Medical Device Excise Tax : Should it stay or not?

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reform

Picture source: Drugwatch.com

Medical Device Tax was enacted in 2010 as a part of for the health care reform (Patient Protection and Affordable Care Act). This policy intended to address the budget deficit in the health system, improve and extend health benefits to more people and help pay for the health reform to an extent by imposing a 2.3% excise tax on the sale of certain taxable medical devices by the manufacturer or the importer of the device.

Medical device associations MDMA, AdvaMed have been trying hard for the device tax to be repealed and have publicized some exaggerated concerns. Other stakeholders (AHA, AHIP, AMA etc.) in the health industry have favored the repeal more as a reaction to the anticipated negative impact rather than a direct impact of the policy itself. Scrutiny and analysis of these concerns by the Joint Committee on Taxation, Bloomberg Government has not revealed much objective outcome. There will be some increase in cost or decrease in profits for the device manufacturers, but so has been the case for any other stakeholder in the health industry due to the health care reform.

imagesCA8ENFCE

Picture source: Hermes Press

In March 2013, the Senate voted 79-20 to end this tax. With the tax repealed, there will be a need for other measures/policies to support the health system. If it is not the device tax, it will be some other form of budget cut in the health system to compensate for the health care spending and minimize the budget deficit. There will always be some stakeholder(s) in the health system that will advocate being affected more than the others. The key is to find the balance and choose the option that benefits the most and supports the health system positively. This policy has the potential to incentivize value based services over the current cost and volume based services in the health system and should not be repealed but rather amended, as needed, to positively support the health system.

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2 Responses to “Medical Device Excise Tax : Should it stay or not?”

  1. evapurkey Says:

    I wonder how much the push-back against this tax ties in to a general American anti-tax stance. As I read the MDMA information on their website (see link above) the arguments are old–stifling innovation, harm patient care, etc. Obviously, industries will object to taxes levied against them, however as Amishra mentions above, many stakeholders will need to contribute in paying for healthcare reform. In general, the industries involved in health (I think of pharmaceuticals, for example) have extremely high profits, a small tax on which would not irrevocably undermine their ability to innovate. As a Canadian observing healthcare reform from north of the border, there really seems to be a lack of general solidarity and compassion in terms of trying to provide a healthcare system that actually furthers health for all Americans.

    I understand that due to the current situation in US politics it has been difficult to move a lot of issues through, and perhaps this is one. America is a world leader in so many areas, the fact that the healthcare system is so broken, complex, and inefficient remains to much of the world a mystery.

  2. jjgpierce Says:

    I agree that the amount of misinformation regarding the Medical Device Tax was very profound at the beginning of the year. Not only from medical device makers, but also from medical associations. The US senate did repeal the tax, but it hasn’t gone into affect as it was part of a budget amendment in a non-binding resolution. Currently there is a bill titled “Protect Medical Innovation Act of 2013” with a similar intention of repealing the tax. This will most likely pass in the House of Representatives due to bipartisan support and strong lobbying by the medical device industry, but may not pass a Senate vote as there would be a $30 billion deficit to contend with. In addition, President Obama has declared that he will veto the bill.

    Taxes may or may not hurt the medical device industry. While it is estimated that 43,000 jobs may be at risk (http://marketrealist.com/2013/08/why-the-medical-device-tax-repeal-bill-shouldnt-pass-anytime-soon/) the tax would most likely become hidden and would be passed onto the consumer with a slightly higher medical device cost. No matter how you look at it, the ACA needs money to pay for its implementation and expansion of current healthcare. No one wants to pay extra, but the money has to come from somewhere.

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