The medical device tax was designed to raise money to help fund the Patient Protection and Affordable Care Act. Increasingly, it appears the tax will raise more hackles than dollars.
The Congressional Research Service conducted the latest study of the projected effects of the tax, a 2.3 percent excise charge on sales of certain medical devices. In short, it found that the tax would have a negligible negative impact on the medical device industry, but that it also wouldn't produce much revenue because of the many limitations built into it.
"Opponents of the tax claim that the medical device tax could have significant, negative consequences for the U.S. medical device industry and on jobs. The estimates in this report suggest fairly minor effects, with output and employment in the industry falling by no more than two-tenths of 1 percent. This limited effect is due to the small tax rate, the exemption of approximately half of output, and the relatively insensitive demand for health services," says the CRS in its summary of the tax.
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"The analysis suggests that most of the tax will fall on consumer prices, and not on profits of medical device companies. The effect on the price of health care, however, will most likely be negligible because of the small size of the tax and small share of health care spending attributable to medical devices."
The report said the increased costs the tax would impose on the industry could lead to the elimination of about 1,200 jobs, but that escalating device costs and other extreme effects on the industry forecast by opponents weren't likely to occur.
An earlier report from the U.S. Treasury said the revenue projections for the tax were falling far short of expectations. It could become moot if the Republican Congress moves forward with one or more of the bills designed to eliminate the tax.
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
