This medical device tax is just not going to end well

posted at 2:41 pm on November 15, 2012 by Erika Johnsen

Conventional wisdom: If you want less of something, put a tax on it. Obamanomics wisdom: Put a tax on… medical devices?! I.e., add another barrier to the industry whose slightest innovations can directly result in streamlined costs, improved efficiency, better health-care options, and saved lives? What the what?

Embedded within the shadowy depths of the Patient Protection and Affordable Care Act (sometimes, I like to use its official name just to re-appreciate the irony of “patient protection” and “affordable”) is a 2.3 percent excise tax on the sale of taxable medical devices by the manufacturer/importer — and it’s no small thing. Happening now:

Medical device executives will descend on Capitol Hill today to press members of Congress to address the 2.3% medical device tax before it takes effect in January. …

“Without action from Congress, implementation of the medical device tax will cost our economy thousands of high paying jobs,” MITA executive director Gail Rodriguez said in prepared remarks. “These job losses will directly impact patient access to the most advanced, life-saving medical technologies available.” …

The letter includes support from physician groups, venture capital firms and other organizations asking the Senate to repeal the 2.3% levy on medical device sales, which device makers will start paying in at the start of next year.

The tax won’t actually hit until this January 1st, but the repercussions are already making themselves felt in the industry. Some more startling details from industry experts, via Politico:

Medical innovation is key to providing cutting-edge, lifesaving technologies to patients. Between 1980 and 2000, new diagnostic and treatment tools helped increase life expectancy by more than three years. But the new tax will take money from our research and development pipelines, reducing our ability to discover and develop lifesaving medical devices such as heart valves, molecular diagnostic tests and MRI machines. …

Many of the novel, cutting-edge medical technology innovations come from small companies with very few employees. Unfortunately, the medical device tax will hit these small companies and startups hardest, because it will be applied on sales, regardless of whether a company is making any profit. Small businesses often suffer losses in the early years of operation when they are investing in research and development on new products. Paying a sizable new tax while incurring traditional startup-driven losses will be more than many small businesses can bear. …

This innovation tax also targets an American manufacturing sector created by companies choosing to locate in the United States even as markets grow beyond our borders. … The U.S. accounts for 40 percent of the global medical technology market. We have a $5.4 billion trade surplus because American workers create high-tech, top-quality medical devices…

And yet, this tax threatens these gains. At least three studies have estimated the tax will cost tens of thousands of jobs — by one estimate as many as 43,000 jobs.

If the Democrats’ real goal with ObamaCare is really all about bringing down medical costs and improving patient care, they’ve sure got a funny way of showing it. The logic eludes me.

In other ObamaCare-related news, here’s yet another new study confirming the oncoming disincentives for doctors to go into primary care, via ABC. …We haven’t even finished writing ObamaCare — I can hardly wait to see what kinds of good times we’ll have once this thing actually gets officially started.

The United States will require at least 52,000 more family doctors in the year 2025 to keep up with the growing and increasingly older U.S. population, a new study found.

The predictions also reflect the passage of the Affordable Care Act — a change that will expand health insurance coverage to an additional 38 million Americans.

“The health care consumer that values the relationship with a personal physician, particularly in areas already struggling with access to primary care physicians should be aware of potential access challenges that they may face in the future if the production of primary care physicians does not increase,” said Dr. Andrew Bazemore, director of the Robert Graham Center for Policy Studies in Primary Care and co-author of the study published Monday in the Annals of Family Medicine.


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