Medical device tax tab now at $30.5B

MassDevice.com covers the medical device tax

For 2 years the medical device tax has been billed as the $20 billion price tag the med-tech industry must pay to cover its share of health care reform.

But as the levy moves closer to its January 2013 implementation, official government estimates and industry advocates now peg its price tag at $30.5 billion over the next 10 years. A MassDevice.com analysis revealed that the med-tech tax will likely cost the industry much more than official Congressional estimates of $1.8 billion next year.

The revelation both calls into question the accuracy of current government estimates and those on which the tax was originally sold to industry, Congress and the American public by the bill’s framers.

Don’t expect the feds to refund any money for overpayment if the bill does manage to make it to 2013 without being repealed, according to Richard Price, vice president for payment and health care delivery policy at industry lobby AdvaMed.

"Congress did not establish an aggregate amount in a given year. Rather, it’s a tax rate," he told us. "There’s no excess amount that’s going to be paid back."

Although AdvaMed has not put out an official estimate on the yearly cost of the tax, Price said, the group is relying on numbers provided by the White House Office of Management & Budget and the Joint Committee on Taxation in Congress.

Both offices estimate that the device tax will raise some $1.8 billion in 2013 and average of about $3 billion a year until 2020, for a total of $20 billion. But in President Barack Obama’s most recent budget the Dept. of Health & Human Services extrapolated the tax through 2022, adding nearly $8 billion in expected revenues for a 10-year total of more than $30 billion.

The JCT, a nonpartisan panel, assists Congress in making "objective and informed decisions with respect to proposed revenue legislation," according to its latest publication, "General Explanation of Tax Legislation Enacted in the 111th Congress" (JCS-2-11), which extrapolates through 2020 the taxes the measure is expected to raise.

A MassDevice.com analysis reveals that the tax is likely to bring in more than $2 billion in revenues next year from just 50 of the top medical device companies, meaning the estimated impact could be substantially higher than the government’s own estimates.

While several repeal efforts are already underway in Washington, Price said the impact of the tax will be felt well beyond the next 10 years, as "there is no sunset attached to this provision."

Mark Leahey, president & CEO of the Medical Device Manufacturers Assn. which represents about 250 small medical device companies across the country, said it’s time to retire the $20 billion for good, saying that those numbers were best-guess estimates at the time and are no longer valid.

"It’s frustrating to look and see that the tax has grown 50% in just 2 years," Leahey said, noting that MDMA members are more focused on the direct impact on their own firms.

"These companies are facing tough choices every day about who to lay off and what projects you can’t fund," he told us. "Unfortunately, those are the daily decisions companies are making – and none of them are about improving care."

Med-tech might have been better served under a Senate version of the Patient Protection & Affordable Care Act, which would have established the levy as a fee rather that a tax. The fee was converted to an excise tax in March 2010 as legislators worked to reconcile House and Senate versions of the bill.

"I think we all would’ve been better off if there was no tax whatsoever," Leahey said. "However, if the options were the House or the Senate version, the Senate version would have resulted in industry paying less. Had Congress stuck with the Senate version, we not have had a $30.5 billion tax."


