Congress’s job is to pass laws that serve the American people. However, Congress often passes sweeping reforms into law and then fails to make updates to ensure they’re working in the real world.
The Affordable Care Act (ACA), which made sweeping reforms to our nation’s health care system, is a prime example. While health care reform helps improve the accessibility of health coverage, it is not perfect and reasonable fixes would ensure the law works for American families. Unfortunately, partisanship has prevented Congress from making commonsense, bipartisan fixes to the law.
One necessary fix is the repeal of the excise tax on medical devices, which was included as part of the payment plan for health care reform.
Medical devices improve the lives of millions of Americans, giving sight to the blind, hearing to the deaf, and mobility to those who have been paralyzed. The medical device industry is a model of American innovation and high-tech manufacturing, where 21st-century technologies support middle-class jobs, save lives, and improve outcomes for patients.
Regrettably, the device tax gets in the way of better, more innovative and cost-effective care for Americans.
The medical device tax hinders job growth in the industry and keeps companies from investing billions of dollars into research and development. According to multiple industry surveys, approximately three-quarters of its members have deferred or canceled capital investments, reduced investment in start-ups, experienced difficulty raising capital, or deferred pay raises for employees because of the medical device tax. While these resources could be used to cultivate the next generation of life-saving devices, they’re instead being sent to the IRS.
In addition, the tax, which is assessed on sales instead of profits, is particularly difficult for small inventors. Startups may well have to pay taxes long before they generate profits. This delays returns on investment and creates a disincentive to early investment — putting small companies at a competitive disadvantage.
We no longer need the device tax because health care reform is less expensive than initially predicted. The tax was originally designed to generate $20 billion to help pay for the cost of the law’s other reforms, but the overall cost of healthcare reform is much lower than previously estimated. In March, the nonpartisan Congressional Budget Office (CBO) again slashed its cost estimate for the law’s insurance provisions, which makes the ACA’s current cost more than $200 billion below what CBO predicted in 2010.
Despite the fact that the revenue from the medical device tax is no longer needed, the policy remains in place and continues to stifle innovation and job creation.
Medical device manufacturing is one of the few U.S. industries that is a net-trade exporter, and is responsible for more than 2 million good-wage American jobs. In fact, the average medical technology job pays up to 40 percent more than the nation’s average salary. These are the types of jobs every Member of Congress wants created in his or her district. Unfortunately, the medical device tax is a major roadblock for innovators, costing thousands of jobs and lost research and development investments along the way.
The good news is there is broad, bipartisan support to end the medical device tax, and we urge Congress to make this a priority. Doing so would provide a much-needed boost toward innovation and job creation, while protecting the objectives of health care reform.
Recent bipartisan action in Congress to end the problematic “sustainable growth rate” (SGR) for Medicare payments shows that when there is common ground, the legislative branch can work. There is a bipartisan consensus that the medical device tax should be repealed. In the last Congress, 79 Senators voted for repeal, and more than 275 members of the House currently co-sponsor legislation to do the same.
Repealing the medical device tax would not undermine the health care reform law or its efficacy — it would stimulate our economy, strengthen America’s global leadership, and invest in a brighter tomorrow. It is time for Congress to pass this reasonable fix to support hardworking American families.