An OpEd in today's Wall Street Journal (ObamaCare's Killer Device Tax) by Henry I. Miller explains why this tax is destructive--particularly how it achieves the opposite of the administration's claimed goals by discouraging jobs, manufacturing, and economic growth.
Miller points out that the tax is especially hard on the startups and small companies that are a source of so much innovation:
Many medical device companies have to ramp up sales before they become profitable. Due to the long, draconian and sometimes unpredictable regulatory process that must be negotiated before a product can be sold, it can take from $70 million to $100 million in total sales before these businesses make their first cent of profits. Nevertheless, they would have to pay the excise tax on their revenue.
Though I have to disagree with Miller on one point:
Anticipating the excise tax, several companies already have announced layoffs or withheld investments. Recent surveys show that medical technology executives are examining a host of other undesirable options, including passing along the added costs through price increases. Even if the market would tolerate that—which is surely questionable given the current pressure to drive down costs—it would, ironically, raise the costs of medical care. That was not supposed to be an outcome of ObamaCare.
Does anyone really believe that ObamaCare was designed to make medical care less expensive? If there is one thing that economists should be able to agree on, it's that competition drives down prices. By making it harder for startups and small companies to succeed, the medical device tax will reduce competition and drive costs (and therefore prices) up.