As the New York Times’ Robert Pear explained this week, health reform’s 2.3-percent excise tax on medical devices “has become a prime target for Republicans, some Democrats and a small army of lobbyists for the industry. But a new report from the Congressional Research Service [CRS] challenges economic arguments that are being made to justify repealing the tax.”
The CRS report reaffirms what we’ve said repeatedly: the tax, which will raise $26 billion over the next decade to help pay for health reform, has only a very limited economic impact, contrary to industry lobbyists’ dire predictions.
“The effect on the price of health care,” CRS says, “will most likely be negligible because of the small size of the tax and small share of health care spending attributable to medical devices.”
“The drop in U.S. output and jobs for medical device producers due to the tax is relatively small, probably no more than 0.2%.”
“[I]t is unlikely that there will be significant consequences for innovation and for small and mid-sized firms.”
“The tax should have no effect on production location decisions, since both domestically manufactured and imported medical devices are subject to the excise tax.”
In short, the scare talk about the medical device tax doesn’t square with reality. Moreover, proponents of repeal need to explain how they would replace the billions in lost revenue.