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.