On December 5, the Internal Revenue Service issued greatly improved final regulations for the application of a medical device excise tax, compared to the proposed rule issued earlier this year. While AAHomecare continues to examine the impact of the guidance, it appears that the vast majority of home medical equipment devices will not be subject to the tax. 
Under the proposal contained in the Affordable Care Act, home medical device makers could have been subject to a 2.3 percent excise tax on their gross revenues, regardless of profits, to raise $1.8 billion in federal revenue in 2013 and $20 billion through 2019. 
A decision tree presented in the rule outlines the criteria to determine whether a device will be subject to the 2.3 percent tax. The rule highlights numerous examples, applying the decision tree to various medical devices. A number of these examples were home medical equipment devices such as portable oxygen concentrators, diabetic testing supplies, manual and power wheelchairs, beds, and ostomy supplies and they illustrate how these devices would be exempted from the tax.

Over the past year, AAHomecare strenuously argued that home medical equipment should be exempted from the medical device tax. AAHomecare is pleased that the IRS accepted nearly all of our recommendations, including the exemption for telephone and Internet sales, and devices requiring minimal or no training from a medical professional. Additionally, AAHomecare is pleased with the guidance provided by the IRS in the final rule, which gives specific examples of how the criteria outlined in the regulation will be used to determine the excise tax exemption.

Read the IRS Medical Device Tax final rule. AAHomecare comments, testimony and other materials related to the Association's advocacy on this issue can be found below:

AAHomecare Analysis of the Medical Device Tax Final Rule (Dec. 19, 2012)

AAHomecare Testimony at Hearing on IRS Proposed Rule on Taxable Medical Devices (May 16, 2012)

AAHomecare Comments on IRS Proposed Rule on Taxable Medical Devices (May 7, 2012)

Consumer Organizations Medical Device Tax Letter (June 7, 2011)

AAHomecare Supplemental Comments on Excise Tax on Medical Devices (March 2, 2011)

AAHomecare Comments on Guidance for the Excise Tax on Medical Devices (January 7, 2011)

Unique Device Identifier Proposed Rule

On July 10, 2012, the Food and Drug Administration (FDA) issued a proposed rule that would establish a unique device identification (UDI) system to track medical devices. This issue has been under development for the past 7 years and was called for in legislation in 2007. According to the FDA, a UDI system would require the label of medical devices and device packages to include a unique device identifier, except where the rule provides for alternative placement of the UDI or provides an exception for a particular device or type of device such as devices sold over-the-counter and low risk devices.  

AAHomecare worked with its Manufacturers Working Group to analyze the proposed rule and draft comments.

AAHomecare Comments on Unique Device Identification System Proposed Rule (November 7, 2012)

FDA Rule on Unique Device Identification System (July 10, 2012)

Competitive Bidding for Manufacturers

Some on Capitol Hill have suggested that Congress should create a Manufacturer-Level Competitive Bidding system. The Government Accountability Office (GAO) released its report on evaluating the merits of a competitive bidding program for manufacturers of HME items and reviewed ways other payers use various acquisition strategies to receive better prices than Medicare for DME. The report, titled “Medicare: Issues for Manufacturer-Level Competitive Bidding for Durable Medical Equipment,” was requested by Former Senate Finance Committee Ranking Member Charles Grassley (R-Iowa) and Ways and Means Health Subcommittee Ranking Member Pete Stark (D-Calif.).  

Rep. Stark sent a letter to CMS requesting that the Agency test the application of such a bidding program under the new Center for Medicare and Medicaid Innovation. Stark said, “I requested this report because it’s always seemed to me that we could get a better deal by going right to manufacturers, just like the federal government does today when they buy vehicles. This GAO report shows that additional savings may be possible, while still ensuring quality and access to care.”

The AAHomecare opposes manufacturer-level competitive bidding  and met with the GAO last year to discuss concerns with the potential program. The GAO’s summary of the report is below.  

Rep. Stark Letter (July 29, 2011)

GAO Report: Issues for Manufacturer-Level Competitive Bidding for Durable Medical Equipment (May 31, 2011)

Proposed Rule Change to Definition of DME

Contrary to president Obama's directive to reduce onerous regulations, CMS has proposed a change to the definition of DME. On July 8, 2011, CMS published a proposed rule would revise the definition of “durable” in DME by adding a 3-year minimum lifetime criterion that must be met by an item or device in order to be considered durable for the purpose of classifying the item under the Medicare benefit category for DME. AAHomecare’s Manufacturers Working Group and Regulatory Council analyzed the proposed change and it was the consensus that the HME sector should oppose the proposed rule and urge CMS to abandon this effort. Both groups felt that the change was unnecessary and would negatively impact HME manufacturers. AAHomecare submitted comments and is also seeking Congressional involvement to stop CMS’ misguided effort.

Proposed Rule Legislative Alert (Sept. 1, 2011)

AAHomecare Comments on Proposed Rule: DME Definition (Aug. 30, 2011)

ITEM Coalition Letter Opposing the Proposed Rule (Aug. 30, 2011)

Proposed Rule Issue Brief (Aug. 26, 2011)


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