Blog Tag: excise tax

Obamacare Replacement Would Repeal Medical Device Tax

Republican lawmakers recently proposed a replacement of Obamacare known as the American Health Care Act (AHCA).  One provision of the proposed legislation would permanently repeal Obamacare’s 2.3% medical device excise taxBeginning in 2013, manufacturers and importers of certain medical devices were required to pay a 2.3% tax on sales of these devices.  Although the medical device tax was suspended for 2016 and 2017, it was set for reinstatement in 2018.

Introduction of the AHCA is not the first time that lawmakers and industry lobbyists have attempted to permanently repeal the medical device tax.  For example, in January 2017, a group of more than 220 Representatives introduced a bill in the House of Representatives that sought to repeal the tax.  In introducing that bill, Rep. Erik Paulsen (R-MN) released a statement citing improvements in the industry after temporarily suspending the tax:

We are already seeing new American jobs and increased investment in research and development as a result of the temporary suspension of this tax. With over 200 cosponsors at the start of this new session, and with overwhelming bipartisan support, permanent repeal should be a top priority for Congress.

Beyond repealing the medical device tax, the Washington Post reports that the AHCA seeks to repeal a wide array of taxes that were expected to cost insurance, medical device, and other healthcare companies billions of dollars over the next decade.  Indeed, according to the Joint Committee on Taxation the 2.3% medical device tax, alone, was expected to cost these companies $20 billion over the next ten years.

Medical device industry representatives are encouraged by the prospect of a full repeal of the medical device tax.  Scott Whitaker, CEO of the trade association AdvaMed stated:

Repealing the tax will provide medical technology innovators with the long-term certainty necessary to support future job growth and sustainable, cutting-edge R&D that will ultimately lead to the next generations of breakthroughs in patient care and treatment. We urge the House and Senate to act expeditiously to pass this important legislation.

Bills to Repeal Medical Device Excise Tax Introduced

Congressman Erik Paulsen (R., Minn.) and Senator Orrin Hatch (R., Utah) recently introduced bills H.R. 160 and S.149, respectively.  Both bills are part of an effort to repeal the 2.3% excise tax on medical device manufacturers and importers imposed by the Affordable Care Act, commonly known as ObamaCare.  Guidance from the IRS on the medical device excise tax can be found here.

Where previous attempts to modify or repeal the medical device excise tax have stalled in the Senate, the Washington Times reports that prospects of the repeal passing both houses of Congress are bolstered by the newly Republican-controlled Senate.  Further, as is reflected on Congress.gov, both bills have significant bipartisan support, and, according to The Hill, efforts to gain more supporters are ongoing.

But, The Hill reports that Republican and Democrat supporters of the repeal disagree on how to offset the revenue that would be lost should the tax be repealed.  Further tempering optimism for repeal of the excise tax is a January 9, 2015 report from the nonpartisan Congressional Research Service, entitled “The Medical Device Excise Tax: Economic Analysis,” which states in its summary that the effect of the tax on the medical device industry will be minor because of the relatively inelastic demand for medical services, the small tax rate, and the numerous exemptions from the tax.  Contrary to industry reports on the tax that predict significant adverse effects on innovation and employment, the Congressional Research Service’s report suggests that “most of the tax will fall on consumer prices, and not on profits of medical device companies.”

H.R. 160 has been referred to the House Ways and Means Committee while S.149 has been referred to the Senate Finance Committee. Check back here for further developments on efforts to repeal the medical device excise tax.