Thursday, August 18

Medical Device Tax Draws Ire

The Affordable Care Act has long been a divisive topic among politicians, with many feeling that the reform attempt best exemplifies a system of government that has become extremely partisan over the years. However, one element of the ACA’s legislation has ironically become one of the few issues to unite both Democrats and Republicans: a medical device tax, enacted in January 2013, has drawn the ire of politicians and lobbyists on either side of aisle for over two years.

Somehow, the controversy over the bill, which places a 2.3% levy on everything from IV bags to artificial hip joints, has continued unabated, with a number of proponents and opponents publishing their arguments in the first few days of 2015. This raises an important question: is the medical device tax hurting or helping the American healthcare industry?

For most politicians, health centers and companies, the answer is clearly the latter: most see the medical device tax as a threat to job creation, device innovation, and the level of patient care. In a country where 80% of medical device manufacturers reportedly have fewer than 50 employees, and 98% have less than 500, opponents say that this tax threatens the industry’s economic stability, causing companies to draw less profit and even send jobs overseas. Moreover, some critics have reported that the tax has caused a decrease in the number of investments in new therapies, stalling innovation. Dr. Tom Fogarty, an American surgeon and inventor best known for designing the embolectomy catheter, went so far as to say that his success would have been impossible if the medical device tax had been in place at the start of his career.

However, supporters of the medical device tax see the levy as a necessary method of supporting healthcare reform; without the bill, the Affordable Care Act could lose $30 billion over 10 years, greatly reducing the program’s ability to expand health insurance coverage. An editorial from USA Today pointed out that simply repealing the tax would therefore violate regulations which require Congress to find alternative sources of revenue, as well as put an estimated $370 billion of health care funding in jeopardy over the next 10 years. USA Today also cited a study from the nonpartisan Congressional Research Service, which found that the tax would have little to no effect on the medical industry, instead of the 43,000 jobs the opposing side claims would be lost.

As a tax which primarily affects companies and healthcare institutions, the medical industry has reportedly spent $150 billion lobbying against the medical device bill. But is this levy really a threat to the industry’s prosperity and innovation?

The medical device tax is believed to be a major topic of discussion in Congress’s new session, which begins Tuesday, January 6. Already, two Congressman, Republicans John Katko from New York and Erik Paulsen of Minnesota, have announced that challenging the medical device bill will be their first act for this year’s Congressional session.

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