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New Health Care Plan Includes a Tax on Cosmetic Procedures

The new health care plan introduced to the Senate includes a proposal to tax some cosmetic procedures in an effort to pay for the plan.

They call it the "Botax." The White House and Senate Democrats have turned to a proposal to tax breast implants, tummy tucks, wrinkle-smoothing injections and other procedures as they search for ways to pay for costly health care overhaul plans.

Vanity was an easy target as lawmakers scraped for cash for the nearly $1 trillion plan to expand health care to millions of Americans who lack insurance. But it's no joke to the drug makers and people who perform the cosmetic nips and tucks. And they're fighting back.

Skin-smoothing Botox injections could be hard-hit. There were some 4.7 million last year and an average cost per visit of about $400, some including several injections. "It is a random hit on an easy target that is only punitive and not corrective," said Caroline Van Hove, a spokeswoman for Allergan Inc., the maker of Botox Cosmetic. "The bottom line is that taxing cosmetic procedures is unnecessarily punitive on people who have merely decided to enhance their appearance."

At issue is a proposal in the 10-year, nearly $1 trillion health care draft unveiled by Senate Majority Leader Harry Reid, D-Nev., that would slap a 5% excise tax on elective cosmetic surgeries and procedures. The plan, projected to raise $6 billion, wouldn't apply to surgery to fix a deformity or injury, but would include procedures such as face lifts, liposuction, cosmetic implants or teeth-whitening.

Easy target

The plastic surgeons may have seemed like an appealing bunch to pick on given that they had already been skeptical of the Democrats' overhaul proposal. But they say it will be a blow to countless American women—of every income level.

"The common misconception is that this is going to tax wealthy, suburban Republican women," said Phil Haeck, MD, of Seattle, Washington, the president-elect of the American Society of Plastic Surgeons. In fact, he said, of the 86% of cosmetic surgery patients who are female, 60% of them have incomes between $30,000–90,000.

In addition, he said the tax would be especially hurtful in tough economic times that have prompted many newly jobless women to look for ways to make themselves more marketable to prospective employers. He said, "They're competing with people 10 to 15 years younger than them and they want to look better."

The emergence of the tax in the latest Senate health legislation shows what can happen when an industry or company that's in Congress' cross-hairs isn't vigilant enough. Daniel Russo, MD, the Birmingham, Alabama, plastic surgeon who heads the American Academy of Facial Plastic and Reconstructive Surgery, said his group first heard of the cosmetic procedure tax idea over the summer. But after being assured by several lawmakers and senior congressional aides that it was not being seriously considered, the group opted not to engage in a major lobbying battle against it, he said.

"On multiple fronts, we were assured that this was not something that any one of the senators or representatives wanted to pursue. This is something that we did not foresee," Russo said in an interview. "We feel it's unfair to those people who've saved hard-earned moneys to have something to improve their appearance, and now may not even be able to afford it," he said.

His group isn't registered to lobby, although the American Society of Plastic Surgeons reported spending nearly $400,000 this year trying to influence Congress. The society, which has two in-house lobbyists, didn't list a plastic surgery tax among its legislative priorities in disclosures filed on Capitol Hill. And Haeck, president-elect of the society, said industry players whose products would be affected took the lead lobbying against it.

Allergan's shares were down more than 2% Thursday after news of the tax broke. The company, which recently projected net product sales for this year of more than $4 billion, expects the injectible wrinkle-smoothing medicine to rake in $1.3 billion in 2009. It has spent $1.4 million lobbying Congress on health care issues this year.

Shares sliding

Medical device and pharmaceutical giant Johnson & Johnson, a maker of breast implants, also saw its shares slide. The company has spent more than $3 million lobbying Congress this year on a wide range of issues, many related to the health overhaul. It was a major player in a successful fight by the medical device industry to get lawmakers to cut in half a proposed $40 billion tax on their products.

Lobbyists and aides familiar with the proposed 5% cosmetic surgery tax said Allergan and Johnson & Johnson, along with others in the industry, helped persuade lawmakers to slash it from a 10% levy, which had been projected to cost about $11 billion over a decade.

Accounts vary on who first dreamed up the Botax. It came out of a late-July meeting on health care that included Sen. Max Baucus, D-Mont., the finance committee chairman, and Peter Orszag, Obama's budget director, although neither man's staff acknowledges having hatched the scheme.

Now that it's in the Senate legislation, plastic surgeons and the cosmetic product industry are dusting off their arguments against it. Opponents cite as a cautionary tale a similar 6% tax in effect in New Jersey. Haeck contends that tax has cost the state $3.39 for every $1 collected. Whatever money would be raised, he said, would come from doctors and patients at a time they can ill-afford it, given the recession and rising unemployment. "These women come in, they've lost their jobs, they don't have the money for a face lift," he said.

Associated Press, November 19, 2009

 

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