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5 Things That Health Reform's Medical Device Tax Won't Do

October 15, 2013 at 4:43 PM

Policymakers and lobbyists pushing for repeal of health reform’s medical device tax as part of a deal to reopen the government have made numerous claims about the tax, many of which are misleading or simply false.  Below are five things that the tax won’t do.

  1. It won’t apply to wheelchairs or any other medical device that the public generally buys at retail for individual use, such as eyeglasses, contact lenses, or hearing aids.  It applies, instead, to such devices as coronary stents, artificial knees and hips, cardiac pacemakers, irradiation equipment, and imaging technology.
  2. It won’t have much of an impact on consumers. The effect on consumers’ costs for health care and health insurance will be minimal and will be swamped by other factors.  Spending on taxable medical devices represents less than 1 percent of total personal health spending, so a small increase in their price would have an almost imperceptible effect on either consumer costs or health insurance premiums.
  3. It won’t drive jobs overseas. The excise tax creates no incentive at all for medical device manufacturers to move production overseas.  It applies to imported as well as domestically produced devices, so it won’t make imported devices any more attractive to domestic purchasers.  Also, devices produced in the United States for export are exempt from the tax, so it won’t reduce the competitiveness of U.S.-made devices in international markets.
  4. It won’t single out device manufacturers for unfair treatment. To help pay for expanding health coverage to 25 million uninsured Americans, health reform either reduces Medicare payments or raises taxes for a wide range of industries that will benefit from health reform.  Those industries include not just medical device manufacturers but also hospitals, home health agencies, clinical laboratories, health insurance providers, and drug companies.
  5. It won’t impose significant burdens on manufacturers. By expanding health coverage, health reform will raise demand for medical devices and boost the revenue of device manufacturers.  A study by Wells Fargo Securities finds that health reform will increase device sales by 1.5 percent in 2014 and by 3.6 percent cumulatively through 2022.  This increase, the study concludes, “will be sufficient to offset” the tax.