Health care reform could include a tummy-tuck tax

The ongoing debate over health care reform is getting nipped and tucked, but not in the way you might expect. To make the new bill work, Congress has to find a way to pay the $848 billion tab.

The Senate has come up with $5.8 billion toward that goal -- thanks to proposed levies on lunchtime lipo, tummy tucks and eyelifts. A 5% excise tax on elective cosmetic surgery would kick in on Jan. 1, 2010, if the Senate version is adopted. But the cosmetic surgery industry is doing its best to keep that from happening.

The tax wouldn't apply to surgery intended to correct deformities resulting from disease or injury, so the aim would be to generate revenue from the purely elective procedures. As a luxury tax, it's unlikely to face much opposition. The American Society of Plastic Surgeons, however, sees hidden problems that it says will lead to unintended consequences.

Also, since 86% of cosmetic surgery patients are women, some critics are raising bias accusations. Jill Filipovic, a 26-year-old lawyer and blogger, told USA Today that women are under much more pressure than men to look younger: "It's an easy choice for senators who are overwhelmingly male to tax something they probably aren't going to use."

Additionally, the excise tax wouldn't be as targeted as many believe. Plenty of lower-cost cosmetic procedures are available, which has made the services much more accessible to the middle class. Dr. Ali Vafa, who runs New York Medical Aesthetics, a nonsurgical cosmetic medical practice in Manhattan, says some treatments cost as little as $250, which opens the industry to a far larger constituency than just the high-net-worth set. In fact, the American Society of Plastic Surgeons says 60% of female patients buying cosmetic surgery have annual incomes of $30,000 to $90,000.

Liposuction Abroad?

In some cases, the tax could become difficult to enforce because the line that separates exempt and taxable procedures may be vague. USA Today reports that according to Dr. Phil Haeck, a nose operation that clears an airway wouldn't be taxed, but throwing in a nose straightening could change the situation. If a tax official were to examine the transaction, there's no guarantee as to how it would be interpreted.

And there's the risk that an excise tax on cosmetic surgery would boost medical tourism because wealthier patients -- those targeted by the bill -- might dash off to foreign countries to beat the tax. In the wake of a 6% cosmetic surgery tax in New Jersey five years ago, patients set out for New York and Pennsylvania instead. A federal measure could push medical consumers to foreign, and higher-risk, markets such as Thailand, Mexico and Costa Rica.

Vafa, whose practice has been growing robustly this year, indicates that the business risks associated with a tax on cosmetic surgery are palpable. "It would affect us," he confirms, saying, "We would have to raise our prices, and people seem to be very conscious about prices as it is." Patients are shopping around, he says, "which they didn't do as much before the recession."

Little Sympathy

Unfortunately for the cosmetic surgeons, their concerns aren't likely to resonate with large portions of the American public. Cosmetic surgery is still seen as a luxury few can afford, especially with high unemployment so prevalent. Those who can shell out the cash for these procedures, of course, probably won't win much sympathy.

So, it isn't surprising that Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants, thinks this provision will survive the debate. The senators generally haven't shown any opposition to it, and the real fight will probably remain centered on government-funded insurance alternatives.

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