States look to tax HME to cut budget deficits

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Saturday, May 31, 2003

WASHINGTON — A tax on medical equipment is one option state officials across the country are considering to help cut into some of the largest state budget deficits in decades. It is an option, however, that could force some small rehab providers out of business, one state official says.

As budget deficits are addressed throughout the nation, some states are considering an option that would place a tax on medical equipment. About 19 states are leaning toward this methodology for their next fiscal year.

The tax would be based on the current sales tax for that particular state and the category price in which the medical devices fall. Most of the states currently using this method do not tax products paid for by Medicaid and Medicare or prescription drugs.

However, Seth Johnson, director of state government affairs for AA Homecare, said the exemptions may be lifted due to such large budget deficits.

The result, Johnson said, could have a drastic effect on the small rehab providers who do not buy their equipment in bulk. Such a tax would make it more difficult for smaller providers to “maintain a bottom line,” he said.

“It’s a real threat this year,” Johnson said. “The way the budgets are at this level, you can’t run a deficit from year to year.” HME

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