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Medical Device Tax

With all the controversy surrounding the new state of health care in the United States, it is not shocking that so many of the details remain confusing to consumers. One of the taxes proposed to help pay for Obamacare was a tax on medical devices. This post will illuminate details on this issue.

What is it?

According to the FDA, a medical device is an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part or accessory. These devices are recognized in the United States Pharmacopeia or National Formulary, intended to diagnose a disease or conditions, cure, mitigate, treat or prevent diseases in man or animals and are intended to affect the structure or any function of the body that does not achieve any of its primary intended purposes through chemical action within or on the body of a human or animal and not dependent upon being metabolized for the achievement of its primary intended purposes.

What is the history of its incorporation into ACA?

Through negotiations of the Affordable Care Act, several parts of the bill have come into question. These include several different taxes, and reforms that the ACA would bring about, like the medical device tax. The medical device tax was a large contributor to the governmental shutdown earlier in the year; however, currently the provision is set to be repealed by the bipartisan budget deal reached this week by the U.S. Legislature.

What are the effects it could have?

The reaction by Minnesota legislators has been less than stellar, as both Republican Erik Paulsen and Democrats Amy Klobuchar and Al Franken have argued that the tax will hurt jobs and innovation. The tax is a 2.3% excise tax on these items, in order to cover the expansion of Obamacare on the health care system to the tune of about $30 billion.

ACA advocates believe that it is only fair for device makers to contribute when it is expected that the overhaul of the health care system will likely greatly financially benefit them. According to data from ReportLinker, some market research overall 2015 market value of medical devices are predicted to earn revenue up to $228 billion and expand further by 2023.

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