Medical Technology Association, the primary industry trade association, known on Capitol Hill as AdvaMed, has pressed Congress for a repeal. The industry has done everything from hiring a small army of lobbyists to purchasing ads in Beltway newspapers and helping set up an Astroturf (i.e., phony grass-roots) website to generate phone calls and letters on the issue. The metadata from a widely circulated letter — ostensibly written by congressional Republicans demanding a repeal — shows that it was actually produced by an AdvaMed staffer.

Republicans have benefitted immensely from the industry’s advocacy. Campaign finance records show political action committees and executives from major medical device companies gave $2.3 million in traditional donations to Republicans this election cycle. That number, however, is only part of the picture. Medical device firms have also financed the GOP message through undisclosed dark money donations. The U.S. Chamber of Commerce and YG Action, two undisclosed campaign entities that boosted Republican candidates this year with nonstop television advertising, receive funds (PDF) from medical device corporations.

What’s more, there’s no real reason to prioritize the repeal of the medical device tax. Firms are posting record profits. Earlier this year, Boston Scientific, which manufacturers pacemakers and other heart-related products, increased quarterly profits by more than 80 percent. Major medical device firms, including General Electric (owner of GE Healthcare), Baxter International and Abbot Laboratories are prolific tax dodgers, using an array of tax shelters to pay as little as 2 percent in federal income taxes on average, according to Citizens for Tax Justice. Repealing the medical device tax, which generates about $30 billion for the government over 10 years, would increase the deficit while padding the companies’ profits.

Republicans are not, however, calling for a much simpler fix that, one would think, aligns with their free market ideology. Since the enactment of Medicare Part D, the prescription drug benefit, the government has been barred from using its purchasing power to negotiate for cheaper rates and has also been prevented from importing cheaper drugs from countries such as Canada. In addition, the ACA included a corrupt deal to slow the introduction of lower-priced generic drugs — a provision in the law that should be reformed. Allowing Medicare to purchase foreign drugs would not only reflect free trade principles but would also save $80 billion over 10 years, which could be applied toward deficit reduction or passed on to seniors.

A truly competitive market requires price transparency. As an article in The New England Journal of Medicine has recommended, costs could be reduced through increased transparency in the health care system. Currently, providers and insurers collude to create gag clauses in contracts to conceal a full readout of price information from consumers. The federal health exchanges could be empowered to collect, audit and publicly report as much information as possible to consumers, giving a full picture of out-of-pocket costs and information that reveals negotiated discounts with certain providers.

These reforms, however, could cut into the profit margins of pharmaceutical companies, hospitals and interest groups that make up our health care system. Such industries are big players in elections, funneling cash to traditional political action committees and, increasingly, to dark money groups.

Republican leaders have not voiced any support for radical health care transparency or for fairly common-sense solutions to reform the Medicare prescription drug benefit. Political reporters aren’t asking Republicans about these reforms either. At his press conference, McConnell was mostly quizzed on process-related questions about how he would run the Senate and was never asked to justify his narrow policy agenda.

Thanks to the support of several Democrats who represent states where medical device companies have a significant presence, Republicans are now confident they can target the medical device tax and win. With the media ignoring the key policy questions, who can blame them?