Medical-device tax needs to go

  • Article by: ERIK PAULSEN and RON KIND
  • Updated: April 22, 2013 - 9:37 AM

The U.S. House needs to kill this burden on export and innovation.

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An encouraging thing happened last month in the U.S. Senate. An overwhelming number of Republicans and Democrats came together in taking a step toward ending a policy that is having unintended consequences on job creation and innovation.

Americans are clearly frustrated, and rightly so, by the lack of progress in Congress to spur job creation, economic growth and the entrepreneurial spirit that makes America unique. This is why we were pleasantly surprised at the strong measure of bipartisan support the Senate gave to repealing the medical device tax, an onerous policy that is harming a great American success story.

As the lead cosponsors of legislation in the House of Representatives to put an end to this unfortunate policy, we know that repeal can’t come soon enough for patient care and job creation.

The medical-device industry is responsible for nearly 2 million American jobs and has led the world in developing new technologies. In an economic environment where domestic manufacturing is an important part of our recovery, these are the very-high-tech manufacturing jobs we need to ensure stay here at home.

American workers are now competing on a global stage, and medical technology is one of the few successfully exporting industries in the country. In fact, medical exports doubled between 1998 and 2008, to $33 billion annually. We often hear that America needs to “start making things again” to help turn this economy around. Medical-device innovators are doing just that.

Unfortunately, in an effort to fund the Affordable Care Act, a new 2.3 percent excise tax was placed on medical devices. For full disclosure, one of us opposed the Affordable Care Act and the other strongly supported it, while wanting to make sure the bill was fully paid for. We both agree that the tax is harmful, and now, as the Affordable Care Act is being implemented, the impact is even more apparent.

As we move forward in repealing the tax, with a bipartisan group of 235 of our colleagues in the House who support this legislation, we must also find another pay-for — one that won’t jeopardize innovation or jobs — so we don’t add to our nation’s debt.

The impact of the tax is already being felt through layoffs at device manufacturers around the country. Over the long term, the device tax will also limit access to life-improving and life-saving innovations.

We continue to hear of potential layoffs and cuts in research and development as companies scramble to pay their share of the tax. With 62 percent of medical-device companies employing less than 20 employees, and 98 percent employing less than 500, many of the hardest-hit companies are the very small businesses that are the lifeblood of our country.

At the beginning of 2013, the first medical-device tax payments were collected from med-tech companies across the United States. Rather than putting that money toward cutting-edge advancements in health care or adding more jobs, the companies sent approximately $388 million to the federal government. This is just the beginning of what is expected to be a $30 billion tax.

While some have suggested that device manufacturers will reap a windfall of new business from the expansion of health coverage, that has not proved to be the case in Massachusetts, where there is near-universal coverage. Many of the newly insured will be relatively young and unlikely to need device-intensive procedures.

In Congress and communities across the nation, we continue to debate and discuss ways to make our health care system more effective and affordable, but we agree that implementing policies that punish innovators shouldn’t be a part of the plan.

When 79 senators vote in support of repealing the medical-device tax as a part of the budget resolution, it is clear that Congress wants to put an end to this policy.

The urgency is real, and it’s time to act.

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Erik Paulsen, a Republican, represents Minnesota’s Third District in the U.S. House. Ron Kind, a Democrat, represents Wisconsin’s Third District.

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