House Passes Bipartisan Repeal of Destructive ObamaCare Tax

By: Patrick Hedger-Policy Director, American Encore

Great news: Today, the House of Representatives passed a repeal of the Medical Device Tax put in place under ObamaCare! The vote passed by a wide margin, enjoying broad bi-partisan support. Forty-six Democrats were a part of the 280 votes to ultimately repeal the destructive and counter-intuitive tax. The repeal stands a good chance of passing the Senate as well, where several prominent Democrats have expressed their desire to see it go. Despite the veto threat from President Obama, a repeal of the Device Tax passing Congress and landing on the president’s desk would be a huge achievement. It would prove that this new GOP-controlled Congress can get things done and would put President Obama in the position of having to explain why he wants to keep the price of live-saving technologies artificially high.

For a better explanation on the Medical Device Tax and why its repeal is so important, please read the following excerpt from American Encore’s Blueprint for 2015: Setting the Stage for the Next Session:

The fundamental problem with ObamaCare is that it does very little, if anything, to actually make the delivery of healthcare to patients more affordable. In fact, one controversial part of the law directly drives up the cost of providing healthcare, from checkups to major surgery.

The Medical Device Tax is a 2.3 percent excise tax imposed by ObamaCare in order to help finance other parts of the law, such as the premiums subsidies and administration of other programs. The tax is estimated to collect roughly $30 billion over the next decade. The qualifying criteria for the tax are incredibly broad. Per the Tax Foundation:[1]

“Taxable medical devices are defined as any device ‘intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease in man or other animals . . . or intended to affect the structure or function of the body of man.’ For instance, the tax would be levied on devices such as pacemakers and defibrillators.”

Such a definition easily applies to products like IVs, needles, stethoscopes, X-ray machines, etc. By definition, this tax makes all of these products used in providing healthcare more expensive, therefore making healthcare more expensive. This is but one side of the coin. Companies that produce and import medical devices will undoubtedly pass off some of the cost of the tax in this way, however they will also compete to keep prices as close to pre-medical device tax levels as possible. This means that the tax creates an incentive to cut production costs and a disincentive to pursue new investments and research.

AdvaMed, a group that represents the American medical device industry, released a report summarizing how member firms of their group were adapting to the tax. AdvaMed found that medical device companies had laid off 14,000 workers and forgone the hiring of an additional 19,000. Nearly a third of all companies reported slashing their research and development budgets, jeopardizing the invention of countless life-saving technologies. The impact of the tax ripples on and on. Per the AdvaMed report:[2]

“Three-quarters of [firms] said they had taken one or more of the following actions in response to the tax: deferred or cancelled capital investments; deferred or cancelled plans to open new facilities; reduced investment in start-up companies; found it more difficult to raise capital (among start-up companies); reduced or deferred increases in employee compensation.”

The tax has a trifecta of impacts that are antithetical to the understood intentions of healthcare reform. It increases the cost of delivering healthcare, creates a disincentive against research and development of technologies which could lower healthcare costs and improve health outcomes, and it has killed thousands of good jobs which probably provided those employees with health insurance!

It’s common sense not to levy a tax on something you’re trying to make more affordable. That’s why previous repeal efforts of the medical device tax have enjoyed broad bipartisan support.[3] Repealing the medical device tax is an obvious first step in ending the counter productivity of the Affordable Care Act as a whole.