Policy Documents

The Economic Impact of the Medical Device Excise Tax

Michael Ramlet, Robert Book, and Han Zhong –
June 4, 2012

In this document from Operation Healthcare Choice, the authors write that the Medical Device Excise Tax (“device tax”) is a tax on all medical devices sold in the United States and a component of the Affordable Care Act (ACA), President Obama’s signature legislation. The device tax will soon be center stage in the Congressional healthcare debate. A Ways and Means committee markup of repeal legislation this week will be followed by a floor vote in the House of Representatives in June. The device tax debate highlights the economic impact of the ACA. 

The device tax pays, in part, for the entitlement expansions in the ACA. The 2.3 percent tax will be applied to all medical devices sold in the United States, including both U.S.-made and imported devices. The only explicit exemptions are for eyeglasses, contact lenses, and hearing aids. The Joint Committee on Taxation (JCT) anticipates the tax will generate over $29 billion in new tax revenue between 2013 and 2022. 

The economic impact of the device tax is costly. The artificial joint manufacturer Stryker announced plans to cut 5 percent of its global workforce in part to reduce costs to pay the tax.

The authors estimate that the full economic impact of the tax on medical device industry employment, investigate the tax’s effect on startups and small businesses, and evaluate the implications for U.S. leadership in the medical device industry.