There are arguments both for and against the tax. Those arguing to keep the Medical Device tax point out several important factors:

Revenue expectations: The Medical Device tax is expected to bring in $38 billion over a ten-year period from 2013 to 2013.
Part of a Comprehensive Plan: The Medical Device tax is a component of the broader health care reform package and the plan to fund it. Concerns have been raised that if questions are raised regarding the justification of the Medical Device tax, other taxes that are part of PPACA would be ripe for elimination as well.
In addition to the Medical Device tax, PPACA is funded by the Cadillac tax (expected revenues of $110 billion over ten years), taxes on drug manufacturers and importers (expected revenues of $34.2 billion over ten years), fees on providers of health insurance (expected revenue of $101.7 billion over ten years).
Proper to tax Industries that benefit from health care: It has been argued that the expansion of health care coverage to additional millions will benefit this market, and because of that, they should contribute to the success of health care reform.

Arguments against the Medical Device Tax include these:

Validity of the use of an excise tax: Excise taxes are generally used to either deter behavior, such as taxing tobacco or alcohol or to obtain funds for distribution purposes for related activities, such as gasoline taxes being used for the building and maintaining of bridges and roads. It could be argued that both the excise tax revenue from the Medical Device Tax and the Cadillac taxes could be used for health care, but a problem exists in that the revenue from the Medical Device tax is not earmarked, but goes to the general fund.
Administrative costs can be significant.
Compliance costs can be even more significant. As mentioned in this article, determination of sale price can be complicated and difficult to audit.
Effect on the economy and the industry: It has been argued that the tax has resulted in the loss of tens of thousands of jobs in the medical device industry and the money collected from the tax is money that could have been used for new research and development. The validity of this argument is not yet determined but it is one of the most vocal arguments made by the industry.

This issue promises to continue to be a subject of disagreement and continued debate. It currently slumbers in a moratorium, but the health care industry and health care reform will be affected by whether it wakens in 2018.

Instant Insights /

6 things to know about the Medical Device tax

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