Consumer Groups: Exempt HME from Medical Device Tax

WASHINGTON — Consumer and advocacy groups for those with
disabilities last week called for HME to be exempted from a medical
device tax required under health care reform, saying it would
prevent consumers from obtaining needed devices.

In separate letters to U.S. Treasury Secretary Timothy Geithner,
30 members of the consumer-led ITEM Coalition and a group of 18
disability-related organizations urged the secretary to exempt HME
from the tax.

Set to begin in 2013, the 2.3 percent tax on medical device
company revenues is required under the Affordable Care Act and is
estimated to raise $20 billion over 10 years. HME leaders, however,
have warned it will send more of the industry’s manufacturing jobs
offshore and curtail
research and development. Providers also fear the tax will have
a trickle-down effect, causing them and their patients to have to
shoulder greater product costs.

“We believe that Congress intended device sales to consumers to
be exempt from the medical device tax so the tax does not directly
flow downstream to impact consumers,” said a June 7 letter signed
by the group of 18 organizations, among them the American
Association of People with Disabilities, Christopher and Dana Reeve
Foundation and United Spinal Association. “Application of this tax
to medical equipment used by individual consumers could inevitably
restrict access to necessary and appropriate medical devices and
supplies.”

The groups went on say the exemption should include “a broad
array of devices and supplies that are used to improve mobility
(e.g., wheelchairs, canes, crutches, walkers, prosthetics,
orthotics, etc.), or improve the ability to breathe via prescribed
oxygen (e.g., oxygen devices and supplies), and other items such as
home care beds, bath safety aids, commodes and other devices that
enable consumers to live in their homes and communities, rather
than in a health care institution.”

Read the full letter from the groups under “What’s New” at
www.aahomecare.org.

In their June 8 letter, the ITEM Coalition members, among them
Easter Seals and United Cerebral Palsy, pointed out that “Americans
paid over $18 billion out of pocket to purchase durable medical
equipment in 2009 (over 50 percent of all DME expenditures and $2
billion more than all private and public health insurance payers
combined for that year).

“Failure to exempt from the tax medical devices that are
purchased by individual consumers will result in increased costs
for individuals with disabilities and could result in consumers
going without needed devices,” the coalition said.

The organizations’ comments support those from HME providers and
manufacturers, who have been pushing for the exemption through
comments to the Department of Treasury and talks with the IRS.

Under the health reform law, a “taxable medical device” is
defined in section 201(h) of the Federal Food, Drug and Cosmetic
Act and includes class I, II and III medical devices — which
cover HME. Exceptions to the ACA requirement would be eyeglasses,
contact lenses, hearing aids and “any other medical device
determined by the Secretary to be of a type which is generally
purchased by the general public at retail for individual use.”

“[HME devices] are for an individual consumer,” said Cara
Bachenheimer, senior vice president, government relations, for
Elyria, Ohio-based Invacare, which also sent comments to the
secretary earlier this year. She said Congress’ intent was not to
burden individual consumers with more expense but instead to tax
such entities as hospitals and nursing homes, which buy medical
devices in bulk.

“There is a pretty distinct marked line,” she said, adding that
there are “strong arguments for the secretary of the treasury to
provide an exemption” for HME.

Alex Bennewith, senior manager of government relations for the
American Association for Homecare, said the association also
submitted comments to Geithner noting an explanation made by
then-Speaker of the House Nancy Pelosi, D-Calif., on the tax:
“Sales of wheelchairs and other medical devices to individuals are
exempt from the tax; the tax only applies to sales of medical
devices to health care institutions, such as hospitals,” Pelosi
stated.

Whether Geithner agrees with that explanation remains to be
seen.

Bachenheimer said a proposed rule on the tax would likely be
issued later this year. “We are expecting to see their initial
thinking sometime this fall,” she said.

Letters such as those sent to the secretary last week are
important in keeping the issue on the Treasury radar, Bennewith
said.

“This is equipment that folks rely on for independence and
quality of health,” she said. “We don’t want to make it even more
difficult to obtain the equipment.”

Meanwhile, Minnesota Republican Rep. Erik Paulsen’s Protect
Medical Innovation Act (H.R. 436), which would repeal the device
tax, has picked up 154 cosponsors in the House.

Paulsen has said the tax hike on medical device makers “will
cripple an important engine of opportunity, job growth and
innovation, while hurting the advancement of technologies essential
to improving patient care.”