Medical Device Tax Is Yet Another Looming Obamacare Nightmare!

Ancient surgical instruments
Obamacare excise tax on medical devices, slated for 2013, could stifle technological innovations like those pictured above.

Hey, guess who’s back after a holiday break? (Answer: Me). I hope your New Year’s resolutions include reading up on the continuing terribleness of Obamacare. Because if not, we’re gonna have a tough year together.

We’ve been chronicling the unspeakable havoc wreaked by the Patient Protection and Affordable Care Act, most recently with our post a few weeks ago on how a new 10 percent excise tax on indoor tanning services had hurt a number of small businesses in Arkansas and nationwide.

Today brings a good report on another of these depredations tucked into the lamentable health care reform law. Over at, Ramesh Ponnuru takes aim at the Obamacare tax on medical devices, which will levy a 2.3 percent tax on sales of everything “from tongue depressors to imaging machines.”

Medical device manufacturers are already hunkering down in response, Ponnuru reports:

In November, citing the new tax, Stryker Corp. (SYK), whose products include artificial hips and knees, announced that it would let go about 1,000 of its workers. Earlier last year, Covidien Plc (COV), maker of surgical instruments, said it would lay off 200 workers in the U.S. and move production to Costa Rica and Mexico. It, too, cited the tax.

Other companies in the field have announced similar measures — or plans to expand production overseas but not in the U.S. — without mentioning the tax. The sluggish economy is clearly part of the explanation, but the medical-devices industry had been a relative bright spot within U.S. manufacturing, losing only 1.1 percent of its employees during 2007-2008 while manufacturing as a whole lost 4.8 percent. A study done for AdvaMed, a trade association for the industry, claims the tax could ultimately cost more than 45,000 jobs.

Curious about the size of the medical devices industry in Arkansas, I checked out this study issued by the Healthcare Leadership Council in September 2011, which reports that the medical technology industry employs some 2,600 people in Arkansas (PDF—see page 13). The study also details how, in the face of higher taxes, the industry as a whole is likely to lose employees, slow innovation and shift production to other countries (which apparently is already under way, according to the Bloomberg report cited above).

If there’s good news, it’s that the medical devices tax doesn’t go into effect for another 12 months, so there’s still a chance to make it go away. And indeed, there’s a welcome effort in Congress to repeal the tax: The Protect Medical Innovation Act of 2011, sponsored by Minnesota Republican Erik Paulsen, boasts 225 sponsors, including the three Republican House representatives from Arkansas, Rick Crawford, Tim Griffin and Steve Womack. Notably, neither Arkansas senator is signed on to similar legislation in the Senate.

In a related Obamacare story, I should note that while I was out, Gov. Mike Beebe announced, via his weekly radio address released December 22, that Arkansas will join a “federal exchange partnership”. This appears to be Beebe’s end run around state lawmakers who are cool to the idea of setting up a state-level health insurance exchange. Because nothing telegraphs confidence in your position like slipping an announcement like that under the door two days before the Christmas holiday.

Tongue-Depressor Tax Will Harm Jobs, Innovation (Bloomberg)

Governor Tackles Health Care Exchanges Again (Talk Business)

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2 thoughts on “Medical Device Tax Is Yet Another Looming Obamacare Nightmare!

  • January 18, 2012 at 7:54 am

    I do not in any way believe that the number of hip replacements sold will be affected by a 2.3 percent price increase. Rather, blame public health workers who are toiling to lower hypertension (fewer kidney dialysis machines sold), obesity (fewer hip replacements sold), diabetes (fewer artificial limbs sold), or the flu (fewer tongue depressors sold).

  • Pingback: That Pesky Medical Device Tax: A Medical Manufacturing Insider Speaks!

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