The Makers of the Things that Save Our Lives Will Be Punished

That's what passes for health care "reform" these days:

The people at Zoll Medical Corporation saw a ray of hope in January when Scott Brown was elected senator from Massachusetts. Located in Chelmsford, 30 miles outside Boston, Zoll is the nation's leading manufacturer of heart defibrillators, which save thousands of heart attack victims each year. Back in January, as the Senate race was raging, both House and Senate Democrats wanted to impose a crippling new tax on the makers of medical devices, Zoll included, to help pay for Obamacare.

The total tax on the industry would be about $2 billion a year, or $20 billion over the next decade. Companies watched nervously as lawmakers pushed ahead, first the House and then the Senate. But then Brown was elected on the promise to be the crucial Republican vote to stop health care reform. For Zoll, things were looking up.

Not anymore. The bill passed by the House Sunday night contains a particularly damaging version of the $20 billion hit for the medical device industry, meaning Zoll and other medical device makers could well be headed for hard times.

"We believe that the tax will cost us somewhere between $5 million and $10 million a year," says Richard Packer, Zoll's chairman and chief executive officer. "Our profit in 2009 was $9.5 million."

That would be a devastating blow. Zoll employs about 1,800 people. Roughly 1,600 of them are in the United States, and about 650 of those are in Massachusetts. Once the new tax kicks in, that could all change. "We can't run this company at a break-even or a negative rate," says Packer, "so we will be forced to look at alternatives."

The company's first option is to pass the increase on to customers like hospitals and ambulance companies. That might or might not work, given that they are coming under increasing pressure to cut their own costs.

The next option is to cut research and development -- a short-term, money-saving move that will surely cost Zoll down the road. And a third option, says Packer, is to "look at trying to shift jobs to lower-cost places around the world." That would be bad news for Massachusetts and the USA.

It's still not clear precisely how the new system will work. The Senate bill, which becomes law as soon the the president signs it, imposes the $2 billion annual tax on the industry starting almost immediately. The government would calculate the size of the entire medical device industry and charge each company a fee based on its share of the market. That's how Zoll estimates its part will be $5 million to $10 million.

For Zoll, that's the worst-case scenario. Things will be a bit better if the Senate approves the reconciliation bill passed on Sunday by the House. One of the "fixes" in the reconciliation bill would impose a 2.3 percent excise tax on medical devices, going into effect in 2013. Even though it would cost the company about the same amount of money, Zoll executives prefer that scenario, if only because the delayed onset would give them time to prepare.

No matter what happens, the makers of the devices that save our lives are going to take a major hit.

American jobs will be lost, new devices will never be developed because of cuts in R&D, and people will die because a group of Democrats couldn't control themselves.