Orthopaedic Alerts - Implant Recall

A once-obscure tax on medical devices, that is part of the Affordable Care Act, turned into a major issue in the spending battle when the U.S. government shut down earlier this month.

One of the amendments the U.S. House wanted to repeal in the Affordable Care Act, known as Obamacare, was the excise tax that many in the medical device industry predict will be a national job killer.

Although the federal government re-opened after the 16-day partial shutdown, the medical-device tax was not repealed — but the debate continues among Republicans, Democrats, and the device manufacturers.

Medical Tax Issue Divides

Obamacare is expected to give the medical industry a boost by delivering new health care programs to millions of uninsured Americans. It was written so the medical industry would give something up in return for the new business.

A 2.3 percent excise tax imposed on the device manufacturers on sales of devices like hip and knee implants, defibrillators and heart stents would generate $29 billion over the next decade, according to the Congressional Budget Office. Those funds would be applied toward expanding the health-care reform.

However, the medical device industry and their lobbyists are calling for repeal of the tax, saying it will spell disaster for the industry.

Lobbyists say it already has cost them $1 billion. They claim it will also hurt the industry by increasing their effective tax rates which will force them to ship an estimated 43,000 U.S. jobs overseas and reduce funds in other areas like research and development.

Device manufacturers say they will have to pass the burden on to consumers in the form of higher health-care costs.

Pro-Obamacare groups call foul on those claims, citing that the new expanded coverage will offset the tax. Also, the excise tax applies to medical devices made overseas, as well as those manufactured in the U.S. It would discourage incentives to ship jobs out of the country. American made devices exported out of the U.S. will be tax exempt.

Officials at think tanks like the Center on Budget Policy and Priorites say it is a sound tax that will prevent Congress from raising other taxes and reduce spending for other essential programs. Plus, they believe repealing the tax would undermine the Affordable Care Act by encouraging other revenue-raising offsets in the bill.

Analysts Evaluate Effect of Medical-Device Tax

A report in USA Today shows that researchers at Factcheck.org found that claims of “thousands of jobs” moving overseas because of the medical-device tax are exaggerated.

Wells Fargo also published an analysis in April that showed the medical-device tax will be a “shot in the arm” for the medical device industry, generating plenty of new revenue to offset the losses from the tax. Zimmer, one of the largest device makers in the U.S., is one of the companies to benefit from the device tax more than others, according to the report.

However, Zimmer officials continue to say the medical-device tax is a threat to the industry and patients.

“Ultimately, this tax threatens patient access to new advances in medical technology,” Zimmer spokeswoman Monica Kendrick told USA Today.

Kendrick said there is a ” broad, bipartisan groundswell of support in the U.S. House of Representatives and Senate for a full and immediate repeal of the tax” in order to protect economic growth and make sure that “medical technology represents a vibrant, U.S.-led industry in the future.”