US industry reacts to new healthcare plan

But it is clear that the $940bn (€703bn) reform package will increase costs for business, both directly and indirectly. And medical device manufacturers are slated for an extra hit financially because of the 2.3% excise tax scheduled to go into effect in 2013. The tax is projected to raise $20bn (€15bn) over 10 years to help pay for some of the cost of the package.

The sweeping reform package — the most extensive piece of health care legislation since Medicare — mandates that all individuals purchase health care insurance or face penalties, places an excise tax on benefit-rich ‘Cadillac’ plans, mandates that all companies with 50 or more employees offer health insurance or face fines of as much as $2,000 (€1,496) per employee, and creates a framework for states to set up insurance marketplaces where small businesses and people without employer-provided coverage can buy insurance.

“These new taxes and fees will inhibit a company’s ability to compete in the global marketplace, and will increase pressures on already-strained budgets and workforces,” said Bill Carteaux, president and CEO of the Society of the Plastics Industry in Washington.

SPI said that it agrees there is need for health-care reform. But Carteaux said SPI was “extremely disappointed” that the measure did not address “the issues that have resulted in the healthcare cost crisis — such as the lack of competition in many insurance markets, runaway litigation, or the inability of businesses to pool risk across state lines”.

He said the plastics industry will also likely face higher costs because of other provisions in the reform package that will indirectly impact the industry.

“We now face a law that places an undue burden squarely on the shoulders of the private sector employers that create and sustain America’s economic engine,” said Carteaux. “The impact [on the plastics industry] will be far-reaching.”

“We do not yet know how insurance companies will respond to a 40% excise tax or how states will pay for their increased Medicaid responsibilities,” said Carteaux. “In all likelihood these costs will be passed on to our businesses, further hampering our ability to grow.”

An executive with a medical injection molding company agreed that the indirect costs of the bill will be a hidden tax that drives up costs for employers.

“The biggest effect will be the rapid acceleration of cost shifting” toward the private sector, he said.

For example, he said, the $500bn (€374bn) in cuts under Medicare over the next 10 years means that hospitals, physicians and health-care providers will have to charge others more to cover their losses in providing treatments to patients covered by Medicare.

Medicare is a US government health insurance programme for people aged 65 or older, or those with certain disabilities or problems such as permanent kidney failure.

“Our costs will go up to compensate for low compensation by the government,” he said. “It is a tax increase that Congress doesn’t have to pass and call a tax increase. It is disheartening.”

There are also concerns over the impact on research and development and innovation from the medical device excise tax on products ranging from surgical instruments to bedpans.

“The MDMA [Medical Device Manufacturers Association] is very concerned about the impact that a $20bn (€15bn) device tax will have on patient care,” said Mark Leahey, president and CEO of MMDA — even though the effective date of the tax has pushed back from 2010 to 2013, and the amount of the tax has been cut in half from the original $40bn (€30bn) proposal and is now deductible from corporate taxes.

“If eliminating the tax is not possible, structuring it to provide relief for smaller companies is critical,” said Leahey. “Under the current structure, many companies will owe more in taxes than they generate in profits, requiring companies to layoff employees, cut R&D budgets and slow the development of new therapies that will improve the quality of care for all Americans.”

One medical manufacturing company executive agreed with that assessment, but added that it was “too early” to tell how companies will compensate for those added costs.

“It won’t help and it will likely hurt the ability of companies to innovate, do R&D and get capital dollars,” he said. “Siphoning more money away from an already risky venture is not a way to encourage capital investment. But is the tax enough to change decisions? I don’t know.”