Monday, September 30, 2013

Dr. Device

As the debate to shut down the government and yet another effort to repeal or delay Obamacare raged on, a new debate about Obamacare has arose.  The Republican party has decided to focus on an issue most of America hasn't heard much about, the medical excise tax.

The medical excise tax is a 2.3% tax on sales by medical device makers.  According to the Congressional Budget Office (CBO), this tax will raise $29 billion in revenue over the next ten years.  This money will then be plugged into expanding health insurance coverage.

Politicians on both sides of the aisle have been critical of the medical excise tax.  After the Affordable Care Act became law, seventy-nine Senators supported a resolution opposing the tax.  Meanwhile, in the House of Representatives, a bill repealing the tax has 260 co-sponsors.  Senators from Minnesota opposed the medical excise tax from when it started because Minnesota hosts Medtronic, a large medical device manufacturer.  Medical device manufacturers have been pushing for repeal of this tax ever since the Affordable Care Act.

Republican Congressional members were sent a fact sheet about the medical device tax. The medical supply and manufacturing companies have spent $150 million, since 2008, trying to repeal the medical excise tax. That $150 million has certainly changed public opinion as people routinely state that the medical excise tax will cost thousands of jobs.

One industry report found that 43,000 jobs would be shipped overseas due to the tax.  But as the Center for Budget and Policy Priorities points out, the tax applies to companies that import medical devices to America, as well as companies that produce the devices domestically.  So if they move jobs overseas, it's not because of the tax.  More likely, they'll move jobs overseas for other reasons.

In Ohio, home to a number of small device manufacturers, industry officials told the Columbus Dispatch that they could not cite a single example of a company cutting jobs in anticipation of the tax.  Health care reform could also benefit the medical device industry.  As 27 million more Americans are covered by health insurance, the increase for medical devices could, in fact, increase.  Health care reform will increase the number of elective procedures that will be performed on those previously uninsured.  Bloomberg government found that the effect of the tax could be offset by the demand of millions of new customers.

It's not hard to feel bad for these companies.  After all, the medical device industry estimates that they receive $106 to $116 billion per year.  The largest companies, not surprisingly, make up the vast majority of medical device sales.  The ten largest companies for medical devices will account for 86% of medical device sales and pay 86% of the excise tax receipts 

I'm sure they're not upset about this.  It's not as if Republican Congressmen are signing letters written by an industry lobbyist.  But industry lobbyists always tell the truth and the whole story.  So, that's fine.  After all, they are the experts.    

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