Hospitals urge Louisiana lawmakers to stop taxing stents, pacemakers

As Louisiana faces a $1.3 billion budget hole next year, one lawmaker is seeking to add an exemption to the state sales tax that would cost the state budget $16.4 million.

That’s because the Legislature, in the chaotic final moments of the first special session last year, passed a law that suspended a host of sales tax exemptions to raise enough money to cover a budget shortfall. In doing so, lawmakers effectively began taxing medical items like stents, pacemakers and surgical supplies.

Now the Louisiana Hospital Association is lobbying to exempt those items again, arguing the state is taking away resources from an industry that has already grappled with repeated budget cuts over the last several years.

“It’s certainly a financial drag,” says LHA President and CEO Paul Salles. “We think a lot of the Legislature agrees with us that this should not have been a part of the increased taxes. … We struggle with finding that funding to begin with.”

Lawsuits over the tax are still making their way through court, but state Sen. JP Morrell, D-New Orleans, who is proposing the bill to exempt medical devices, says he hopes to clear up the issue this spring.

“The most expensive medical devices are not really optional,” Morrell says. “This seeks to put it back the way it was.”

In adding the exemption, lawmakers would have to find $16.4 million more in budget cuts or tax hikes, adding to the already difficult task of grappling with the looming budget crisis. But Morrell says the move is a no-brainer.

Salles has received positive reaction from legislators. He says he believes the removal of the sales tax exemption was an inadvertent consequence from sweeping sales tax changes that lawmakers eventually somewhat cleaned up in the second special session last year.

Initially, the Legislature began taxing tissue for human transplants, prosthetic limbs and meals sold in medical facilities, but decided later in the year to reinstate those exemptions. Hospitals have had to eat the costs, as they negotiate their prices with insurers in contracts that were already locked in by the time the tax exemption was suspended.

“The point is we think it’s bad public policy, particularly in a state where we struggle to fund health care,” Salles says. “This diverts precious resources from patient care.”

Read a Business Report feature on the legal challenges to the state’s sales tax on medical supplies.

—Sam Karlin

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