Tax on Medical Devices Resumes After Two Years

In January, the 2.3 percent excise tax for medical devices was resumed, after a two-year hiatus. The tax was originally imposed in 2013 as part of the Affordable Care Act (ACA) to help fund expanded health-care coverage. Congress opted to suspend the tax in 2016 and 2017 after strong opposition by medical device manufacturers.

Although many expected that this tax would be suspended again in 2018, efforts to repeal the ACA failed and the recent tax bill did not include this exemption. Industry groups, including the Advanced Medical Technology Association (AdvaMed) and the Medical Imaging & Technology Alliance, warn the tax will take $20 billion from the industry over the next decade.

“What we have seen from past experience is that [this 2.3 percent tax] comes out of funding for product development, research, and the jobs associated with those things,” said J.C. Scott, head of government affairs at AdvaMed. “We fear we will see employment freezes or reductions and a slowdown in the pipeline for medical innovation.” Device manufacturers also argue that the increased costs of production will likely be handed down to consumers.

However, supporters of the tax believe the purported industry harm has been overstated and argue that the expansion of health-care coverage under the ACA benefited medical-device makers.

Device manufacturers are still hoping that the tax is repealed. “Retroactive action by Congress … cannot fully undo the impact of allowing this tax to be triggered on January 1,” AdvaMed wrote in a letter to President Trump, noting their support of the tax repeal.

Source: Associated Press, January 2, 2018.