On the Medical Device Tax

by Zach Moore

A part of the "First Word, Last Word" column on the The Voice
Originally published on 10/31/13 and available here: http://www.buvoice.com/opinion/2013/10/31/first-word-last-word.html

(Advisor's note: this submission was required to be "about 500 words", but the subsequent rebuttal from a writer of The Voice totaled 637 words)

Since the beginning of Barack Obama’s presidency, an image has been painted for the American people of a universal, problem-free health care system that offers affordable or even “free” care. Based on the president’s rhetoric, one would believe that there is a magic money tree placed in the north lawn of the White House that miraculously drops leaves of one hundred dollar bills right into the pockets of Obamacare. Although this sounds excellent and the president somehow has fooled many Americans into believing this fairy tale, it is far from the case. An American who thinks based on logic understands the sad truth and reality, which is that President Obama has drafted a piece of legislation that is destroying the economy. Where does $60.1 billion of funding for the Affordable Care Act come from over the next decade? Sorry, not from the money tree the president is hiding from us all, but from the all too familiar 2.3% medical device tax.

Pacemakers: About to be way more $$$

Before jumping into the medical device disaster that the president has pursued, I believe it is important for readers to understand the importance this industry has in health care. Pacemakers, chemotherapy and defibrillators, just to name a few, are products that the medical device industry is responsible for. In order to produce and sell these products, research and development is key. A 2.3% tax on all revenues now significantly threatens the ability of this industry to devote money to innovate new products that could save lives.

Although many understand the effects on price and demand based on tax rates, it is obvious that the president does not. It is common sense for one to know what happens when tax rates increase on the revenues of a company: The price of goods go up in order to counter act the lost revenue. Therefore, what the president said would be more affordable, actually becomes less affordable. The price of medical devices goes up, therefore, making health care less affordable than it was before. What happens when these prices increase? Sales decrease, leading to a downward spiral of demand and lost revenues for one of the largest employers in the U.S.

Currently, according to the Wall Street Journal, the medical device industry employs 400,000 U.S workers directly, and another two million through supply and distribution. A 2.3% tax on this industry threatens many of these employees’ jobs. By cutting revenues by $6.7 billion annually, companies simply will not have the ability to maintain the size of their workforce. This is seen already, as, according to the Wall Street Journal, medical device companies have cut their workforce by 10% in order to brace for the impact.

This frivolous tax is something that the people of this country can not continue to ignore, nor can we as American’s continue to fall victim to the blinding image of something the president portrays as being free. Funding $60.1 billion comes from somewhere, and in this case it comes from thousands of lost jobs, increased costs for consumers, and irretrievable innovation that could have potentially saved lives.