The medical device tax, an obscure component of health reform, is suddenly in the public eye after the House of Representatives chose to attach a repeal of the tax, along with a one-year delay of Obamacare, to a Senate budget resolution to fund the federal government. The move by the House sets up a showdown that may end in the federal government being shut down until a deal can be hammered out — something that hasn’t happened in nearly 20 years.
As lawmakers scramble in Washington, we turned to Brian Johnson, publisher and co-founder of MassDevice.com, an online business journal covering the medical device industry, to tell us what’s up with the tax and why it’s suddenly a hot-button political issue. MassDevice.com has been covering this issue for four years, speaking with lawmakers, medical device CEOs and lobbyists.
So Brian, to echo our headline, what’s all this fuss about the medical device tax?
The medical device tax is a 2.3% excise tax on every sale of a medical device in the United States, except for some consumer products like contact lenses and Band-aids, which are exempt.
The levy was conceived four years ago this month as a way to pay for the Affordable Care Act and has been in place since this January of this year. It’s estimated that the tax will generate about $30 billion in income for the federal government over the next ten years and, since they started making semi-monthly payments to the IRS this January, medical device companies have already paid more than $1 billion to the federal government under the tax, according to a recent report.
The tax is universally hated by the medical device industry, which has been feverishly lobbying lawmakers to get the tax knocked out, delayed or repealed outright for the better part of four years now.
The tax is also generally unpopular with lawmakers on both sides of the aisle in Washington and has actually already been repealed once by the House of Representatives as a stand-alone bill in June of 2012 by a vote of 270-146, as one of the 44 separate bills the House has passed repealing all of, or parts of Obamacare. The Senate also voted in favor of repealing the medical device tax, 79-20. However, that was a non-binding resolution, which amounts only to a symbolic show of support in the Upper Chamber.
However, the tax also has powerful friends. In fact, it has the three most powerful friends you can get in Washington, D.C. Sen. Max Baucus (D-Mont.) chairman of the Senate Finance Committee, is the father of the tax, having been in on creating the ACA in 2009; his colleague, Senate Majority Leader Harry Reid (D-NV), has no interest in bringing a repeal bill to a vote because he helped broker a deal to cut the tax in half in 2009. And the biggest backer of the tax, President Barack Obama, has promised to veto any bill containing a repeal of the medical device tax.
So is this really worth shutting the federal government down over? Don’t these guys make billions of dollars a year? Why can’t they just pass that 2.3% on to their customers? Continue reading