Claims About Medical Device Tax Are Out of Joint

August 8, 2013 at 9:04 am

Critics of the 2.3-percent excise tax on medical devices have made false and exaggerated claims, as we have previously written.  A recent article in The New York Times provides further evidence that the impact of the tax will be minimal.

The article tells the story of a Colorado man whose health insurance wouldn’t cover his hip replacement because it was considered a pre-existing condition.  His local hospital quoted him an unaffordable price of more than $78,000.  So he had his hip replaced in Belgium, where it cost him a grand total of $13,660.

The artificial hip itself is one component of the overall price of the procedure.  While an artificial hip costs about $350 to produce in the United States, the Times reports, device manufacturers charge vastly more.  The Belgian hospital paid about $4,000, and American hospitals typically pay over $8,000 for the same model.

Opponents of the medical device tax have contended that it will harm innovation.  The Times reveals, however, that three major manufacturers of artificial hips and other joints sold more than $1 billion of joint implants in 2011 but spent only 5 percent of those revenues on research and development (R&D).  At the same time, each of these firms paid their CEOs over $8 million.

Clearly, this segment of the medical device industry can easily absorb a 2.3-percent tax without raising prices or cutting R&D.

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More About Paul N. Van de Water

Paul N. Van de Water

Paul N. Van de Water is a Senior Fellow at the Center on Budget and Policy Priorities, where he specializes in Medicare, Social Security, and health coverage issues.

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3 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. 1

    Medical Claims provides services for medical treatment process without pay bill of medical. For that, we have to fill a medical insurance claim form which assured from medical insurance company and to make member of this company. We can claim through private and government company.

  2. Guy Richardson #

    It was interesting to see a big deal made about how these taxes might also effect veterinarian clinics as well.

    Certainly, interesting, but I can’t imagine the costs to be passed along would be that great in either case.

  3. J.J. #

    Agreed. For every $1,000, it would be additional $23; every $5,000 would be $115. If someone is willing to pay (full or partial) for a medical device, they are able to afford the additional amount.

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