Medicare Faqs

What Is the Medical Device Excise Tax?
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The Medical Device Excise Tax is a 2.3 percent tax on sales of taxable medical devices sold after Dec. 31, 2012. The tax applies to manufacturers and importers, and has no direct effect on Medicare beneficiaries.

A taxable medical device is a device listed as such with the Food and Drug Administration. Taxable devices include wheelchairs, pacemakers and other devices used by Medicare beneficiaries.

The tax, which was part of the Affordable Care Act, does not apply to sales of eyeglasses, contact lenses or hearing aids, nor does it apply to devices that are purchased by the general public for individual use. (This is known as a retail exemption.) This includes over-the-counter drugs and a number of devices that qualify as durable medical equipment (DME), prosthetics, orthotics or supplies available for purchase under Medicare Medical Insurance (Part B).

RELATED What Kinds of Durable Medical Equipment and Devices Are Covered by Medicare?
RELATED How Will Medicare Payroll Taxes Change in 2013?

Manufacturers and importers of devices are to deposit the tax semimonthly. The first such deposit—covering the first 15 days of January 2013—is due Jan. 29, 2013.

The medical device industry has fought the tax. On March 28,. 2011, the president and CEO of the Medicare Device Manufacturers Association (MDMA) said, “MDMA continues to passionately work for a full repeal of this ‘innovation’ tax, which will harm patient care and job creation.”

Many industry experts have supported this claim.

In a note to investors reprinted in The Wall Street Journal, Michael Weinstein, a stock analyst for J.P. Morgan, wrote, “Few companies will be able to pass all or even a portion of the tax onto hospitals or distributors, so a number of companies have started to put cost-cutting plans in place.”

Read more about the Medical Device Excise Tax in our Beyond the Sound Bite blog.

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