Obamacare cost...

[frank ryan]

If you started a fund raiser to do so, you would probably have enough money left over to live like a King.

lol!

[Uncle Ted]

Much like Nancy Pelosi - I haven't actually READ the bill. So I don't know if this is true or not. But my neighbor tells me that the tax on new medical equipment is around 24%. Where did you get the 3.8% from? Is my neighbor off his rocker?

I don't know where either of you guys get your numbers. The tax is 2.3% but is a sales tax not an income tax. Therefore, that 2.3% will come directly off a medical equipment company's bottom line or be passed on to their customers. It most likely won't come from the end customer, however, given that medicare payments are not increasing significantly as well. Someone will have to eat the cost and it won't be likely the end customer.

When 2.3% comes off profit it can actually look like a 15% increase in income taxes to the average company, however. So maybe your neighbor is talking about effective income taxes.

That calculation ignored the fact that the vast majority of medical-device consumers already are covered by Medicare, Medicaid or private insurance. So there will be little or no increase in sales volume to offset the added cost of $30 billion—according to the Congressional Budget Office—to the industry. This tax comes straight out of a company's bottom line. Because many devices are sold to hospitals, physicians and other providers through multiyear contracts, the prices are already locked in, so the tax cannot be passed on to the buyer.

The hit will be severe. For a typical company, a 2.3% tax on revenues equals a 15% tax on profits. When combined with a 35% corporate tax and state corporate taxes, the tax rate for the medical-device industry will exceed 50% in most jurisdictions. Many marginally profitable businesses will then hemorrhage red ink, since they'll have to pay the excise tax whether they are making money or not.

Maybe your neighbor is talking about one of those marginally profitable businesses. Of course, there seems like there is a lot of those (or worse) around these days.

[byu71]

I don't know where either of you guys get your numbers. The tax is 2.3% but is a sales tax not an income tax. Therefore, that 2.3% will come directly off a medical equipment company's bottom line or be passed on to their customers. It most likely won't come from the end customer, however, given that medicare payments are not increasing significantly as well. Someone will have to eat the cost and it won't be likely the end customer.

When 2.3% comes off profit it can actually look like a 15% increase in income taxes to the average company, however. So maybe your neighbor is talking about effective income taxes.



Maybe your neighbor is talking about one of those marginally profitable business. Of course, there seems like there is a lot of those (or worse) around these days.

2.3%, I guess when I pulled the number out of my fanny it changed to 3.8%. Thanks for the correction.

[Joe Public]

2.3%, I guess when I pulled the number out of my fanny it changed to 3.8%. Thanks for the correction.

That (3.8%) is the rate of the new net investment income tax, so you may have seen that number recently as well.

[Uncle Ted]

That (3.8%) is the rate of the new net investment income tax, so you may have seen that number recently as well.

Ah, yes, add the fact that dividend taxes are going back to your tax bracket rate and the Obama tax on the rich will raise that rate to 39+%, '71 is most likely looking at something in the neighborhood of 43% taxes on investments. It might be a good time to move into muni bonds even though they give crap for yields.

[ERCougar]

Ok...you guys were talking CT and MRI scanners, so let's focus on that for a moment. The customer in this case would be hospitals or private companies/doctors who want to open up their own MRI shops. Yes, medical equipment manufacturers will pass that cost on to their customers, but this cost then directly eats into a bottom line, making the profitability of such a venture a little more dubious.

Why is this a cost control measure? One of the big differences between the US and countries with much more reasonable healthcare costs are the numbers of MRI and CT examinations--it's not even close and these are expensive (and in the case of CT exams--dangerous). There is good reason to suggest that both of these exams are ordered based as much or more on availability as medical necessity, so lower availability means lower utilization means lower costs.

I would not at all be surprised to see our use of a whole variety of medical equipment types are much higher than anywhere else in the world, without any improvement in outcomes, although I don't know enough to comment on this.

EDIT: By the way, this is a nice example of an economically justifiable tax. Device manufacturers are making more money than they otherwise would, if we had some sort of sane system of incentives and cost-bearing. This tax merely passes this money back to the government, who bears the cost of this profit.

