This medical device tax is just not going to end well

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Erika Johnsen @ Hot Air:

Conventional wisdom: If you want less of something, put a tax on it. Obamanomics wisdom: Put a tax on… medical devices?! I.e., add another barrier to the industry whose slightest innovations can directly result in streamlined costs, improved efficiency, better health-care options, and saved lives? What the what?

Embedded within the shadowy depths of the Patient Protection and Affordable Care Act (sometimes, I like to use its official name just to re-appreciate the irony of “patient protection” and “affordable”) is a 2.3 percent excise tax on the sale of taxable medical devices by the manufacturer/importer — and it’s no small thing. Happening now:

Medical device executives will descend on Capitol Hill today to press members of Congress to address the 2.3% medical device tax before it takes effect in January. …

“Without action from Congress, implementation of the medical device tax will cost our economy thousands of high paying jobs,” MITA executive director Gail Rodriguez said in prepared remarks. “These job losses will directly impact patient access to the most advanced, life-saving medical technologies available.” …

The letter includes support from physician groups, venture capital firms and other organizations asking the Senate to repeal the 2.3% levy on medical device sales, which device makers will start paying in at the start of next year.

The tax won’t actually hit until this January 1st, but the repercussions are already making themselves felt in the industry. Some more startling details from industry experts, via Politico:

Medical innovation is key to providing cutting-edge, lifesaving technologies to patients. Between 1980 and 2000, new diagnostic and treatment tools helped increase life expectancy by more than three years. But the new tax will take money from our research and development pipelines, reducing our ability to discover and develop lifesaving medical devices such as heart valves, molecular diagnostic tests and MRI machines. …

Many of the novel, cutting-edge medical technology innovations come from small companies with very few employees. Unfortunately, the medical device tax will hit these small companies and startups hardest, because it will be applied on sales, regardless of whether a company is making any profit. Small businesses often suffer losses in the early years of operation when they are investing in research and development on new products. Paying a sizable new tax while incurring traditional startup-driven losses will be more than many small businesses can bear. …

This innovation tax also targets an American manufacturing sector created by companies choosing to locate in the United States even as markets grow beyond our borders. … The U.S. accounts for 40 percent of the global medical technology market. We have a $5.4 billion trade surplus because American workers create high-tech, top-quality medical devices…

And yet, this tax threatens these gains. At least three studies have estimated the tax will cost tens of thousands of jobs — by one estimate as many as 43,000 jobs.

If the Democrats’ real goal with ObamaCare is really all about bringing down medical costs and improving patient care, they’ve sure got a funny way of showing it. The logic eludes me.

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Curt served in the Marine Corps for four years and has been a law enforcement officer in Los Angeles for the last 24 years.

4 Responses to “This medical device tax is just not going to end well”

  1. 1


    What about when the bills for these devices actually come due? Who pays for it?

    If you said the government, even under medicare, you’d be wrong. On several fronts. One, even if the payment on such devices are capped by the government, the government will pay what it always does. A percent only of the total cost. Meaning that the manufacturer will mark up the cost to make up the difference, just to stay in business. And who pays for that then? Private health insurers, who pass their cost onto it’s customers by way of increased premiums. Or, people who still opt for no insurance. Who now will pay a heftier amount for the item they could have had for a much lower price this year.

    In the end, it will be just like any other tax on private industry. The customers, of whom many are the middle-class, will foot the bill. Just as it always is.

  2. 2

    Liberal1 (Objectivity)

    Sounds like a bunch of conservative hype to me. If these companies can’t absorb a 2.3% tax increase, I would say that they’re just cry-baby conservatives. Even if those companies passed on the total tax to the final consumer, who was required to pay the entire 2.3% tax on their base cost of the product, it wouldn’t be that great. For example, the average cost for a hearing aid is $2000 these days. If the consumer was responsible for the entire excise tax as applied to their purchase price, they would only pay less than $50. I doubt if that amount of money is going to make the difference between buying or not buying. The conservative-news-entainment-complex is just making a big deal out of something to satisfy their readers’ fetish about no taxes.

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