medical device excise tax
Published February 15, 2016

Good News for Consumers and Manufacturers: Temporary Suspension of Medical Device Excise Tax

For several years now, consumers of medical devices, including non-profit hospitals, have experienced rising prices for those devices.  The increase is a result of a 2.3% excise tax that the Affordable Care Act of 2010 imposed on manufacturers, producers, or importers of medical devices, such as surgical supplies and orthotic devices.  Good news, albeit temporary, comes in the form of recent legislation that will grant these manufacturers a two-year reprieve from the medical device excise tax.

What gets taxed, and who “really” pays?

The Food and Drug Administration maintains a complete listing of what constitutes a medical device, which generally includes devices that would not be available for purchase by the general public, such as MRI machines, hospital beds, and defibrillators.  Though the manufacturer, not the consumer, is responsible for remitting the excise tax on these types of medical devices, nothing prohibits the manufacturer or producer from passing the cost of the tax directly to the consumers.  Most manufacturers either increase their prices to cover the tax, or separately include the tax on their customers’ invoices.  The result is a 2.3% increase in supply costs for healthcare organizations.  As enacted, the medical device excise tax offered no exemptions for non-profit hospitals and healthcare systems, leaving them to feel the financial sting for costs that might not be recoverable otherwise through patient care.

Relief starts now!  

Signed into law December 19, 2015, the Consolidated Appropriations Act suspends the medical device excise tax for sales occurring between January 1, 2016, and December 31, 2017.  Over the next two years, manufacturers of medical devices will not be subject to this tax; and, consequently, medical device consumers should experience no pass-through collection of the tax.

Enjoy it while it lasts!

Unfortunately, the suspension is only temporary. Beginning January 1, 2018, the excise tax on medical devices will once again be assessed at 2.3% of the sales price for such goods, and the responsibility to remit the taxes will once again reside with the manufacturer or producer.  Regardless, consumers should enjoy the two-year vacation and hope that a permanent repeal will come by 2018.

Consumers beware!

Effective immediately, manufacturers will no longer remit the 2.3% tax and should remove any pass-through excise taxes from their invoices.  Consumers should exercise caution when paying invoices for medical devices to ensure the vendor is not including the 2.3% pass-through excise tax.  Consumers also may consider contacting vendors to request an equivalent price reduction!  If you have any questions regarding the medical device excise tax, contact one of our executives listed below, (800) 270-9629.

Interested in Learning More?

Sign Up for Our Latest Thought Leadership!



    Select Your Subscriptions