[hostile]

I don't know where either of you guys get your numbers. The tax is 2.3% but is a sales tax not an income tax. Therefore, that 2.3% will come directly off a medical equipment company's bottom line or be passed on to their customers. It most likely won't come from the end customer, however, given that medicare payments are not increasing significantly as well. Someone will have to eat the cost and it won't be likely the end customer.

2.3% of all gross sales for any provider of medical supplies. This includes things like orthopedic implants (artificial joints), hospital beds, glasses, heart stents, etc. My understanding is that the companies are prohibited from passing the tax on to the consumer. I spoke with one of the product reps about this tax. His company's (Johnson & Johnson) response to the tax is that each product rep will bear a portion of the tax. For this particular rep he now has a $6,000 tax that comes out of his income every year.

[hostile]

2.3% of all gross sales for any provider of medical supplies. This includes things like orthopedic implants (artificial joints), hospital beds, glasses, heart stents, etc. My understanding is that the companies are prohibited from passing the tax on to the consumer. I spoke with one of the product reps about this tax. His company's (Johnson & Johnson) response to the tax is that each product rep will bear a portion of the tax. For this particular rep he now has a $6,000 tax that comes out of his income every year.

Interestingly, even though they can be implanted, condoms will not be subject to the sales tax.

[Uncle Ted]

2.3% of all gross sales for any provider of medical supplies. This includes things like orthopedic implants (artificial joints), hospital beds, glasses, heart stents, etc. My understanding is that the companies are prohibited from passing the tax on to the consumer. I spoke with one of the product reps about this tax. His company's (Johnson & Johnson) response to the tax is that each product rep will bear a portion of the tax. For this particular rep he now has a $6,000 tax that comes out of his income every year.

Hmm... forcing the rep to eat the cost doesn't seem right.

So companies can't explicitly pass the tax on to the customer but what stops them from implicitly passing it on? i.e. by raising the price on the product. This tax isn't a sells tax but smells more like very significant (hidden from the consumer) VAT that will most likely end up driving the smaller competitors (that most likely have smaller margins) out of the market. In the end, with less competition, the cost on for these items with most likely be much higher. The more I learn about this tax the more it seems to stink. It is no wonder the dumbass dems that voted for it are having second thoughts.

[Moliere]

Taxes are a cash outflow. In economic models for projects they are no different than salaries, equipment, maintenance, etc. Increased cash outflows will decrease projected returns and reduce projects undertaken.

Maybe we have too many MRI machines now, but I doubt we'll be saying that same thing in 2014 after one year of the tax and after adding 20 million new people to health care rolls.

[frank ryan]

Taxes are a cash outflow. In economic models for projects they are no different than salaries, equipment, maintenance, etc. Increased cash outflows will decrease projected returns and reduce projects undertaken.

Maybe we have too many MRI machines now, but I doubt we'll be saying that same thing in 2014 after one year of the tax and after adding 20 million new people to health care rolls.

Tax the drug reps and salesmen to the gills! MRIs for everyone!

[The_Douger]

I can't believe they did that to their salespeople, if that's the case.

[hostile]

I can't believe they did that to their salespeople, if that's the case.

That's the only one I have heard of so far. His division sells a little over $1 million over the course of a year at the hospital where I work so their tax would be around $23,000. He was told he need to pay $6000 of that.

[snowcat]

Health insurance premiums may as much as double for some small businesses and individual buyers in the U.S. when the Affordable Care Act’s major provisions start in 2014, Aetna Inc. (AET)’s chief executive officer said.

http://www.bloomberg.com/news/2012-1...-premiums.html

[Uncle Ted]

Health insurance premiums may as much as double for some small businesses and individual buyers in the U.S. when the Affordable Care Act’s major provisions start in 2014, Aetna Inc. (AET)’s chief executive officer said.

http://www.bloomberg.com/news/2012-1...-premiums.html

WTF?!?

I might have to fire all my employees including myself.