Excise Tax Avoided
Are you prepared for a 2.3 percent government surcharge that will be applied to many home medical equipment products? Thanks in large part to the American Association of Homecare, you don’t have to worry. Because of concerted efforts by AAHomecare and several manufacturers in the home-care community, the Internal Revenue Service exempted the vast majority of home medical equipment items from the 2.3 percent medical device excise tax that was mandated by the Affordable Care Act.
Under that law, home medical device makers could have been subject to the 2.3 percent excise tax on their gross revenues, regardless of profits, to raise $1.8 billion in federal revenue in 2013 and $20 billion through 2019. We’re not aware of any other device sector that was able to secure such a broad exemption.
For manufacturers, the exemption means that any home-care products that would have been subject to that law will be spared the 2.3 percent tax. For home-care providers, this means that you will be spared any of the extra costs that would have been passed along from manufacturers to suppliers.
How did this positive outcome occur? Over the past year AAHomecare worked closely with its Manufacturer Device Tax Working Group and its member-driven Regulatory Council to push for an exemption for all home-care items and supplies. We held meetings with officials from the Treasury Department, the Centers for Medicare & Medicaid Services (CMS) and Congress, and we filed several rounds of comments on behalf of our members.
For instance, in May of 2012, we delivered detailed comments to Treasury Secretary Timothy Geithner on the issue. Later that month I testified in favor of exemptions for home-care products at a Treasury Department hearing. We argued for a “bright-line” test that would explicitly exempt home-care devices and supplies. We also lobbied to exempt respiratory home medical equipment related to home oxygen, nebulizers, positive airway pressure devices and the like, even though they are classified as “anesthesiology devices” under FDA regulations.
The result? The IRS accepted nearly all of our recommendations, including the exemption for devices requiring minimal or no training from a medical professional and exemptions for telephone and Internet sales. A decision tree presented in the final IRS rule outlines the criteria to determine whether a device will be subject to the 2.3 percent tax and highlights numerous examples including portable oxygen concentrators, diabetic testing supplies, manual and power wheelchairs, beds and ostomy supplies.
Challenges like the imposition of the medical device tax confront the home-care community far more often than we’d like. We live in a budgetary climate in which policymakers scour every nook and cranny of Medicare and Medicaid in search of cost savings. This search for cost savings will not end any time soon, and it will get worse before it gets better. As with any sector with significant Medicare reimbursements, home medical equipment remains squarely in the crosshairs for budget-cutting.
In 2013, we will continue the fight for better Medicare policies with respect to competitive bidding, power mobility, audits and many other issues. But it’s important to point out that the victory on the device tax issue was made possible by the companies that are members of the American Association for Homecare. It is their membership dues that pay for everything we do in government relations. At AAHomecare we have a team of Washington professionals who devote 100 percent of their time to fighting for stronger home-care policies in Congress and at federal agencies, including CMS, IRS and FDA.
We need everyone’s support to continue fighting these battles. Whether you’re a manufacturer or a provider, I hope you will consider stepping up and helping to shape legislative and regulatory policy in the home-care field as a member of AAHomecare. Join us and share in the responsibility to help the home-care community do the work that must be done in Washington.
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