Two-year suspension from medical device tax

Two-year suspension from medical device tax

December 21, 2015

Friday 18th, 2015 marked the passing of a two-year suspension from paying 2.3% medical device tax.The Advanced Medical Technology Association (AdvaMed), the Medical Imaging & Technology Alliance (MITA) and the Medical Device Manufacturers Association (MDMA) were among the organizations that applauded the decision. 

“We are grateful that Congress was able to come together to preserve U.S. jobs and medical innovation by delaying the device tax for two years,” Nelson Mendes, MITA board chairman and president and CEO of Ziehm Imaging Inc., said in a statement. “The bipartisan cooperation we’ve seen gives us hope that policymakers will continue their work to fully address the device tax for employees, patients and advocates across the country who have been impacted by its harmful effects.” 

Some of the medical device companies have been lobbying for the repeal of the tax, which was part of the Affordable Care Act. When the tax was proposed for the first time, lawmakers predicted it would generate about $30 billion over 10 yeats to help pay for the ACA. After going into effect in 2013, it raised $913 million through the first half of that year, which was about 75 percent of what was anticipated. 

According to the Joint Committee on Taxation, the 2-year suspension will cost the federal government an estimated $3.4 billion between 2016 and 2017.

Yet some believe repealing the tax was not a good thing.

Dr. Bill Bithoney, managing director and chief physician executive of the health care consulting firm BDO Center for Healthcare Excellence & Innovation, said in a statement that medical device companies that have raised prices and reduced their work forces in the lead-up to the tax will receive a “windfall” when it’s repealed.

“While some camps will be legitimately relieved at the repeal of these levies, the simple reality is that the funds from both the Cadillac tax and the medical device tax are important to funding the Affordable Care Act. How will the projected billions of dollars raised by these taxes be replaced?,” he said.

The medical device tax is projected to go back into effect on Dec. 31, 2017, but whether it is repealed before then depends on who the next president will be and the balance of power in Congress.