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What Is the Medical Device Tax?

Posted on 09/30/2013 by | Washington Watch | Comments

Bulletin Today | Politics Print Print

You might not be familiar with the tax on medical devices — pacemakers, artificial joints and the like — that’s emerged as an unlikely issue in the battle over a government shutdown. Here’s a primer.

healthcare symbolHouse Republicans insist the tax must be repealed, and the health care law delayed for a year, if funding to operate the government is to continue. From the other side, “The Senate will reject any [funding bill] that includes a repeal of the medical device tax,” Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid, told the Associated Press.

The tax is bringing in an estimated $29 billion from medical device makers over 10 years, to help pay for Obamacare. It’s one of several revenue streams that the law is collecting from various parts of the health care industry. By expanding health insurance coverage to millions of uninsured people, the law in theory creates more revenue for providers; they in return pay more in taxes and fees.

AdvaMed, the trade group representing device makers, argues against the tax on several fronts. The group argues that the tax will stifle industry research, clinical trials and investment of manufacturing. Plus, it says that industry costs will be passed on to consumers through higher health care costs. Products sold directly to consumers, such as eyeglasses and hearing aids, are exempt from the tax, according to the IRS.

But the trade group’s key contention is that the tax will cost the country tens of thousands of jobs because manufacturers will move operations overseas. Supporters of the health law counter that the tax applies to devices made both here and abroad.

Jobs is the issue that Republicans jump on, and AdvaMed eagerly notes that many Democrats in the House and Senate have also supported repealing the tax — though never in enacted legislation.

The New York Times reports that the device makers have spent millions on lobbying on the topic and millions more on campaign donations to members of Congress.

If the device makers get a pass, other providers, such as the prescription drug makers and health insurers, will likely want out, too, Politico points out.

Ross Baker, a political science professor at Rutgers University in New Brunswick, N.J., describes the attempted repeal of the tax as a “salami tactic”: “If you can’t execute [the health care law] outright, you kill it by the death of a thousand cuts.”

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