Published December 11, 2012
Democratic lawmakers have joined with Republicans in raising alarm about a looming ObamaCare-tied tax on medical devices, saying the additional tax is causing "uncertainty and confusion for businesses" and should be delayed.
The previously obscure tax has, over the last several months, emerged as one of the most controversial in the health care overhaul and one of the few with bipartisan opposition. Starting Jan. 1, the Affordable Care Act imposes a 2.3 percent tax on medical devices with the goal of raising nearly $30 billion over the next decade.
But a group of U.S. senators this week revived concerns that the tax could hurt one of the few U.S. industries "that enjoys a net trade surplus."
"The medical technology industry directly employs over 400,000 people in the United States and is responsible for a total of 2 million high-skilled manufacturing jobs," Minnesota Democratic Sen. Amy Klobuchar and North Carolina Democratic Sen. Kay Hagan wrote in a letter with 16 other senators and senators-elect Monday to Senate Democratic Leader Harry Reid. "In an environment focused on increasing exports, promoting small businesses and growing high-tech manufacturing jobs for the future, we must do all we can to ensure that our country maintains its global leadership position in the medical technology industry and keeps good jobs here at home."
The lawmakers urged Reid to support a delay in implementation, warning of the business consequences.
"With this year quickly drawing to a close, the medical device industry has received little guidance about how to comply with the tax-causing significant uncertainty and confusion for businesses," they wrote. "As we work together to develop a long-term solution to help move our economy forward, reduce our debt and reform our tax code, we urge you to support delaying enactment of this provision in a fiscally responsible manner."
It's unclear whether any changes to the planned tax could be included as part of a broader deal to avert the looming fiscal crisis. The Republican-controlled House over the summer already voted to repeal the tax, but the Senate never took it up.
Last week, Republican Georgia Rep. Tom Price reiterated his call for the tax to be stripped, saying doing so "is a place where Republicans and Democrats alike can find common ground in efforts to serve the American people."
Stephen J. Ubl, president of the Advanced Medical Technology Association, also said this week in response to recently issued IRS rules that the tax could cost thousands of jobs -- and is already causing companies to lay off workers and cut back on research and development.
"While Washington talks about a fiscal cliff, this tax could push us off an innovation cliff, costing as many as 43,000 jobs and hurting the ability of medical technology companies to find tomorrow's treatments and cures. It should be repealed," he said.
The tax would target a broad range of devices, from X-ray machines to ultrasound equipment to pacemakers.
Equipment makers argue that the tax ends up being much higher than 2.3 percent since it's on gross sales. One industry spokesman with Indiana-based Cook Medical estimated earlier this year that the impact on actual earnings is more like 15 percent. Cook Medical earlier this year announced it was scrapping plans to open five new plants because of the tax.
Dozens of other CEOs have issued similar warnings, saying the looming tax could put whole companies out of business.
The administration, though, has defended the provision. According to the Treasury Department, the medical device companies actually stand to benefit from the law. Though the 2.3 percent tax hits the industry, the department argues that the millions of new health care customers insured as a result of the law will increase the demand in hospitals to order more equipment -- in turn boosting medical device companies' profits.