Under Trump, Congress Likely to Kill Medical Device Tax

Republicans take aim at funding mechanism for Affordable Care Act

When Donald Trump becomes president on January 20, one of the first business tax breaks he is likely to deliver is the permanent suspension of a federal tax on medical devices, according to a Reuters report. The tax, imposed in 2013 as a funding mechanism for the Patient Protection and Affordable Care Act (PPACA), was temporarily stopped last January. Medical device makers who would benefit from the move include Medtronic Inc., Boston Scientific, St. Jude Medical, and Johnson & Johnson.

Senate Republican leader Mitch McConnell said repealing the PPACA will be the first order of business in the Senate when it convenes in January.

According to Reuters, the U.S. medical device industry, in its long-running opposition to the device tax, is seeking to frame the fight as a jobs issue. In 2015, however, the Congressional Research Service, a nonpartisan arm of Congress, reported that the tax was having only a “fairly minor” effect on the production of devices and on employment in the industry.

There are approximately 9,000 U.S.-based medical device manufacturers. The industry accounts for approximately 520,000 U.S. jobs and has $150 billion in direct sales, according to a spokesman.

Republicans said the device industry has little reason to fear that the tax will ever return. Senator John Barrasso, a member of the Senate Republican leadership, said legislation to repeal the PPACA will move next year in a way that will circumvent expected Democratic resistance.

Federal revenue from the tax was never momentous, Reuters says. When imposed, it raised barely $2.5 billion a year—less than expected. By comparison, federal tax subsidies to help people obtain health insurance under the PPACA in 2016 were estimated to be $660 billion, according to the Congressional Budget Office.

Source: Reuters; December 9, 2016.