Repealing one provision of the Affordable Care Act has gained some bipartisan support during the budget stalemate in Congress. A small tax on medical devices that helps pay for the law is unpopular with Republicans and some Democrats from high-tech states who want to kill it. But the tax is a sensible way to get a major player in the lucrative health care industry to help defray some of the costs of health care reform, and it should not be repealed unless replacement revenue is found.
The 2.3 percent excise tax, which took effect in January, is aimed at U.S. sales of medical devices sold through doctors' offices and hospitals. Those devices include hip replacement devices, implants, pacemakers and even bandages. It does not apply to consumer items bought at retail outlets, such as eyeglasses, hearing aids and wheelchairs. Over 10 years, the tax will bring in an estimated $30 billion. It is one of the taxes that helps fully pay for the health care law, along with new taxes on health insurers, drug companies and tanning salons.
This array of revenue streams makes the Affordable Care Act a more responsible law than the Bush administration's Medicare drug benefit, which passed without being funded and added directly to the deficit. Any repeal of the medical device tax would have to be made up by another tax. The source of that revenue should have to be named by any lawmaker favoring repeal. Senate Democrats rejected the House's repeal effort, but many indicated their support for the idea in an earlier vote. A symbolic vote by the Senate in March to repeal the tax passed 79-20, with 33 Democrats favoring repeal.
The arguments against the medical devices tax are weak. The $130 billion medical device industry in the United States complains about being singled out, but it is about to gain a windfall under the Affordable Care Act that will sign up tens of millions of Americans for health insurance who will get needed checkups and procedures. Small companies will not be the primary payers of the tax, because the industry is dominated by a handful of major firms. An estimated 90 percent of the tax will be paid by the 10 biggest devicemakers.
Concerns about lost jobs and stymied innovation are the talking points of a wealthy industry trying to escape a tax. But after nine months with the tax in place, there is scant evidence it is preventing companies from bringing new products to market, triggering large layoffs (small job losses have been reported) or sending business operations overseas. Making sure the Affordable Care Act is paid for is a higher public interest than lawmakers protecting hometown businesses from fair taxation. The tax should stand, or a new tax source will have to be found to replace the revenue.