If you are asking whether the US buyer pays the overseas manufacturer 2.3 percent, the answer is no. The tax is charged by at point of sale, but the US does not have jurisdiction over the rest of the world. The US could impose an important duty, but it can’t tell overseas manufacturer to collect a sales tax.</p>
<p>
</p>
<p>Yes, if the US subsidiary is the “importer” it charges and collects 2.3% sales tax on any medical device it sells, based on the sales price it sets. </p>
<p>
No, the hospital is not a “manufacturer, producer, or importer” so it does not need to collect tax. </p>
<p>This is not complicated – the law couldn’t be written more simply and directly. </p>
<p>There are other taxes that could be imposed. If a big medical supply house opens up for business in Wyoming, then the Wyoming legislature could decide to reap a piece of the action by imposing its own separate state tax on the sale of all medical devices within its borders – but that’s got nothing to do with the federal tax.</p>
<p>Ok… I was getting very confused here…thanks. </p>
<p>So…I am trying to understand why this tax is so devastating. I was wondering if I was missing something. </p>
<p>The job loss in this country is estimated to be around 10,000 people. Maybe. Many jobs are moving overseas because the business is overseas. The BRICs have a lot of growth prospects so that is where the jobs are going. Some companies say they are moving or creating jobs overseas and people jump on that and say, “get rid of the medical device tax”. </p>
<p>Many companies dont blame the medical device tax while other people are putting Words in the companies mouths and blaming the tax.
The tax is a write off. For some companies the tax us reduced to 1.5 percent after taxes.</p>
<p>There is a fact check article dated Oct9th that addresses this medical tax issue.</p>
<p>Yes just once- its not a VAT that is applied at successive points in the transaction. </p>
<p>But- lets assume that the tax is entirely passed on. Then its more like 2.5%. And each successive distributor when applying their markup applies it to the new sales price. So if you have two distributors (maybe one middle man and one hospital) each with a 50% gross mark up, and then you add a sales tax on the end the net effect (assuming that it all gets passed to the consumer) would be like 6%. </p>
<p>Is it a big deal? I dont know, my impression is that health care has enough inflation that this is just par for the course. But I’d imagine that companies would take this as a trigger event to look into offshoring to get the jump (or stay even) with competitors also subject to the tax. </p>
<p>I actually know someone who is a director of taxation for a medical device company, but I can’t bring myself to ask him. It would be one boring conversation.</p>
<p>I like the NY Times Opinion piece that BClintonk linked regarding the medical device tax.</p>
<p>“The medical-device industry faces virtually no price competition. Because of confidentiality agreements that manufacturers require hospitals to sign, the prices of the devices are cloaked in secrecy. This lack of transparency impedes hospitals from sharing price information and thus knowing whether they are getting a good deal.”</p>
<p>Yikes! What did you like about the <em>oped</em> from a guy named Topher?</p>
<p>It barely seemed to address the issue of the tax. What we got was the guy from a liberal think tank growled “they can afford it” to people who have more money than he. "By the company’s own estimate, the device tax would amount to at most $300 million, and its investment in research and development amounts to only $1.7 billion. "</p>
<p>Where I come from there is no “only” in front of a billion dollar spend. </p>
<p>This is off-topic but how does “bundling” help the consumer? My doctor wants to use a particular cardiac device but the hospital has but together a better bundled cost on a cheaper model. No, please.</p>
<p>I like the fact that it was mentioned that there isnt clarity about pricing. There are relationships that increase prices. There isnt a free marketplace.</p>
You might find that its the least of his worries. Ask him what the cost and fees are to get FDA approval of the devices the company makes. (Though perhaps that is handled by a different department).</p>
You are assuming a robotic markup process - that each distributor down the line applies a fixed multiplier to their total cost. Keep in mind that they’ve also paid other add on costs, such as costs for shipping & installation, which may be far more significant in determining cost to the end user.</p>
<p>This seems like a bad recommendation:
" individual physicians often choose devices on their own, which weakens a hospitals ability to bargain for volume discounts.
