The Union Tribune had an editorial today advocating the repeal of the tax on medical devices. On rare occasions, the UT editorial staff goes above politics and states a well-researched opinion with a solid foundation. This, isn't one of those times. New hope for repeal of Obamacare tax | UTSanDiego.com The UT complained that the tax was destroying jobs etc.
USA Today's editors the opposite side of the debate in their editorial, however they did publish a rambling opposition opinion by Tom Fogerty that complains that the tax somehow reduces innovation. But back in 2013, Michael Hiltzik wrote a convincing column that the tax should remain-- I find I usually agree with Michael Hiltzik's opinion. .
First of all, the tax on the devices is only 2.3% which is hardly noticeable on a patient's medical bill. I don't know if there is sales tax added on medical devices but the 2.3% is probably less than 1/3 of the state, county or city sales taxes that would be added. If there is not sales tax on such devices, then 2.3% is negligible compared to taxes on everything else. Does the 8% sales tax we pay on electronic gadgets stop innovation? Second, the 2.3% tax is reduced by the savings a company gets on their income tax, so that the 2.3% is actually around 1.4% after taxes. The tax isn't charged on eyeglasses, hearing aids or exports. So over half of the industry's products aren't affected. Because it isn't charged on exports, it shouldn't affect international trade. Yes, it is likely that the tax pushes up the price of those devices by the amount of the tax. But we also know that a very large percentage of the cost of getting a heart stent, hip joint, knee joint etc is the cost of the operation and recovery. The cost of the device itself is probably less than 25% of the total medical cost. Also much of the cost is actually paid by the Government! If a medicare, medicaid, military, or VA patient gets a new hip, the Government pays the tax as part of the overall medical bill.
I recently read the book America's Bitter Pill by Steven Brill. It is a very long and very detailed description of how the ObamaCare --Affordable Care Act --was put together, and the struggle to get the important website up and running. The negotiations among the many stakeholders in the process of developing the bill was very complex and very intense. As part of the plan, it was recognized that by adding all of the new patients through Obamacare, some businesses would reap sudden windfall profits. Doctors, hospitals, Insurance companies, pharmaceutical companies and medical device companies would get a huge boost in sales and profits when new patients were added. As part of the process, all of the participants gave up some "share" to make it fair to all. The medical device companies share was the 2.3% tax. They are now experiencing that windfall in sales and profits. However they have spent $150 million over the past 5 years to lobby and make contributions to political campaigns in the hopes of eliminating this tax. The problem is, if the tax is eliminated then next the other businesses, such as hospitals, will then want to also eliminate their "share." The Republicans know this, and understand that if that tax were eliminated, it would possibly cripple Obamacare. That, I believe, is their main goal. They have been working very hard to find some way to make the ACA appear to have failed, so they can more easily kill it. They want to kill it, not because it doesn't work, but because they don't want credit given to the Democrats or Obama. The "NIH" or "Not Invented Here" complex. The Republicans killed the Clinton medical plan, and had many opportunities to present their own. However they have never proposed any plan that appeared to work.
Concerning the tax effect on innovation. A device such as an improved hip replacement part would sell just the same with the additional tax as without if the improved device, is, in fact, improved. How many patients would worry about a 2.3% tax when selecting the best hip replacement joint?
It is revealing that Tom Fogerty and the San Diego Union Tribune editorial board carefully avoided any mention of facts or fairness among the industry stakeholders in Obamacare. Their editorials cited unsubstantiated loss of jobs and innovation as the rationale -- none of which meet the test of facts. You have to wonder if the editorial was written as quid pro quo for the medical device manufacturers placing ads in the newspaper?
USA Today's editors the opposite side of the debate in their editorial, however they did publish a rambling opposition opinion by Tom Fogerty that complains that the tax somehow reduces innovation. But back in 2013, Michael Hiltzik wrote a convincing column that the tax should remain-- I find I usually agree with Michael Hiltzik's opinion. .
First of all, the tax on the devices is only 2.3% which is hardly noticeable on a patient's medical bill. I don't know if there is sales tax added on medical devices but the 2.3% is probably less than 1/3 of the state, county or city sales taxes that would be added. If there is not sales tax on such devices, then 2.3% is negligible compared to taxes on everything else. Does the 8% sales tax we pay on electronic gadgets stop innovation? Second, the 2.3% tax is reduced by the savings a company gets on their income tax, so that the 2.3% is actually around 1.4% after taxes. The tax isn't charged on eyeglasses, hearing aids or exports. So over half of the industry's products aren't affected. Because it isn't charged on exports, it shouldn't affect international trade. Yes, it is likely that the tax pushes up the price of those devices by the amount of the tax. But we also know that a very large percentage of the cost of getting a heart stent, hip joint, knee joint etc is the cost of the operation and recovery. The cost of the device itself is probably less than 25% of the total medical cost. Also much of the cost is actually paid by the Government! If a medicare, medicaid, military, or VA patient gets a new hip, the Government pays the tax as part of the overall medical bill.
I recently read the book America's Bitter Pill by Steven Brill. It is a very long and very detailed description of how the ObamaCare --Affordable Care Act --was put together, and the struggle to get the important website up and running. The negotiations among the many stakeholders in the process of developing the bill was very complex and very intense. As part of the plan, it was recognized that by adding all of the new patients through Obamacare, some businesses would reap sudden windfall profits. Doctors, hospitals, Insurance companies, pharmaceutical companies and medical device companies would get a huge boost in sales and profits when new patients were added. As part of the process, all of the participants gave up some "share" to make it fair to all. The medical device companies share was the 2.3% tax. They are now experiencing that windfall in sales and profits. However they have spent $150 million over the past 5 years to lobby and make contributions to political campaigns in the hopes of eliminating this tax. The problem is, if the tax is eliminated then next the other businesses, such as hospitals, will then want to also eliminate their "share." The Republicans know this, and understand that if that tax were eliminated, it would possibly cripple Obamacare. That, I believe, is their main goal. They have been working very hard to find some way to make the ACA appear to have failed, so they can more easily kill it. They want to kill it, not because it doesn't work, but because they don't want credit given to the Democrats or Obama. The "NIH" or "Not Invented Here" complex. The Republicans killed the Clinton medical plan, and had many opportunities to present their own. However they have never proposed any plan that appeared to work.
Concerning the tax effect on innovation. A device such as an improved hip replacement part would sell just the same with the additional tax as without if the improved device, is, in fact, improved. How many patients would worry about a 2.3% tax when selecting the best hip replacement joint?
It is revealing that Tom Fogerty and the San Diego Union Tribune editorial board carefully avoided any mention of facts or fairness among the industry stakeholders in Obamacare. Their editorials cited unsubstantiated loss of jobs and innovation as the rationale -- none of which meet the test of facts. You have to wonder if the editorial was written as quid pro quo for the medical device manufacturers placing ads in the newspaper?
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