Nova Cosmetic Center

Dec. 7 (Bloomberg) -- A tax on breast enhancements and other cosmetic care, similar to one proposed in the U.S. Senate’s health-overhaul legislation, doesn’t generate even a third of the $30 million a year originally projected for it in New Jersey, the only state with such a levy.

That program, begun in 2004, grossed about $9 million last year, according to data from the state’s legislative services office. That doesn’t include the cost of administering the 6 percent levy, which the office doesn’t have figures on. The 5 percent U.S. tax pushed by Senate Democrats seeks to gain $6 billion over 10 years to help pay for the health overhaul.

The New Jersey tax hasn’t been worth the controversy that followed, said Joseph Cryan, the assemblyman who proposed it. It has spurred sometimes angry debate from doctors over the medical necessity of procedures, and chased customers out of state, he said. It also prompted charges of discrimination against middle- class women, who make up the majority of patients, according to the Chicago-based American Academy of Cosmetic Surgery.

’’It was a real education,’’ said Cryan, a Democrat who now wants the levy repealed, in a telephone interview. “We essentially discouraged the business from happening at all.”

Susan Hughes, a Cherry Hill, New Jersey, facial surgeon, said her business dropped by 10 percent when patients began crossing the state line to Pennsylvania. Administering the tax strained relationships with patients, and created extra work and costs for her office, she said.

‘You Idiots’

“We become the tax collector,” Hughes said in a telephone interview. “Now you’re going to repeat that on a national level? You idiots!” Hughes’s office manager, Jaime Castle, said she’s also concerned about layering the taxes, making New Jersey residents pay a combined 11 percent.

In the U.S., about 12 million people spent $10.3 billion in 2008 on cosmetic procedures and products, according to the American Society of Plastic Surgeons, based in Arlington Heights, Illinois. About 90 percent of patients are females, the Society said on its Web site.

Americans paid $391 on average for a treatment with Allergan Inc.’s brow-smoothing Botox, $3,348 for breast enlargements using implants made by Allergan Inc. and New Brunswick, New Jersey-based Johnson & Johnson, and $6,012 for facelifts, according to online data from the society.

Senate Majority Leader Harry Reid, a Nevada Democrat, proposed the U.S. cosmetic care tax without specifying which products or procedures would be taxed. The levy is included in the Democrats’ health-care overhaul, now being debated in the U.S. Senate.

Obama at Capitol

President Barack Obama visited the U.S. Capitol yesterday to press Senate Democrats to agree on health legislation as lawmakers struggle to resolve disputes over issues including a proposed government-run insurance plan.

Democrats met throughout yesterday to seek an alternative to Reid’s plan to create the new national program to cover the uninsured. Opposition within his party leaves Reid at risk of falling four votes short of the 60 he needs to pass the legislation, the most sweeping overhaul of the nation’s health- care system in more than four decades.

The cosmetic-care levy meets the goal of financing the legislation within the health-care system, said Jim Manley, a spokesman for Reid, in an e-mail.

David Pyott, chief executive officer of Irvine, California- based Allergan, and specialists led by Phil Haeck, president- elect of the plastic surgeons’ society, point to New Jersey as a model of what can go wrong.

‘Ill-Conceived’ Plan

The Senate proposal is “ill-conceived, dreamt up at the last minute, and discriminatory toward women,” Pyott said in a telephone interview. Lawmakers are deciding to target “soccer moms,” and declining to take similar aim at the erectile- dysfunction drug Viagra, made by New York-based Pfizer Inc..

Viagra is also about “feeling good,” Pyott said.

Manley, from Reid’s office, declined to answer questions about the New Jersey program, or the concerns cited by Cryan and Pyott. Senator Barbara Boxer, a California Democrat involved in women’s health issues, said the tax doesn’t discriminate.

“Men get cosmetic surgery more and more,” Boxer said in an interview. “I don’t think it’s the biggest nightmare in the world if you pay a little extra for your Botox when it raises revenue that helps provide health care” for uninsured people.

Senator Kent Conrad, a North Dakota Democrat who sits on the Senate Finance committee, said he didn’t have concerns about the revenue-raising potential of the tax. The projections were based on estimates by the Congressional Budget Office, Conrad said in an interview.

“I have a great deal of confidence in the CBO,” he said.

Reconstructive Surgery

The U.S. tax wouldn’t apply to reconstructive surgery, or any procedure needed to improve a congenital deformity, personal injury or disfiguring disease, according to the legislation that the Senate is debating.

For Theresa McKenrick, 48, of Rock Hill, South Carolina, having cosmetic surgery will make her feel better about herself. A part-time teacher and mother of two, McKenrick said a small inheritance is the only way she can consider paying $14,000 for a breast lift and tummy tuck.

Such enhancements help “change a woman’s state of mind and perception of her own body,” she said. “That’s important.”

Cryan said the line between what is elective and what is medically necessary for patients isn’t always clear. That made administration of the New Jersey tax difficult, he said.

Reviewing Details

Some people may get a nose job “because they want to look better; some people have it because they can’t breathe,” said Steven Blair Hopping, a Washington surgeon, in a telephone interview. Reviewing the details behind these decisions for the Internal Revenue Service may also be “a real violation” of privacy provisions in the Health Information Portability and Accountability Act, he said.

Pat McMenamin, a surgeon in Sacramento, California, said that cosmetic surgery can be as much about mental health as it is about physical well-being.

McMenamin said he recalls working on “a younger male patient who was almost suicidal over his nose.”

“Or you take a young man with male breasts who won’t take his shirt off,” McMenamin said. “Is that elective? Or you take a 20-year-old who is going bald, or a young woman with absolutely no breast tissue.”

Jane Tingle, 77, of Rocklin, California, said she wonders if her Botox injections would be taxed. Tingle, a retiree on a fixed income, now pays about $350 a shot to treat her debilitating migraine headaches every six months, she said. The tax would add $17.50 for each session.

‘A Lifesaver

“It’s not cosmetic for me,” Tingle said in a telephone interview. “It changed my life, it’s such a lifesaver.”

While studies have shown Botox can help against this form of pain, it isn’t approved for that use by the U.S. Food and Drug Administration. Allergan expects a decision on its application to market Botox as a migraine treatment next year, said Caroline Van Hove, a company spokesman, in an e-mail.

The drug generated $1.3 billion in worldwide sales in 2008, the company said. The product is based on a toxin that paralyzes facial muscles. Botox was used in 5 million U.S. procedures last year, making it the top physician-administered, non-surgical cosmetic treatment, according to the plastic surgery society.

Beyond the effect on consumers, opponents of the legislation say it won’t produce as much revenue as the Senate Democrats suggested in their legislation, will require a system of administration that will decrease revenue.

40 Percent Drop

Across the U.S., doctors reported a 40 percent drop in cosmetic procedures during the recession, suggesting the federal tax payout -- based on 2008 figures -- wouldn’t reach projections, said Haeck, of the plastic surgeons’ society.

He also said almost two-thirds of patients earn less than $60,000 a year, which he said suggests the tax would hit hardest against a group it may not have been targeted at. A U.S. tax may push higher-earning women from the country, he said.

“The misconception is they would be putting a tax on rich suburban women, maybe even rich suburban Republican women,” said Haeck, who practices in Seattle, in a telephone interview. For the rich, “we already see a sizable number of people going on medical tourism trips to Thailand, South America, Mexico. This might tip the balance.”

To contact the reporter on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net.