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Eleanor Dehoney: The Medical Device Tax Debate — Will Logic Prevail?

Efforts in Congress to repeal the medical device tax have been caught up in debates over health reform and jobs, obscuring a fundamental question: Should a nation committed to medical progress impose an excise tax on it?



“There is science, logic, reason; there is thought verified by experience. And then there is California.” — Edward Abbey, American author


As a would-be Californian, I feel a little guilty poking fun at the Golden State, but this quote gets to the heart of the debate over the medical device tax. There is a straightforward reason for ending the tax, then there is the debate. In the media and in Congress, the effort to repeal the device tax has been buffeted by the push and pull over Obamacare and disputes regarding the impact of the tax on U.S. jobs.

It is not surprising that a hot topic like healthcare reform and an issue as tangible as the jobs impact would garner attention, but neither issue is the salient one.

True, the medical device tax helps fund Obamacare. So why shouldn’t health reform factor heavily into the policy debate? Because you can’t judge a tax by its use. There are other funding streams that could be tapped for healthcare reform — and, in fact, an alternate funding stream might not be necessary, since Obamacare is coming in under budget. At the same time, there are certainly other federal initiatives that could use an additional funding stream. Sink or swim, the future of the medical device tax deserves its own debate.

What about jobs? Should the number of documentable job losses associated with the device tax be the litmus test for keeping or jettisoning it? No. The major concern with the device tax is its impact on access to — and the use of — investment capital, which cannot be captured by jobs data. In fact, there may be no way of adequately quantifying sub-optimal investment. That’s because innovations that never occur don’t leave a footprint, and many factors influence changes in the flow of capital. Isolating the device tax impact may be impossible.

What the medical device tax does — and I’ve heard no one argue otherwise — is reduce the potential return on investing in medical device R&D. That means less investment in devices overall, and a tilt toward less-risky investments within the device arena.

That’s not good. There are many examples of breakthrough devices that have changed the face of medicine: sophisticated prosthetic limbs that have literally transformed the future for wounded warriors; pacemakers, stents and other technologies that have given years of life back to people who otherwise would no longer be with us; mobility and vocal devices that enable people with various forms of paralysis to walk and communicate. We need more of those.

What it boils down to is this: If we, as a nation, value medical progress, we should not impose an excise tax on it. I’m not sure if that’s logic, reason, or thought verified by experience, but I hope it’s a rule of thumb Congress and the administration can agree — and act — on soon.

(Top image: Courtesy of Tim Hipps, U.S. Army FMWRC)

Eleanor Dehoney is Vice President of Policy and Advocacy at Research!America.





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