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."