RSS From Medical Design & Outsourcing

  • Teknor Apex to showcase wide range of PVC compounds for medical devices at Medtec China
    Building on its international leadership role as a supplier of medical-grade PVC compounds, Teknor Apex Company has developed flexible and rigid formulations that address the special needs of device manufacturers. The company will highlight these capabilities at Medtec China 2015. “Teknor Apex produces or markets medical-grade PVC compounds in China, Singapore, Europe, and the United […]
  • The Raspberry Pi eco-system goes interstellar with the new Raspberry Pi Sense HAT
    Newark element14 has globally launched the latest addition to the expanding ecosystem of Raspberry Pi accessories, the Raspberry Pi Sense HAT, as featured in the ‘Astro Pi’ space mission. The Sense HAT will enable enthusiasts to control the same hardware used in space. The Sense HAT attaches to the Raspberry Pi board, and can be […]
  • CommScope completes acquisition of TE Connectivity’s Telecom
    CommScope Holding Company, has completed its previously announced acquisition of TE Connectivity’s Telecom, Enterprise and Wireless businesses, a leader in fiber optic connectivity for wireline and wireless networks. The all-cash transaction, valued at approximately $3 billion, strengthens CommScope’s position as a leading communications infrastructure provider with deeper resources to meet the world’s growing demand for network […]
  • SPI awards IKO Prosthetic Creative System the Student Design International Design Excellence Award
    SPI: The Plastics Industry Trade Association congratulated IKO Prosthetic Creative System for winning the SPI Student Design Award, part of the Industrial Designers Society of America’s (IDSA’s) International Design Excellence Awards (IDEA) program. The award was presented to IKO, an innovative, youth-focused prosthetic design company led by Chicago-based designer Carlos Torres, by SPI’s Senior Director of […]
  • New assay could revolutionize diagnosis and treatment of life-threatening disease
    Invasive Fungal Disease (IFD) is an emerging global health problem associated with high mortality rates in severely immunocompromised patients, such as those undergoing intensive chemotherapy or stem cell transplantation, and in patients suffering immune compromising conditions such as AIDS. The most common causative agents of this disease have been identified as Candida and Aspergillus species, […]
  • Molex delivers ISO 13485-compliant, medical-grade surgical cables from its class 100,000 clean room facility
    Molex, LLC operates a fully ISO 146441-1:1999 Class 8-certified clean room, satisfying strict particulate contamination levels specified by ISO-compliant requirements. Located in Thailand, the facility has less than 100,000 particulates (≥0.5µm) per cubic foot of air and manufactures a variety of ISO 13485-compliant medical cables and surgical cables used in operating theatres, hospitals, laboratories and […]
  • Swept-Source OCT: Patent license agreement between Massachusetts General Hospital and Heidelberg Engineering
    Heidelberg Engineering has entered into a patent license agreement with Massachusetts General Hospital (MGH) in Boston. The agreement grants global and exclusive rights to 77 basic patents and patent applications which relate to swept-source OCT technology and its application in ophthalmology. Spectral domain OCT has become indispensable to eye care professionals worldwide to diagnose and […]
  • MIT’s MultiFab presents a stark challenge to incumbent 3D Printer manufacturers’ hardware, software, and business Models
    MIT’s Computational Fabrication Group recently announced the MultiFab, a low-cost 3D printer that can combine up to 10 different resins in one part and also includes a 3D scanning system to identify and fix errors during production. According to Lux Research, these capabilities are rare in commercial 3D printers today due to the manufacturers’ need […]
  • AVX releases Accu-P MP medical grade film chip capacitors for medical devices
    AVX Corporation, a leading manufacturer of passive components and interconnect solutions, has released a new series of thin film chip capacitors specifically designed to meet the demanding performance specifications for implantable medical devices. Delivering extremely tight capacitive tolerances, exceptionally repeatable performance, and remarkably low ESR and high Q at high frequencies—including VHF, UHF, and RF […]
  • RIVANNA commences manufacturing of its Accuro device
    Rivanna Medical announced that it has begun manufacturing its FDA-cleared Accuro device, a handheld and untethered smart-phone-sized device that is designed to guide spinal anesthesia with automated 3D navigation technology in addition to ultrasound imaging of abdominal, musculoskeletal, cardiac and peripheral vascular anatomies. The product will be launched at the ASA annual meeting in San […]
  • FDA seeks public input on Quality Metrics guidance
    by Oliver Wolf, Senior Product Manager, MasterControl In line with the general shift towards risk-driven approaches in the quality management world, FDA is now taking steps towards applying those same principles to its own auditing schedule. At the end of July, the Center for Drug Evaluation and Research (CDER) and the Center for Biologics Evaluation […]

Leave a Reply