HME dodges tax bullet

Friday, December 7, 2012

WASHINGTON – A more detailed “facts and circumstances” test in the IRS’s final regulations for a medical device tax should ensure that “virtually all” HME falls under a retail exemption, industry stakeholders say.

“This is a home run,” said Cara Bachenheimer, senior vice president of government relations for Invacare.

Starting Jan. 1, the IRS plans to levy a 2.3% excise tax on certain medical devices as part of a healthcare law that Congress passed in 2010. It expects the tax to raise $29 billion over 10 years.

The IRS’s proposed regulations included a retail exemption for 1.) devices regularly available for purchase and use by individuals who are not medical professionals; and 2.) devices with a design that demonstrates they are not primarily intended for use in a medical institution, office or by a medical professional. While that made exemptions for some HME clear, it left other HME like oxygen concentrators in a grey area, stakeholders argued.

“We had a concern that, under the proposed regulations, some HME would be subject to the tax,” said Jay Witter, senior director of government affairs for AAHomecare.

A more detailed “facts and circumstances” test in the final regulations, however, lists other factors for determining whether a medical device falls under the retail exemption, and they’re favorable to HME. One of those factors: whether consumers who are not medical professionals can purchase the device in person, over the phone/Internet or through retail businesses like drug stores, supermarkets or DME suppliers.

“Our position has always been that DME suppliers have always been seen as retail businesses by the IRS and Medicare,” Witter said. “So we’re pleased they specifically included DME suppliers.”

The final regulations even include, as examples, how manual and power wheelchairs, portable oxygen concentrators and homecare beds fall under the retail exemption.

“That was huge,” Bachenheimer said.

The changes to the regulations have everything to do with an industry full-court press spearheaded by manufacturers like Invacare and Pride Mobility Products, and trade groups like AAHomecare, stakeholders say.

“We have been lobbying the IRS and the Department of Treasury to include all HME in the retail exemption, so we’re pleased,” said Seth Johnson, vice president of government affairs for Pride Mobility.

To read the IRS’s final regulations: