Following close on the heels of the latest dismal jobs report this week is a House vote to repeal the Medical Device Tax. The Protect Medical Innovation Act, or H.R. 436, was introduced by Representative Erik Paulsen (R-MN) and thanks to bipartisan support, including 233 co-sponsors, was approved by the Ways & Means Committee by a vote of 23-11 last week. H.R. 436 will now go to the House floor for a vote sometime this week.
H.R. 436 seeks to repeal the Medical Device Excise Tax included as part of Obamacare legislation. As part of the Obamacare bill, a 2.3 percent tax increase on medical device manufacturers will begin in 2013, and could equate to $29 billion in additional taxes on medical device manufacturers, a cost which will inevitably be passed to the consumer. As H.R. 436 proceeds to the floor this week for a vote, House members on both sides of the aisle should vote in support of this repeal effort in order to protect healthcare manufacturing jobs, the healthcare manufacturing industry, and innovative efforts to improve healthcare in the United States.
The Employment Situation Summary released by the Bureau of Labor Statistics last week evidenced a stagnant unemployment rate of 8.2 percent under President Obama. However, the two sectors showing upward trends in employment, healthcare and manufacturing seem to be the targeted industries under Obamacare. Last month the healthcare industry added 33,000 jobs, with the manufacturing sector adding an additional 12,000 jobs to the labor force for a total of 45,000 jobs. If the Medical Device Tax goes forward this week, "the tax could result in job losses in excess of 43,000." The Medical Device Tax under Obamacare would not only work a direct burden on job creation, but would also work a hardship on the Medical Device Manufacturing Industry and create a virtually impenetrable economic barrier to innovation, placing most innovators in the red.
The industry as a whole would suffer as the Medical Device Tax would make for a $3 billion increase in taxes paid by medical device firms. The tax increase would cripple domestic medical manufacturers, leading to cost-cutting measures including job loss and outsourcing of medical manufacturing jobs and plants. Additionally, the $3 billion tax increase would inevitably lead to manufacturing costs being passed along to consumers and patients leading to increases in the costs of everything from bedpans to tongue depressors.
The effect the Medical Device Tax would have on innovators in the medical field is that medical device manufacturers may end up paying taxes on "devices sold at a loss." For example, Analogic, which specializes in innovative medical technology production, earned $3.7 million in net income last year. Under Obama's Medical Device Tax, Analogic would have paid roughly $7.5 million in taxes last year, amounting to a $3.8 million loss. The effect of this tax is unsustainable, killing innovation and jobs.
Thus, the negative effect the Medical Device Tax under Obamacare would have would be to discourage medical innovation, while also cutting job growth in two industries vital to the American economy. House members should vote in support of H.R. 436 this week in an effort to support American job growth and encourage medical innovation in the United States.