Posted in Medical Device Business by Nancy Crotti on January 8, 2015
The medical device tax is the issue that won’t go away. Elected officials and medical device companies began railing against Obamacare’s medical device tax before it even became law and have complained about it ever since it did.
Now with a Republican majority in Congress and bipartisan support from legislators in states that host major medtech firms, it appears the 2.3% tax may be axed from the Affordable Care Act by the end of March, according to a report in the political news website thehill.com.
The topic of repeal raises a few big questions:
Will Congress come up with enough money to replace the $29 billion the tax would raise over a decade?
If it doesn’t, will President Obama veto a bill to repeal the tax, introduced Janunary 6 by Minnesota Republican Rep. Erik Paulsen? (Minnesota, for now, anyway, is home to Medtronic, one of the world’s largest med tech companies. If the Irish High Court approves, Medtronic will move its headquarters to Dublin, Ireland, as part of its purchase of Covidien. The North Star State has many other medtech and life science companies.)
Will hardline Republicans, who want to repeal the entire Affordable Care Act, go along with a piecemeal disassembly?
Does the tax really hurt medical device companies, given the influx of newly insured Americans under Obamacare? It was included in the law to pay for their care.
Paulsen and Rep. Ron Kind (D-WI) said Wednesday they expected lawmakers to replace the money lost in a repeal, the Hill report said.
Senator Orrin Hatch (R-UT), who last April called the levy a “stupid, dumbass tax,” does not believe a “pay-for” will be necessary to get Paulsen’s bill passed. The incoming chair of the Senate Finance Committee, Hatch proposed his own repeal bill last year. Sens. Al Franken and Amy Klobuchar (D-MN.) have also long opposed the tax, and medtech companies have paid lobbyists significant sums of cash to pressure Congress to repeal it.
A Washington Post analysis, however, disputes the conclusion that the tax has costed thousands of medical device professionals their jobs.
Lawmakers often cite a late 2013 survey by the Advanced Medical Technology Association (AdvaMed) that reported 14,000 lost jobs and “foregone hiring” of 19,000 because of the tax to back up their claims of job loss.
Of the group’s 300 members, 38 responded, representing “22.3% of total industry revenues ($35.5 billion), so job losses and jobs foregone reported by survey respondents were multiplied by (159.4/35.5) to arrive at an estimate for the industry as a whole,” the survey’s methodology section says.
Medtronic and Boston Scientific each announced layoffs of 1000, and Abbott Laboratories, 450, in 2012 and 2013. A 2014 report by the Congressional Research Service found the tax to be an inefficient fundraising mechanism. Because businesses can deduct the 2.3% excise tax from their federal taxes, the effective tax rate is about 1.5%.
