'Bo-Tax' for Health-Care Reform?

Plastic surgeons shriek as Democrats consider an excise tax on elective cosmetic procedures to raise funds for health reform

Plastic surgeons are hoping to nip a proposed 5% excise tax for elective cosmetic procedures from the health-reform measure Senate Democrats plan to vote on this week

The tax is just one of many ways the Senate bill aims to raise $6 billion to help pay for the $848 billion plan, which the Congressional Budget Office estimates would lower federal deficits by $130 billion over 10 years. The tax in the Senate bill would apply only to surgical procedures that qualify as "not necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease." Doctors and health centers would collect the funds from patients and send them to Uncle Sam.

More than 12 million surgical and nonsurgical (minimally invasive) cosmetic procedures were performed in the U.S. in 2008, according to the American Society of Plastic Surgeons (ASPS). Total spending on those procedures totaled $10.3 billion, with nearly half—$5 billion—deemed reconstructive procedures. Cosmetic procedures that are not elective would not be subject to the Senate bill's tax.

Senate Majority Leader Harry Reid (D-Nev.) and his fellow Democrats now face the task of gathering enough votes in the Senate, though the final bill could emerge without the proposed tax on elective cosmetic surgery. While it's unclear if the tax has any particular broad support in Congress, it helps Democrats raise funds to help pay for the bill. "This is an environment where they need as much money as possible—everything is on the table," says Daniel Clifton, a Washington-based policy analyst at Strategas Research Partners. The first vote on the Senate bill is expected on Nov. 21, Reid said Thursday.

an unfair burden on women?

Overwhelmingly, the majority of cosmetic -surgery patients are women, who underwent 91% of the total procedures, or 11 million, in 2008. For this reason, critics say the proposed tax places an unfair burden on a subgroup of the population, forcing them to produce revenue to fund health-care reform that attempts to benefit a wide range of Americans. "It's just unfair—I don't think the people who wrote this understand who they are really taxing," says Dr. Phil Haeck, a plastic surgeon in Seattle and president-elect of the ASPS. "This is truly a women's tax, not a man's tax," Haeck says, likening it to taxing women's perfume but not men's cologne. He says 80% of the procedures he performs qualify as elective.

Critics argue that while the architects of the tax may intend it to befall only the wealthy—suburban, upper-class housewives flocking to Botox injections and breast enhancements, the reality is far different. Dr. William K. Boss, a plastic surgeon with practices in Hackensack, N.J., and Manhattan, says the middle-class dominates his client base, not the wealthy or elite. "These are people just trying to better themselves," Boss says. Plastic surgeons are worried the tax could discourage people from seeking their services. And as medical tourism overseas increases in response to lower prices for a range of surgical procedures, Boss fears the proposed tax could lure more people seeking elective cosmetic surgery to venture abroad.

New Jersey, where Boss has practiced for 27 years, enacted a 6% tax starting in September 2004 on the purchase of certain cosmetic medical procedures. Critics of the tax say the revenue it has generated has been far less than projected and argue that it doesn't even meet the administrative costs the state spends to collect it. (New Jersey tax officials did not respond to a call for comment.)

Since 1997 the total number of cosmetic procedures performed in the U.S. has risen by over 160%, according to the American Society for Aesthetic Plastic Surgery. Last year, despite the deep recession, cosmetic procedures rose 3%, to 12.1 million, according to the American Society of Plastic Surgeons.

Botox injections lead the list of the most common cosmetic procedures, and the top Botox maker, Allergan (AGN), saw its shares slip by 2.3% on Nov. 19. Caroline Van Hove, a spokeswoman for Irvine (Calif.)-based Allergan, called the tax "ill-conceived" since it does not reduce costs or seek to change unhealthy behaviors. In an e-mail, Van Hove says the tax "is a random hit on an easy target that is only punitive and not corrective."

Before it's here, it's on the Bloomberg Terminal.