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Medical Device Tax Could Lead to Employment Changes

By Shameka Neely

Posted September 14, 2011

A new medical device tax could send thousands of jobs overseas. Experts disagree on whether the tax could lead to higher consumer prices.

In 2013, the government plans to impose a 2.3 percent tax on medical devices as way to pay for of the Affordable Care Act passed last year. Experts like Kosali Simon of Indiana University's School of Public and Environmental Affairs say it is likely the tax will be like most corporate levies – paid not by corporations but by their customers.

"Whenever a tax is levied even if it's stated in law it's going to be paid by the company, it's not necessarily the company that's going to take the hit because prices can adjust," she said.

Cook Group Executive Steve Ferguson said the tax could send more manufacturing business overseas, since international rates are much lower. But he expects his company, which manufactures medical devices will shoulder the burden of the tax hike.

"Prices have a tendency to go down especially from the pressure hospitals are under," Ferguson said.  "We're seeing a decline in prices, but it's going to have to be absorbed by companies and on their bottom line as opposed to just adding it to the cost of health care."

There are more than 300 FDA approved medical device manufacturers, employing 20,000 Hoosiers. Ferguson said while Cook plans to absorb the hit to its bottom line if the tax is enacted, the company will still lobby against its implementation.

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