OPINION:
In devising the Affordable Care Act, Congress and President Obama searched for tax monies to offset the program’s costs. One revenue-raiser was a new 2.3 percent tax on medical devices. This doesn’t sound like much in the overall Obamacare fundraising effort — the funds it will raise amount to little more than a rounding error. However, it will devastate one of the nation’s most innovative industries and the millions of Americans who benefit from its products. The realization of its impact and the insignificant amount the tax will contribute to offsetting Obamacare costs make repeal a distinct possibility.
In the battle over the medical device tax, it is clear that support for repeal does not amount to any endorsement of Obamacare, given the tax is not an integral part of the law. Rather, the tax, which was supposed to raise $29 billion over the next decade, will deliver less than 3 percent of Obamacare’s $1 trillion projected cost — all while decimating our nation’s most innovative industry.
The term “medical device” may not immediately bring to mind the astounding array of innovations — advanced imaging technologies, pacemakers, stents, prosthetics and oxygen delivery systems, just to name a few — that fall under this broad category, but these products are integral to the diagnosis, monitoring and treatment of life-threatening diseases. Evidence shows that medical devices detect disease earlier, inform treatment plans, and improve health outcomes for thousands of individuals in need.
The device tax, a tax that even the Congressional Research Service says is “challenging to justify,” since excise taxes are generally used to discourage undesirable activities such as smoking, just isn’t a lynch pin to the fate of the law.
No matter what happens to Obamacare, one fact remains: The medical device tax stymies innovation, creating unnecessary hurdles for both established manufacturers and start-ups, which rely equally on pushing boundaries to realize what was once only imagined. Innovation has made the American medical technology field what it is today. The medical device tax — which taxes revenues, not profits — threatens to undermine these companies by forcing them to deplete the very resources necessary to drive innovation. The tax is working against the U.S. economy and threatening our country’s position as the global leader in this important manufacturing sector.
It is also important to note that device tax repeal is not a giveaway to business interests. Thousands of U.S. jobs are at stake. For example, medical imaging companies have about 60,000 direct employees in the United States and contribute indirectly to another 266,000 jobs. Moreover, the average salary of an imaging company employee is $95,000, 80 percent higher than the national average compensation of workers across all industries, according to a Medical Imaging & Technology Alliance 2013 report. Paying out billions to the Internal Revenue Service limits manufacturers’ ability to invest in engineering jobs to develop the next wave of medical technologies and bring them to market.
The impact of the tax is already being felt. A recent Advanced Medical Technology Association member survey estimates the device tax cost 4,500 jobs in the industry in 2014. This is on top of the 14,000 jobs that were lost because of the tax in 2013. The trade group also projected another 20,500 jobs will be lost in the next five years.
Lastly, it should be noted that medical technology companies did not experience a “windfall” from the law’s expanded insurance coverage, which some would say is offset by the device tax. There is simply no evidence of this in the marketplace. When Massachusetts implemented similar health insurance mandates in 2007, sales of medical-imaging equipment in that state dropped and were also slower to recover compared to other states.
Congress should support a device tax repeal not because it sends a larger signal about the Obamacare. It doesn’t. Lawmakers should support repeal to encourage private-sector research investment and spur job creation.
• Gail Rodriguez is executive director of the Medical Imaging and Technology Alliance.
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