FAQ: What’s at stake if Congress repeals the medical device tax
As Republicans and Democrats have battled over reopening the federal government and raising the federal debt ceiling, one idea that keeps coming up is a repeal of the 2010 health law’s tax on medical devices.
While the idea has drawn support from members of both parties, experts say it’s still a heavy lift for the repeal’s proponents. For starters, repealing the tax would create about a $30 billion revenue hole over the next decade. And supporters of the law fear that making such a change could start a stampede of demands for similar rollbacks from insurers and health care providers, who are also subject to new taxes and fees to help finance the health law.
With that in mind, here are some frequently asked questions about the tax.
Q: What is the medical device tax?
A: Since the beginning of this year, medical device manufacturers and importers have paid a 2.3 percent tax on the sale of any taxable medical device. The tax applies to devices like artificial hips or pacemakers, not to devices sold over-the-the counter, like eyeglasses or contact lenses.
Q: Why did Congress put the tax into the health law?
A: The law created a package of new taxes and fees to finance the cost of the health law’s subsidies to help purchase coverage on the online marketplaces, or exchanges, and the law’s Medicaid expansion.
Q: Why do proponents of the repeal suggest the medical device manufacturers should get a break over those other industries?
A: Medical device makers say the tax will cost 43,000 jobs over the next decade and will increase health care costs.
The device makers also assert that, unlike other health industry groups that are being taxed through the health law, they will not see increased sales because of the millions of people who will be getting insurance through the overhaul. “Unlike other industries that may benefit from expanded coverage, the majority of device-intensive medical procedures are performed on patients that are older and already have private insurance or Medicare coverage. Where states have dramatically extended health coverage, such as in Massachusetts where they added 400,000 new covered lives, there is no evidence of a device ‘windfall,’” the group’s letter to Congress stated.
Q: Who else is pushing for a repeal?
A: Republicans and Democrats in both chambers – in particular those who hail from states with many device manufactures, such as Minnesota, Massachusetts and New York -- have sought to repeal the medical device tax. Most recently, Sen. Susan Collins, R-Maine, has pushed for a repeal as part of larger legislation to lift the debt ceiling and reopen the government.
The Republican-controlled House has twice passed legislation to scrap the tax, including a recent measure that would have also delayed implementation of the health law by a year. In the Senate, 33 Democrats and Maine Independent Angus King voted earlier this year to repeal the tax, although the vote was a symbolic one, taken as part of a non-binding budget resolution.
Q. Who opposes the repeal?
A. The White House in the past has said the president would not support such a measure, although it has not commented about the issue in the current negotiations.
Senate Majority Leader Harry Reid, D-Nev., has said that the Senate will reject any attempts by Republicans to delay implementation of the law or to repeal the medical device tax as part of reopening the government or lifting the federal debt ceiling. But it is unclear if he would still oppose the effort if it was part of a major bipartisan compromise on the health law and budget issues.
Meanwhile, other health care providers are watching closely. In a recent blog post, Chip Kahn, president and chief executive officer of the Federation of American Hospitals, an association of for-profit institutions, wrote that if Congress reopens the heath law “to reconsider the contributions of any one health care sector that benefits from ACA’s coverage expansion, it should simultaneously address the changed circumstances of hospitals and provide similar relief.”
Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communications organization not affiliated with Kaiser Permanente.