Return of Excise Tax on Medical Devices Could Raise Costs to Manufacturers and Consumers

Courtney Clay | 1.5.18

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With the new tax reform set to begin this year, so will the return of an excise tax on medical devices. The excise tax will raise the costs of production for the manufacturers of vital medical devices, such as MRIs machines, CT scanners, X-ray machines, and pacemakers, which in turn could raise costs to consumers.

For years, bipartisan majorities have called for the tax of medical devices to be repealed. The 2.3 percent tax was first implemented in early 2013 to help fund the newly minted Affordable Care Act. Congress suspended the tax in 2016 and 2017 expecting that it would be repealed before resurfacing in 2018. The repeal never happened.

Scott Whitaker, president and CEO of the Advanced Medical Technology Association, sent a letter to President Donald Trump on December 20th asking that he address the issue before the end of 2017. Whitaker believes the tax will have a “devastating impact…on [the] industry.” He also suggested that even retroactive action taken by Congress in 2018 would not entirely reverse the impact of allowing the tax to take effect on January 1.

The Medical Imaging and Technology Alliance, a trade organization whose members are likely to be impacted by the excise tax, estimates the tax will require device manufacturers to pay more than $194 million per month to the Internal Revenue Service. Meanwhile, the Joint Committee on Taxation estimates the excise tax raises an average of nearly $3 billion each year in government revenue, which is expected to rise to $3.6 billion by 2022.

While there is still a debate on whether the excise tax will force manufacturers overseas in an effort to save costs, some legislative efforts have begun in an attempt to remove the ACA funding measure. Two GOP Representatives have introduced a bill that would stall the excise tax’s implementation for another five years. The bill has yet to work its way through Congress, but some Democrats have suggested they will not support the measure unless there is an alternative in place to counteract the lost revenue. For more information, please see Andrew Soergel’s article on U.S. News & World Report.

Medical devices are often crucial when providing effective health care, both to the physicians and their patients. If you have any questions on health care regulation and compliance, please feel free to call (214) 291-3200, or email Courtney Clay at cclay@byrdadatto.com or Brad Adatto at badatto@byrdadatto.com.