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There’s just not much to say, so we’ll talk about devices

About a group of people that refuses to fund the government because it objects to a law passed by both Houses, signed by the President, and upheld by the Supreme Court.

So we’ll focus on the one thing that people in both parties seem to agree on – a desire to repeal the medical device tax.

The 2.3 percent excise tax:

  • went into effect this year,
  • applies to things like catheters, MRI machines, surgical implants – but not toothbrushes and other personal care items, and
  • will raise about $29 billion over ten years, funds that will be used to offset some of the insurance subsidies enjoyed by folks who don’t make a lot of money.

Shockingly, some Rs and Ds agree that the tax should be repealed. Not shockingly these Senators and Congresspeople are from districts where big device companies operate – companies such as Medtronic, GE, Phillips.

Not surprisingly, the device industry is in full voice over the issue, claiming the tax will cost 45,000 jobs (really!), increase consumers’ costs, be hard to implement, and distort the market.  What is really happening here is the industry refused to go along with an initial request from PPACA backers to pony up some funds to help pay for the bill – a request acceded to by the insurance industry, pharma, and hospitals.  Thus the device folks were on the outside looking in in the final days of negotiations.

It’s understandable that they’d want to undo the tax – it’s also unrealistic and a bit weird.  After all, the industry is going to get a LOT more revenues from the newly-insured next year, growing their top line and increasing profits as well.  And this for an industry that already generates profits in excess of 15 percent of revenues…

The other industries that are going to benefit from PPACA are contributing to the cost, so it seems logical that the device manufacturers should too.

What does this mean for you?

It is unlikely the device tax will be repealed, as the President and Senate Majority Leader are bot adamantly opposed to a repeal.

But even if it is, it isn’t going to have much – if any – effect on consumers or payers.


Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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