…
Medicare should also pay hospitals a single lump sum for all of the associated costs of a given procedure (like a hip replacement). This approach, known as bundling the costs, would create incentives for hospitals to lower device costs. Savings should be shared with the physicians, so that their incentives are aligned with the hospitals. "</p>
<p>Ummm- what the ****? The physician prefers a particular device but he is going to get an incentive to pick the one that saves his hospital money? No thanks. I’d rather make my own decisions about devices implanted in my body. </p>
<p>I’d suggest that “Topher” who works in an office with Rahm Emanuel’s brother and Tom Daschle isnt unbiased about the the ramifications of Obamacare.</p>
<p>I once asked him about SOX in re MF Global in that I am a critic of SOX and though the published excuses were implausible. He didnt even entertain the question- it was a prima fascie fiddle. So I have never had an actual accounting conversation with him, probably because he has become aware of how it bores people and therefor self censor.</p>
<p>Yes, thats true. I have no direct knowledge of this market. </p>
<p>I dont think its the end of the world, and the argument that it is doesnt seem convincing. It will obviously be inflationary to the medical sector, but that is already an area that is moving away from cost containment.</p>
<p>So this is the scenario we are supposed to be worried about:</p>
<p>Acme Medical Devices makes widgets, which it sells to hospitals for $10,000 a pop. Now it has to charge a 2.3% tax, so now it has to charge hospitals $10,230 per widget. Hospitals won’t buy widgets for $10,230. Oh no! </p>
<p>So now Acme decides to offshore its widget production. Now it can sell widgets for $8000. It still has to charge the 2.3% tax. The hospital has to pay $8000 + $134, for a total of $8134. </p>
<p>So the hospital has just saved a ton on widgets. </p>
<p>I have two problems with this scenario. First, I don’t believe it. I don’t believe hospitals are going to jib at paying 2.3% more on devices whose cost is already both astronomical and skyrocketing. I also don’t believe that the incidence of taxes on medical devices would fall on manufacturers and not buyers. Moreover, even if I did accept those premises , I still wouldn’t understand why it would be a bad thing to lower medical costs by making astronomically expensive devices somewhat less expensive.</p>
<p>This is not to say that the tax is good or justified. But the argument we’re being presented here is preposterous.</p>
<p>It helps the patient avoid duplicative tests and procedures. It forces the doctors and hospitals to pay attention to avoiding complications, because they won’t be paid for the care they have to provide to treat the complications. It incentivizes medical professionals to cooperate and share information about a patient, rather than each treating one part of the patient without regard to the health of the entire patient.</p>
<p>In short, it’s paying for results rather than treatments.</p>
<p>Also, in the bundling pilot programs, or at least some of them, some of the savings is passed on to the consumers as cash.</p>
<p>I’m not sure if this thread is a spin-off of the investment thread or the ACA premiums thread. If it’s the former, I bought shares of MAKO last July. It’s a medical device company and luckily Stryker will buy it and now the stock has more than doubled from the time I bought it. As for the impact of the medical device tax on Stryker, CEO Kevin Lobo said,
However, he also said,
</p>
<p>As per calmom’s post #84
</p>
<p>I presume this eliminates casts. A little story about casts. Due to a slight ankle sprain/strain, my orthopedist advised me to buy his boot cast. I declined and said I will just buy it from CVS. He said his cast was better and the insurance company will pay for it. The doctor charged me nearly $300. The insurance company didn’t pay for it because I hadn’t met the deductible. The boot cast costs $35 at Amazon. It’s not the same brand but the design and function are the same.</p>
<p>Ummm, what? They are already antagonistic. In what scenario are insurance companies happily paying for complications?</p>
<p>I’d say that Obamacare squares the circle [of covering more people for more stuff for the same price] by gypping the existing insured. “Hey you guys- you can get the bundled open heart operation by the low bidder! Yeah!”</p>
<p>Insurance companies aren’t HAPPILY paying for complications, but they are paying for complications. If you get a hospital acquired infection in your PIC line, your insurance company will pay for it to be treated. But it would be better for everyone if the hospital followed a protocol that minimized hospital-acquired infections.</p>
<p>You might say that the hospital ought to follow that protocol anyway. Well, they should, but bundling has proved to improve statistics about such complications.</p>
</p>