Medical device tax delay would cost $3.4B

The 2-year delay of the medical device tax would take $3.4 billion from the federal budget in 2016 and 2017, according to an estimate from the non-partisan Joint Committee on Taxation.

The 2.3% excise tax, enacted in 2010 as part of the Affordable Care Act, went into effect at the beginning of 2013. It applies to all U.S. sales of prescribed medical devices. An omnibus spending bill introduced this week includes a provision that would put a 2-year pause on the medtech levy and on the so-called “Cadillac tax” of 40% on high-benefit healthcare insurance policies.

Pausing the medical device tax would mean a budget hit of -$1.40 billion in calendar 2016 and -$1.96 billion the year after, the Joint Committee on Taxation said yesterday. In June, the Congressional Budget Office estimated that a House bill to repeal the tax would mean net deficit increases of $1.83 billion in fiscal 2016 and $1.96 billion the following year. Repealing the tax would add about $24.4 billion to the deficit from 2015 to 2025, according to the CBO.

The medical device industry has fought tooth-and-nail against the tax since it was 1st floated as a way to fund the Affordable Care Act. Since then, numerous bills to do away with it have circulated on Capitol Hill, including the “Protect Medical Innovation Act of 2015,” sponsored by Rep. Erik Paulsen (R-Minn.), that the CBO evaluated last summer. In June, 46 Democrats joined the vote to approve the Paulsen measure; in August, the Senate said it would take up a companion measure before the end of the year, although those plans might be obviated if the omnibus spending package goes through.

Estimates of the impact of the medical device tax have varied wildly since its 1st airing in 2009; 4 years of political deadlock, which included a federal government shutdown over the issue, have done little to add clarity. Federal government officials have projected that the tax will raise about$30 billion over 10 years. Back in July 2013 a report released by a coalition of medical device lobbying groups estimated that the tax had cost the industry $1 billion during the 1st 6 months of that year.

In July 2014, MassDevice.com learned via a Freedom of Information Act request to the Internal Revenue Service that the tax bureau collected only $1.4 billion from the medical device tax in 2013, far short of all predictions. An audit by a U.S. Treasury inspector general revealed that the IRS collected a little more than $913 million during the 1st half of 2013, well shy of the $1.2 billion it expected the tax to bring in.

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