As the House Rules Committee met on Monday to consider a bill repealing the Affordable Care Acts medical device tax, the Obama administration vowed to preserve the funding source to help finance health reform and offset the cost of the ACA.
The Protect Medical Innovation Act of 2015 (H.R. 160), which has 282 cosponsors, would eliminate the 2.3 percent excise tax imposed on the sale of medical devices that was included in the 2010 Affordable Care Act. At a June 15 hearing, House Rules Committee Chairman Pete Sessions (R-Tex.) called the tax an unfair burden that increases healthcare costs, discourages medical innovation, and kills American jobs. Likewise, House Ways and Means Chairman Paul Ryan (R-Wis.) commented that the tax is sending businesses overseas and hurting seniors.
But, in a statement of administration policy, the Office of Management and Budget on Monday countered that repealing the medical device tax would only serve to increase the federal deficit by $24.4 billion over the next 10 years and to finance a permanent and costly tax break for the medical device industry and its profitable corporations.
The medical device industry, like others, will benefit from millions of new consumers who are gaining health coverage under the Affordable Care Act, stated OMB. This excise tax is one of several designed so that industries that gain from the coverage expansion will help offset the cost of that expansion.
The House is expected to pass the bill this week or next and send it to the Senate, where it also has strong bipartisan support. However, the White House has threatened to veto the bill should it make it to President Obamas desk for his signature.
While critics claim that the tax could have significant, negative consequences for the U.S. medical device industry and on jobs, a January 2015 economic analysis by the Congressional Research Service (CRS) projected fairly minor effects, with output and employment in the industry falling by no more than two-tenths of 1 percent.
The analysis suggests that most of the tax will fall on consumer prices, and not on profits of medical device companies, stated CRS. The effect on the price of healthcare, however, will most likely be negligible because of the small size of the tax and small share of healthcare spending attributable to medical devices.
In addition, CRS also concluded that the relatively small effects on the industry suggest that innovation and research would be minimally affected.
Nonetheless, in a statement issued earlier this month by the Medical Device Manufacturers Association the industry group said that it warned in 2009 that a medical device excise tax would thwart innovation and patient care, and sadly, these predictions have come true.
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