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New year brings ray of hope for opponents of device tax

One of the medical device industry's most ardent wishes may come true in 2014. The bipartisan federal budget agreement that was passed just before the winter break includes language calling for a repeal of the medical device tax. There is a caveat, however: Congress would have to find and approve an alternate revenue source. Anything short of that is not likely to get President Obama's signature.

The 2.3% excise tax on most medical devices is part of the Affordable Care Act, or Obamacare as it is known in the vernacular. The tax is designed to offset the cost of expanding health coverage to the uninsured. Much of industry is vehemently opposed to the tax, claiming that it has resulted in thousands of layoffs. Some observers have questioned that assertion, noting that it's impossible to tell how many layoffs were a direct result of companies bracing for the economic impact of the tax and how many of those job cuts were going to happen in any case. What is beyond debate, however, is that the tax disproportionately affects start-up companies, which are often at the forefront of innovation, because it is levied on sales, not profits.

The repeal language in the budget is non-binding, stresses Stewart Eisenhart of Emergo Group in an article posted on the company's website. In other words, legislators will need to find other revenue sources to replace the healthcare funding that would be generated by the tax. "Congress would first have to identify and approve that alternate revenue source before shutting down the [device tax]," writes Eisenhart.

Given recent history, achieving consensus on that front may be a tall order. But the provision does at least provide legislators with a more viable path to success than the demand by some members of Congress for an outright repeal.

TAGS: Medical
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