Who pays for health care reforms?

Tom Laurin

As this issue goes to print, the US Senate Finance Committee is hashing out the details of Sen. Max Baucus’ health care reform bill – an important piece of legislation that could significantly affect the medical device industry.

Four senators – Amy Klobuchar, D-Minn.; Evan Bayh, D-Ind.; Richard G. Lugar, R-Ind.; and Al Franken, D-Minn. – have written a letter to Baucus expressing deep concern over the proposed $4 billion annual tax on medical device manufacturers. “At a time when every effort is being made to promote small business and growth industries of the future,” they wrote, “the proposed medical device tax would harm economic development and health care innovation nationally and in our states.”

Estimates vary as to how much the annual tax would cost device makers, but it could be a 10 to 30 percent income tax surcharge yearly. The senators pointed out that such huge fees would leave manufacturers with less money to fund product development and innovation.

The health care reform bill would affect the industry in other, less direct ways, too. Most medical products are reimbursed through hospitals, and reduced reimbursements are expected to come with the reforms. This could result in estimated cuts of $15 billion to $17 billion to the medical device industry over 10 years.

To survive, medical device manufacturers will have to make up that money somehow, likely through layoffs and technological stagnation. Labor costs money, and research costs money, and when there is less money to go around, both suffer.

Here at Laurin Publishing, we know that innovation is the key to keeping both people and the economy healthy. We work hard to cover and encourage new developments in all areas of biophotonics, and we have always had faith in the industry and what it provides.

Health insurance reform is important – and costly. But it should not be implemented too quickly, and not in a way that could kill innovation.