Will The President Heed The Call To Repeal The Medical Device Tax Law?

Is there a need to repeal the Medical Device Tax?

Repeal Of Medical Device Tax Law

In light of the reckless and uncompromising stance of both the Republicans and the Democrats which has taken the nation to the brink of default, the two political parties are urged to set aside party differences and look into the benefits of repealing the Medical Device Tax Law which has drawn support from some Republican and Democrat members. The repeal of the 2010 health law’s tax on medical devices has been coming up and could be what the government desperately needs to act on to save face amidst their party battle on the nation’s budget.

infrared heater mounted on awning or parasolWhat Is The Medical Device Tax Law?

This law is part of the Affordable Care Act passed in 2010 which imposes 2.3 percent tax on gross receipts for medical device. Since the beginning of 2013, manufacturers and importers of medical devices have paid 2.3% tax on the sale of any taxable medical devices. This would include devices such as pacemakers, infrared heat lamp devices, artificial hips but not devices sold over-the-counter like contact lenses or eyeglasses.Specialty Bulb - Heat Lamp Aug 2013Model_P6_of_1967

Supporters of the Medical Device Tax Law

Despite the significant support of the proposed repeal from both parties, those who support the law fear that it could create a stampede of demands for similar tax cuts or rollbacks from insurance and other health care providers who are similarly subject to new taxes and fees to help pay for Obamacare subsidies and Medicaid’s expansion.

New Taxes and Fees

In addition to the medical device taxes, health insurer’s annual fee is expected to raise over $100 billion spread over ten years. Fees for brand named drugs are expected to bring in another $34 billion. Come 2018, a 40 percent excise tax on the portion of most employer-sponsored health coverage exceeding $10,200 a year and $27,500 for families, which in reality targets most generous health plans.

These figures apparently are the reasons why Obamacare proponents are not throwing out the medical device tax law.

Impact on Medical Device Makers

The medical device makers throughout the country say that the tax will:

  • cost 43,000 jobs over the next ten years, causing jobs to be moved overseas
  • increase health care costs
  • cost a device maker some $100 million
  • reduce a device maker’s R&D budget by at least 20%
  • force a cut on manufacturing operations and employment levels to offset the lost earnings due to the tax

Support from Lawmakers for the Repeal of Tax LawSpecialty Bulb - Heat Lamp - Aug 2013medical device tax 300

These are the points contained in a letter sent to lawmakers by medical device manufacturers in September. In a similar effort, US Sen. Debbie Stabenow along with 17 of her peers sent a letter to Senate Majority Leader Harry Reid last year urging the Senate to “do all we can to ensure that country maintains its global leadership position in the medical technology industry and keeps good jobs here at home.” Stabenow also highlighted the 400,000 people Americans directly employed by the medical technology industry and the 2 million skilled manufacturing jobs the industry is responsible for.

The Final Say

In the end, it is up to President Obama and his allies to compromise and embrace the voice of both parties opposing the medical device tax, as a crucial step in ending the budget deadlock which led to the shutdown


But would the President heed the clamor for the repeal of the Medical Device Tax Law?