Medical Musings: Device tax may change as 'fiscal cliff' approaches

The excise tax on medical devices, a controversial part of President Barack Obama's Affordable Care Act, is now evolving from a medical reform issue to a tax reform issue. In a press conference in Boston last month, AdvaMed CEO Stephen J. Ubl said the group will seek to dramatically change the tax as part of the tax reform negotiations taking place to avert the "fiscal cliff" scheduled to occur when the Budget Control Act of 2011 goes into effect.

Even if the tax cannot be totally undone, it's hoped within the industry that some of its most onerous provisions could be changed. One goal, for example, is to exempt start-ups from the tax for a certain period of time.

That said, some of the staunchest opponents of the tax remain hopeful that it will be repealed, citing support from Democrats in the House and the Senate. Even liberal U.S. Senator-elect Elizabeth Warren (D-MA), mindful of medical device employment in Massachusetts, is opposed to the tax. Senior Massachusetts Sen. John Kerry has also expressed concern about the tax. Even if the Senate can muster enough votes to support a House-initiated repeal, it's doubtful that Congress could overcome a presidential veto.

Significant change of the tax as part of a major tax overhaul seems very possible, however. The major obstacle will be getting on the radar screen given the enormity of the tax reform issues under consideration. Overall tax reform provides the opportunity to find other revenue sources for Obamacare that won't affect future medical device development in the United States.

Widespread cutbacks have already begun at some major medical device makers. Some are citing the new excise tax as the cause. Others are citing slowing demand coupled with growing pressures to reduce costs of medical devices.  It will be interesting to see if jobs are reinstated if the device tax is fundamentally revised.

 

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