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Medical Coding News Archives

Medical Device Tax Survives Shutdown

 
October 24, 2013:

Anita Schmidt, BS, RHIT, Clinical Technical Editor

Although the Affordable Care Act (ACA) is not directly related to funding, it was at the forefront of the budget stalemate causing the United States government to shut down on October 1st, 2013. To help fund the ACA, new taxes, such as those on drug companies and tanning salons, as well as levies on health insurers, were instituted. One tax in particular took the spotlight in the debt-ceiling debates, the tax on medical devices.

This 2.3 percent sales tax applies to clinical medical devices, such as replacement hips, MRI machines, and pacemakers, sold to U.S. health care providers. The tax, which does not affect devices like hearing aids that are sold directly to consumers, applies to all covered products sold in the United States regardless of where they are manufactured. Implemented on January 1, 2013, it is projected to generate $30 billion in income for the federal government over the next 10 years. The funds will be put toward expanding the Medicaid program under ACA.

Medical device manufacturers that oppose the tax state that the financial burden would stifle innovation and cause them to move tens of thousands of jobs overseas. Those supporting the tax counter that the industry already has a 30 percent profit margin that is more than enough to spur innovation and that the job numbers the industry cites are inflated.

Although the shutdown ended without the lifting of this medical device tax, device manufacturers vow to continue to fight this tax under ACA, and others are following their lead. A group of businesses has just formed to fight an annual fee on health insurers that could provide $100 billion in funding to ACA over 10 years.

 

 
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