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US government permanently repeals medical device excise tax

por John R. Fischer, Senior Reporter | December 23, 2019

"Congress's failure to expand the EITC and CTC while handing huge tax breaks to the healthcare industry is a betrayal of low-income families generally, not just in terms of healthcare," he told HCB News. "By spending some $175 billion on tax cuts for profitable health insurers and medical device makers instead of using some $130 billion of that total to pull poor households out of poverty, Congress will force many working families to choose between food and rent, heat and car payments. The stress and deprivation of poverty hurts health, especially among children."

He also noted that there are device makers who have said the tax would not stop them from developing and selling products, and cited a 2015 paper by the Center on Budget and Policy Priorities that used an economic analysis of the tax by the Congressional Research Service to argue against its repeal.

"Depending on the extent to which consumers reduce their demand for medical devices in response to an increase in their price, CRS estimates that the drop in employment in the device industry could range from 47 workers (0.01 percent of industry jobs) to 1,200 workers (0.2 percent of jobs)," said the report. "In fact, health reform will likely benefit the medical device industry and boost its sales. By extending health coverage to a projected 27 million more Americans, or by nearly 10 percent, the Affordable Care Act will increase the demand for medical devices and the revenue of device manufacturers."

Opponents argue otherwise, saying that when that tax was in effect, it caused a loss of 29,000 jobs in the medical equipment industry, according to the Department of Commerce, as well as a $34 million drop in industry research and development. They assert that such a decrease in R&D innovations would make investors more hesitant to invest in products that could potentially enhance patient care, if the tax were to be reinstated.

A recent survey by Medical Alley Association members backs these claims up, with 83 percent of respondents saying the tax would have led to declines in R&D spending, and longer wait times among patients for access to technology. Sixty-seven percent said they would have to delay or forgo planned hiring, while 47 percent said they would have to put off plans to physically expand their business.

“These results confirm what we’ve heard in private meetings: the medical device tax actively chills innovation and disproportionately hurts small businesses,” said Medical Alley Association president and CEO Shaye Mandle in a statement this month when the results were made public. “There is bipartisan support for repealing the tax, and we urge Congress to act before the end of the year.”

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