No Deal on Device Tax in Shutdown, But Industry Group Cites Progress on Repeal

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Oct. 28 --During the 16-day partial government shutdown, lawmakers considered but didn't include a delay or repeal of the Affordable Care Act's medical device tax in the measure that reopened the government.

Nevertheless, on Oct. 18, the day after the government reopened, Mark Leahey, the president and chief executive officer of the Medical Device Manufacturers Association, said the industry is heartened by the growing opposition to the tax, which is expected to collect $30 billion over a decade. Leahey said in a statement, “Having consistently worked against the medical device tax since it was first proposed, MDMA is emboldened by the growing bipartisan support and momentum to put an end to this bad policy.” Leahey added, “More and more Members of the Senate and House of Representatives are learning about the devastating impact the medical device tax has on innovation, jobs and patient care, and MDMA will continue to educate elected officials about this important issue until it is repealed once and for all.”

Lawmakers frequently considered a delay or repeal of the medical device excise tax during negotiations over the funding agreement to reopen the government . Ultimately, the device tax wasn't included in the final agreement. President Barack Obama signed the measure that reopened the government Oct. 17 (Pub. L. No. 113-46).

The Affordable Care Act imposed a 2.3 percent excise tax on the sale of certain medical devices by device manufacturers, producers, or importers. The tax, which was implemented at the start of 2013, has proven a persistent element of Republican-led proposals on both sides of the Capitol. Repealing or delaying the tax has support among some Democrats, as well, although the parties differ as to whether and how to make up about $30 billion in revenue the government has said the tax will raise for the ACA over a decade.

Although the government shutdown, which began Oct. 1, was originally triggered by House Republicans who demanded defunding the ACA, the final agreement that ended the impasse contains only a minor tweaking of the law.

The agreement requires the Obama administration to verify the income of people applying for federal subsidies to help pay for health coverage on the insurance marketplaces. The marketplaces, or exchanges, began enrollment on Oct. 1 for coverage beginning Jan. 1, 2014.

The agreement requires the secretary of health and human services to submit a report to Congress by Jan. 1 on the procedures put in place to verify the income of people applying for subsidies on the exchanges.

CRS: Uncertainty on Tax Remains

Implementation of the device tax still faces issues, including clearing up confusion about which devices are taxable, the Congressional Research Service said in an Oct. 11 report to Congress, during the shutdown. The title of the CRS Report is “The Medical Device Excise Tax: A Legal Overview.”

The law specifically exempts certain devices such as eyeglasses, contact lenses and hearing aids, as well as items that typically are sold directly to consumers at retail, the CRS said. Some uncertainty remains, and federal regulations are only a first step in clarifying the tax's reach, the CRS said.

“The new Treasury regulations on the medical device excise tax, while providing some certainty with respect to what devices will be exempt from the tax, generally favor a more flexible approach to defining the scope of the central exemption to the tax,” the CRS said. “As a consequence, uncertainty remains as to which medical devices will be subject to the tax.”

The CRS report is at