HIDAís Health Reform Update

Edition: July 2012 - Vol 20 Number 07
Article#: 4019
Author: Linda Rouse OíNeill, VP Govt, HIDA

Repeal of medical device tax gains steam

Just last month everyone agreed a stop on the 2.3 percent medical device tax was unlikely. But a long-shot legislative repeal of the tax is gaining steam in Washington due largely to efforts by the manufacturers and distributors most impacted. In a letter to House leaders, which HIDA joined, hundreds of organizations from Abaxis to Zynex Medical urged immediate action. The letter cited job loss, innovation decline and certain increase to health costs that the tax would have. Editorials and opinion pieces echoing that sentiment have shown up in a diverse mix of papers from the Wall Street Journal to the Fort Wayne (In.) Journal Gazette and everything in between.

Mixed Congressional support for repeal

The House of Representatives handily passed Minnesota Rep. Erik Paulsonís bill that would repeal the tax by a vote of 270-146. However, the Senate hasnít indicated it will consider the bill, much less pass it, and the White House has threatened to veto it. The tax is considered an essential part of financing the Affordable Care Act, estimated to cost over $1 trillion. Thatís right Ė $1 trillion. Implementing health reform wonít come cheap, and new estimates credit the device tax with raising nearly $30 billion that will go toward the cause. House Republicans have proposed a reduction in federal health insurance subsidies as a trade off for the loss in device tax revenue.

Supreme Court decision may impact if tax exists at all

Factor in the added complication of a pending Supreme Court decision. At print, the law had yet to be overturned (and many remain doubtful that such drastic measures will be taken). The IRS, lawmakers, device companies and, letís be honest, everyone else, is waiting as long as possible to see if the Courtís decision will impact their planning for 2013 and beyond.

Wall Street odds for repeal?

As all of this unfolds, Wall Street is paying attention. After all, most of the companies impacted are traded on the stock exchange. Morgan Stanley gives repeal a 30 percent chance of happening, up from previous predictions of 10 percent. Not sure thatís safe money, but if youíre in Vegas you could probably find someone to take that bet. Odds-makers caution that nothing is likely to take effect until after 2013, when the tax is already in place.

Bottom line: Unless the Supreme Court scraps health reform all together, companies should have plans in place for implementing the tax January 1, 2013.