With congressional Republicans reportedly planning a renewed push to repeal the medical device tax, a Congressional Research Service report updated this week is especially notable. It confirms what we’ve been saying for some time: The 2.3-percent excise 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 the dire predictions of industry lobbyists.
“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.” (page ii)
“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%.” (page 7)
“It is unlikely that there will be significant consequences for innovation and for small and mid-sized firms.” (page 8)
“The tax should have no effect on production location decisions, since both domestically manufactured and imported medical devices are subject to the excise tax.” (pages 18-19)
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.