ACA Now

Implementation Status

On December 7, 2012, the IRS published a final rule implementing the medical device tax for CY 2013. The IRS also released Notice 2012-77 providing interim guidance on several related issues not addressed in the final regulations, including the determination of sales price, the tax treatment of medical software licenses, the taxability of donated medical devices and the taxability of medical convenience kits.  The IRS also has FAQs regarding the tax and a homepage with general information on this provision.

On August 19, the Treasury’s Inspector General for Tax Administration released a report, “The ACA: An Improved Strategy Is Needed to Ensure Accurate Reporting and Payment of the Medical Device Excise Tax” (available here). The report finds that medical device tax collections are below original IRS estimates and provides recommendations to strengthen IRS administration of the tax.

On Jan. 6, Rep. Paulsen (R-MN) reintroduced legislation to repeal the ACA medical device tax. On Jan. 13, 2015, Sens. Hatch (R-UT) and Klobuchar (D-MN) reintroduced device tax repeal legislation. Also that day, the Congressional Research Service issued a report on the tax’s impact on research and jobs suggesting a “modest effect” (e.g., reported here).

On Apr. 23, the Senate Finance Subcommittee on Health convened a hearing to discuss the impact of the medical device tax on the industry, U.S. healthcare system and patient outcomes.

On June 2, the House Ways and Means Committee marked up and advanced H.R. 160 to repeal the ACA’s medical device tax. On June 5, CBO estimated that H.R. 160 would cost $24.4 billion over the next 10 years. On June 15, the White House threatened a veto of the House legislation (H.R. 160). On June 18, the House passed H.R. 160 (280-140).

On July 30, GAO released an analysis of 102 companies finding that average net sales and profits increased by 4% annually between 2005 and 2014, capturing a period before and after broader ACA and device tax implementation. GAO says the “analysis does not infer a causal relationship between these provisions and changes in companies’ net sales or profits, because any changes could be due to other factors, such as mergers and acquisitions, the introduction of new products, and product recalls.

On Dec. 18, President Obama signed the Consolidated Appropriations Act, 2016, which includes a two-year delay of the ACA Cadillac tax, as well as a two-year suspension of the ACA medical device tax and one-year suspension of the health insurer tax. Also see these updates reflected on the IRS’ ACA tax page.

2017

On Jan. 23, 2017, President Trump signed an executive order on minimizing the burdens of the ACA that alluded to using regulatory authority to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”

2018

On Jan. 22, a continuing resolution funding the government through Feb. 8 further suspended the Affordable Care Act device tax in 2018 and 2019, the insurer tax in 2019, and Cadillac tax through 2021.

2019

On December 20, 2019, President Trump signed the Consolidated Appropriations Act, 2020 (available here), which permanently repeals the ACA health insurer tax, medical device tax, and Cadillac tax.