Doctors Ask: What Do You Mean, Cosmetic Tax?

Doctors already envision loopholes in health care bill's cosmetic surgery tax.

November 20, 2009, 6:54 PM

Nov. 23, 2009— -- Tucked into the last hundred pages of Sen. Harry Reid's proposed health care bill is a 5 percent tax on cosmetic surgery that has doctors from various specialties wondering if they will soon become tax collectors who must also interpret the tax code.

If the bill passes as it was proposed Nov. 18, doctors will be asked to collect tax on surgical procedures that fall under the bill's definition of "cosmetic," regardless of whether the procedure is covered by insurance. If the doctors don't collect the tax, they are responsible for paying it.

The American Academy of Cosmetic Surgery was quick to criticize the tax as an affront to middle-class women. Dr. Patrick McMenamin, the group's president, said 86 percent of cosmetic surgery patients are working women between the ages of 35 and 50, with an average income of $55,000 a year.

A nationwide 5 percent tax on cosmetic surgeries would amount to $5 billion to $8 billion a year, according to McMenamin's estimates.

But he and other doctors point out that New Jersey -- the only state to impose a cosmetic surgery tax -- generates 59 percent less money in taxes than projected.

"As in New Jersey, the federal government will probably invest $3 to $5 for every dollar collected," said Dr. Robert Weiss, immediate past president of the American Society for Dermatologic Surgery.

Doctors from other specialties also worry that the language of the bill could open a Pandora's box of confusion about which procedures are cosmetic for some patients, and which are not for others.

"They're trying to say they're going to tax cosmetic, and not tax reconstructive surgery, but the way it's written, it's leaving itself wide open," said Dr. Mitchell Roslin, chief of bariatric surgery at Lenox Hill Hospital in New York City.

Reid's press office did not respond to a request for comment on doctors' criticism or confusion about the tax.

But a spokesperson for the Nevada Democrat confirmed by e-mail that, "The tax applies to any cosmetic surgery or other similar procedure which is performed by a licensed medical professional and is 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 Unsure If Bill Would Make Them Tax Interpreters

Such language is adapted from the IRS tax code prohibiting people from taking tax deductions on cosmetic surgeries. Make a mistake, and IRS might initiate an audit.

But, in the case of the Reid bill, it's unclear if it would be up to the physician performing a procedure to decide whether to collect a tax. And doctors see plenty of gray areas where the law would potentially tax patients who are in need of legitimate care, or allow doctors to fudge what is non-cosmetic.

For instance, Roslin of Lenox Hill hospital said, 10 percent of his patients who go through bariatric weight loss surgery then choose to have excess skin removed. The tummy tucks, face lifts, full body tucks or reconstruction for breasts that "sag down like water bottles" from years of excess weight could all be construed as cosmetic. But words such as "congenital" might confuse the argument.

"Obesity is a congenital disease: 70 percent of variants of height and weight are influenced by your genes," Roslin said, alluding to the "congenital abnormality" exception in the bill's cosmetic procedures definition.

"It also could be argued that it's a combination of genes, and a combination of an accident," Roslin said.

He said most people would consider a car crash an accident but a culture that supports obesity is not.

"If I eat too much when there's available food [and need surgery]," then he guessed people would argue it would not be an accident. But if someone drank too much and "I got myself drunk and drove into a tree, then I'm entitled to a nose job?" he asked.

Roslin said the flaps of excess skin left after losing hundreds of pounds can sometimes cause rashes. He wondered if the patients who had rashes would be exempt from the tax because it treated a medical problem, but the patients who didn't have a rash would have to pay.

A host of other surgeries to correct physical disfigurements that are not congenital, or that were a side effects of other medical treatments, might not fall under the exceptions listed in the bill, either.

Several doctors wondered whether breast reconstruction after a mastectomy would count as cosmetic because a "disfiguring disease" didn't misshape a woman's breasts, the treatment did.

Medications, Not Just Disease, Can Cause Deformities, Too

In a similar case, liposuction would likely be taxed in many cases but liposuction for lipodystrophy might be open to debate. Lipodystrophy is a misplaced collection of fat, often seen as a hump on the back of the neck, that is caused by certain medications -- including protease inhibitors for HIV -- but not caused by accidents or disfiguring diseases.

"Would a condition that is not physically a medical issue, but is causing emotional distress to a patient, be subject to a 5 percent tax?" asked Dr. Mark Abdelmalek, chief of laser and dermatologic surgery at Drexel University College of Medicine in Philadelphia.

Abdelmalek could rattle off a list of non-congenital abnormalities that are medical problems but could be taxed as cosmetic issues under the language of the bill, including treating alopecia (hair loss) in women, and removal or destruction of irritated skin tags.

Dr. Garry S. Brody, professor emeritus of the University of Southern California Keck School of Medicine, wondered if the broad language regarding "payment for a procedure" would cause confusion and a host of loopholes.

"[There is] no indication as to whether this includes ancillary fees such as anesthesia and facility fees as well, as the physicians fees," Brody said. "It will be an accounting nightmare and probably tempt fraudulent billing.

"As this is a private relationship with doctor and patient, it will probably be under-reported."

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