Medical device tax: All is not lost

Thursday, March 25, 2010

WASHINGTON - If you're looking for a glimmer of good news in the new healthcare reform bill, it could be the sales tax on manufacturers of HME and other medical devices.

The 2.3% tax, which applies to just about all HME, takes effect in 2013 and is designed to raise $20 billion over 10 years to help pay for healthcare reform. Earlier incarnations had it at a higher rate, 2.9%, and kicking off in 2011.

"It could have been much more onerous," said Seth Johnson, vice president of government affairs for Pride Mobility Products. "Since it is pushed out to 2013, it will allow Pride and the rest of the industry time to find ways to absorb the additional costs."

The 2013 start date gives the industry some options. It could craft legislation to repeal or reduce the tax on HME before it begins.

There's also language in the reform bill that allows the Department of Treasury to exempt retail items from the tax.

"It appears that they are looking at things that are sold to individual consumers," said Cara Bachenheimer, senior vice president of government relations for Invacare. "That is exactly what every one of our products is designed for. So I think there is an argument for that."

Of course, if all fails and the tax kicks in, manufacturers will likely not be alone in feeling the pinch, say industry watchers.

"You could say that it is almost a 2.3% reduction in reimbursement because the HME dealer is going to have to pay more if we can't absorb the increase," said Larry de la Haba, Graham-Field's senior vice president of business development.