Repeal Tax on Medical Devices

The Affordable Care Act passed along party lines in 2010. But as aspects of the law start going into effect, bipartisan consensus is building against one of its key funding mechanisms — a tax on medical devices.

Democrats and Republicans alike revolted against Obamacare's 2.3 percent tax on medical device makers late last month when the Senate resoundingly voted down the $29 billion excise tax on gross device sales. Seventy-nine senators voted to repeal the tax. Among the 33 Democratic senators was Sen. Debbie Stabenow of Michigan — a state that is home to one of the country's leading device makers: Stryker.

The devices tax went into effect on Jan. 1 as part of a wave of new Obamacare taxes — including a .9 percent Medicare surcharge and 3.8 percent tax on investments for incomes over $200,000 — put in place to start funding the subsidies for private health insurance and state Medicaid expansion that hit next year. But medical manufacturers say the onerous device tax, which they must pay whether they make a profit or not, will punish an industry in which the U.S. is the undisputed global leader. Many firms say the tax (to be collected over 10 years) will gut research budgets and force business relocation abroad.

The medical supply giant Stryker has spoken against the device tax, saying it will cost the company roughly $100 million a year — or 20 percent of its research and development budget. The company has already announced job cuts of 1,170, which is 5 percent of its worldwide workforce, in anticipation of the tax.

"Stryker remains significantly concerned with the upcoming medical device excise tax and its negative impact on jobs and innovation, and will continue to work with Congress to try to repeal the tax," says Stryker CEO Kevin Lobo.

As a result of this pushback, Stabenow — who voted for the tax just three years ago — is now one of the leading voices for the tax's repeal, even though she has not suggested a funding replacement.

"The medical technology industry directly employs over 400,000 people in the United States and is responsible for a total of 2 million skilled manufacturing jobs," reads a letter urging repeal, which Stabenow co-signed with other Democratic senators.

"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 letter also complained of Obamacare's haphazard implementation, saying that device makers have "received little guidance about how to comply with the tax."

Stabenow is joined by other Democrats who represent medical-device manufacturing states.

For instance, Minnesota Sen. Al Franken says a repeal is urgent: "For now, the best thing to do to ensure that this important industry continues to create jobs and producing life-saving devices is to delay this unwise tax."

The medical device tax repeal was attached to the nonbinding Senate budget resolution. Repeal will come if the Senate sends a bill to the GOP-controlled House, which has repeatedly voted to kill the tax.

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