Legislative Train Wrecks – ACA’s Medical Device Tax

We all know, including the leviathan’s authors themselves, that the ill-named Affordable Care Act is really the exact opposite. It is clearly not affordable and completely without care for American’s health or futures, or America’s business health and future, overall. In addition to it simply being the wrong strategy and worst implementation possible, it also has many provisions which are disasters in and of themselves. The medical device tax is just one of these disasters.

Unintended consequences -- destruction of innovation, jobs, and businesses

Unintended consequences — destruction of innovation, jobs, and businesses
(Infographic: Silicon Valley Bank) (3)

“Last week, while testifying before the Senate Budget Committee, Treasury Secretary Jack Lew defended the medical device tax hidden in the Patient Protection and Affordable Care Act, calling it ‘a critical component of the health care law that can’t easily be replaced.’

Earth to Lew. A punitive tax intended to pay for the massive bill of the health care law at the expense of innovation should have never been included in the first place.

Imposed on medical device manufacturers whether or not they make a profit, this new 2.3 percent tax on the sale of virtually all medical devices will lead to increased health care costs, undercutting one of the primary goals of health care reform.

Not only is it a punitive tax that singles out a particular industry, it simply isn’t a health care issue. The tax was imposed solely to generate revenue to help pay for the massive health care overhaul.

Clearly no one thought too far ahead on this one.

Additionally, a study from AdvaMed (1) estimates that 43,000 jobs could be lost because of the medical device tax. That’s because it raises taxes on the medical device industry by almost 30%.

The impact is already being felt through layoffs at device manufacturers around the country. In the long term, cuts in research and development will limit access to life-improving and life-saving innovations.

Combined with the high corporate tax rate already imposed on the research and development and manufacturing industries, the medical device tax is a huge disincentive for companies to stay and grow in the United States.

As the AdvaMed President and CEO said in a letter to Secretary Lew, ‘That is directly contrary to the Administration and our industry’s shared goal of keeping and growing good jobs in the U.S.’

More taxes, fewer jobs, less innovation, and higher costs; that doesn’t make sense to us at all.” (Rob Engstrom, Senior Vice President and National Political Director, U.S. Chamber of Commerce)

AdvaMed’s CEO, Stephen J. Ubl, continues in his linked letter (2) (PDF), “First, it is important to understand that there has been no increase in reimbursement for medical technology relative to other health services. National spending on medical technology has remained essentially constant at six percent of national health expenditures for the last two decades. Moreover, because the industry is highly competitive, prices for medical technology have risen during the same period at an average annual rate of only one percent–less than a quarter the rate of other medical goods and services and less than half the rate of the overall CPI.

Second, repeal of the medical device tax is central to tax reform and economic growth. It is not a health policy issue. When enacted, the tax was used in a bookkeeping sense to offset some of the costs of the Affordable Care Act. Now, however, the tax is simply a part of general revenues. Repealing it will have no effect on the programs authorized under the Affordable Care Act.

Third, as you noted both foreign manufacturers and U.S. manufacturers pay the same tax on U.S. sales, but the tax still has a highly uncompetitive impact. First, it raises the total amount of federal taxes paid by the industry by almost 30 percent.2 When combined with the high and uncompetitive corporate tax rate already levied on American based research and development and manufacturing, it is a profound disincentive against locating these activities in the U.S.—whether the manufacturer is a U.S. company or a U.S. subsidiary of a foreign company. That is directly contrary to the Administration and our industry’s shared goal of keeping and growing good jobs in the U.S.

As you consider the Administration’s position on repeal of the medical device excise tax, I hope you will work with the strong majority of members of Congress on both sides of the aisle who seek repeal of this counterproductive tax.”

Let’s repeal ACA and its destructive taxation, regulation and collectivist framework. Defund it, take its batteries out, pull its plug… whatever we need to do to keep it from destroying our economy and nation any further than it already has. It’s well on its way.

D.M. Chaney (C) 2013

(1) http://www.freeenterprise.com/economy-taxes/bills-introduced-repeal-medical-device-tax?utm_source=Friends&utm_medium=Email&utm_campaign=med-device-tax

(2) http://www.friendsoftheuschamber.com/email/images/Lew-Letter.pdf

(3) https://www.svb.com/startup-outlook-report/

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One thought on “Legislative Train Wrecks – ACA’s Medical Device Tax

  1. Pingback: WEBINAR: The AdvaMed Code of Ethics: What it Means for the Industry & Your Company | Speakman Speaks on Life Sciences Insurance & More

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