President Obama defends his medical-device tax, which even Democrats who voted for the Obamacare bill that contained it are criticizing, on the ground that the companies are going to get “30 million new customers” as a result of the bill.
The main reason Congress included the tax in the health- care legislation was, of course, to raise money. Democrats wanted the Congressional Budget Office to certify that the bill would reduce the deficit overall. But why go after one industry in particular? The justification for this selectivity was that the legislation would be a boon for this sector. By expanding health coverage, the new law would increase demand for medical devices and thus, in effect, subsidize the industry. The tax was, therefore, a partial clawback of this subsidy.
Stephen L. Ferguson, the chairman of the board of Cook Group, a medical-device maker based in Bloomington, Indiana, makes three counterarguments: First, after enacting a similar law, Massachusetts saw no greater growth in sales than any other state. Second, a disproportionate number of the newly insured will be young people with low health risks, thus limiting the potential increase in sales. Third, in many cases pre-Obamacare law already requires hospitals to provide medical devices to uninsured people who need them.
“So it doesn’t increase the number of devices sold,” Ferguson says. . . .