Medical device tax looms

Thursday, January 26, 2012

WASHINGTON - The witching hour for an annual excise tax on medical devices is quickly approaching, and the fate of HME manufacturers is still in the hands of the IRS.

HME manufacturers are still waiting for the IRS to decide whether or not it will exempt HME from the 2.3% tax.

"We're still waiting for them to interpret and implement the provision," said Cara Bachenheimer, senior vice president of government relations for Invacare. "They said they would come out with a proposed rule last year and then it was January. Now they're saying the first quarter."

The $20-billion tax is a provision of the Affordable Care Act signed into law in 2010. It will be levied on a company's total revenues, regardless of whether it generates a profit.

Under law, the secretary of the treasury has the power to exempt "any medical device determined by the secretary to be of a type which is generally purchased by the general public at retail for individual use." Stakeholders believe HME fits that description to a T.

"Congress' intention is to tax scalpels sold to hospitals," Bachenheimer said. "Our products are sold to individual customers."

Stakeholders have had several meetings with IRS officials and have submitted numerous comments and other information to them. They've also made a case to exempt HME that are used in both the home and institutional settings, like beds, manual wheelchairs and wound care supplies.

"We've provided them with everything they've needed," said Seth Johnson, vice president of government affairs for Pride Mobility Products. "We believe we're in a pretty good position."

There are also bills in the House and Senate to repeal the tax, but in an election year and with a weak economy, stakeholders give them only a 50/50 chance of going anywhere. That's why they're focusing on getting an exemption from the IRS.

"The addition of this tax would be significant," Johnson said. "It's another increase in the cost of doing business that would have an impact company wide."