Evidence suggests that some medical device manufacturers are shifting the burden of the medical device excise tax directly to American hospitals and other health care providers, an industry association charges.
Under the Affordable Care Act, manufacturers and importers of medical devices would be subject to a 2.3 percent excise tax. The tax was fiercely opposed by the medical device industry during lobbying over the health care reform law and after its passage. However, the Healthcare Supply Chain Association and its group purchasing organization members are warning that now that the tax is in place, medical device makers are simply passing along the costs to hospitals, health care providers and ultimately patients.
Hospitals have committed $155 billion over the next 10 years to help fund the Affordable Care Act, according to the association, which now reports that some medical device manufacturers are billing hospitals directly to cover the costs associated with the ACA’s medical device tax.
“American hospitals have already lived up to their shared financial responsibility for national health care reform, and now face mounting budgetary strain as they continue to deliver affordable and effective patient care with fewer dollars,” said HSCA president Curtis Rooney in a statement. “It is disheartening to find that some medical device companies have chosen to tack the tax right onto their invoices. We urge all manufacturers to immediately stop passing the medical device tax on to American hospitals, and ultimately to patients and taxpayers.”
Beginning Jan. 1, 2013, a 2.3 percent excise tax was imposed on sales of “taxable medical devices” by manufacturers and importers. In a March 2011 letter to the Internal Revenue Service, HSCA joined the American Hospital Association, the Federation of American Hospitals, and the Catholic Health Association in urging the IRS not to allow medical device manufacturers to pass on the cost of the device tax to hospitals. The IRS issued regulations on the tax last month (see IRS Issues Guidance and Regulations on Medical Device Tax).
“HSCA and its group purchasing organization members will continue to monitor the device marketplace for evidence of cost-shifting onto hospitals, and encourage our hospital partners not to enter into contracts that bill them for the device excise tax,” said Rooney. “As hospitals, long-term care facilities and other healthcare providers continue to stretch their budget dollars, they will continue to rely on their GPO partners to reduce healthcare costs and deliver the best medical products and services at the best value.”
6 Comments
Anytime "ALL" are forced to support a Government mandate of a service or Product "ALREADY AVAILABLE" by private industry , the cost will be Hidden through higher product and service costs. Think! TUITIONS (supported by Tax credits paid by all of us.)---Public schools labelled as "free"?????? Supported by higher Real estate and auto taxes on "BUSINESSES, Lottos, Casino's etc. Government Workers gain Millions in automatic raises by simply raising taxes Penny's for all the workers. Medical device taxes is a hidden Income TAX increase--To blame on Medical industry.
Posted by: pete8743 | January 28, 2013 12:43 PM
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I love it how this new monstrosity ACA is pitting against one another the various provider communities, in this case hospitals versus device makers. The mistake the device makers made is to blatantly itemize the new tax on bills sent to hospitals. To do so in this environment is to invite bad press and (more) heavy-handed regulation. The device makers should not be expected to absorb the tax burden, and they don't have to. The simpler, less risky strategy is to incorporate the new tax into product prices, which is what they will inevitably do.
In any case, the patient ultimately pays all or most of the tax no matter how it is levied. The proportion of tax shifted to patients will depend on the elasticity of demand for medical devices. Since this surgery is quite popular and Medicare/insurance often covers most of the cost, demand for it is quite inelastic (i.e., responds very little to price). And the more inelastic the demand for any good or service, the more the tax burden is passed along to the final consumer. That's why "sin taxes" (on booze and tobacco) are such a good revenue-raiser and fall mostly by the "sinner."
Posted by: janejohn | January 28, 2013 11:49 AM
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Surprise, surprise!! The options were pass it on, reduce R&D or eat it. Is anyone surprised they many decided to pass it on? Yes, there were, those who cut a deal with the adminstration to benefit from ObamaCare.
Posted by: dwhaartz | January 28, 2013 9:50 AM
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Just another reason we should have gone with a single payer, Medicare for All, type program instead to reform health care in this country.
Posted by: JAscher | January 28, 2013 8:58 AM
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Perhaps there should be a requirement for every member of Congress to have completed at least the first two weeks of Economics 101.
What did they think? They could increase the costs of the equipment manufacturers without creating incentives for higher selling prices of their products? And that hospitals wouldn't pass on these costs to insurance companies? and that insurance companies wouldn't pass these costs on to employers? and that employers wouldn't wouldn't pass these costs onto their customers?
First economics lesson for Congress -- there is no such thing as free money.
Make that requirement: they must earn at least a B in economics.
Posted by: pbwmiller | January 28, 2013 8:15 AM
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I think they should change the name, Unaffordable Care Act!!!!
Posted by: Terri3759 | January 28, 2013 7:08 AM
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