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A Project of The Annenberg Public Policy Center

Again with the Wheelchair

First the Republicans claimed President Obama’s health care law taxes “sick puppies,” and now Mitt Romney’s campaign claims the law taxes “wheelchairs.” Wrong again.

At issue is a new 2.3 percent excise tax on certain medical devices. The tax is set to kick in next year to help offset the cost of expansion of health coverage for the uninsured in the new health care law. According to the Romney ad, the law will mean “taxing wheelchairs and pacemakers.” The ad shows a picture of a manual wheelchair.

But Treasury Department officials say that under the proposed rules being finalized by the IRS, wheelchairs — both manual and motorized — will be exempt from the new tax on medical devices.

Ordinary wheelchairs would fall under the “retail exemption” in the proposed rules, an administration official said. According to the Internal Revenue Services’ “Notice of Proposed Rulemaking” under the retail exemption:

IRS Notice of Proposed Rulemaking: A device will be considered to be of a type generally purchased by the general public at retail for individual use if it is regularly available for purchase and use by individual consumers who are not medical professionals, and if the design of the device demonstrates that it is not primarily intended for use in a medical institution or office or by a medical professional.

Ordinary wheelchairs — like the one pictured in the Romney ad — are regularly purchased retail by the general public for individual use, and therefore fit that exemption, a Treasury official said. And customized, motorized wheelchairs will be exempt under the rules’ “safe harbor” provision, which states that “customized items” that are “generally purchased by the general public at retail for individual use” would be exempt from the tax. A public hearing on the rules was held in May, but Treasury has not yet finalized and released the rules.

What Devices Will Be Taxed?

The ad is, however, correct that the tax would apply to pacemakers. Also subject to the tax would be such devices as cardiac defibrillators,  stents and ultrasound equipment. The medical device tax is expected to bring in $20 billion over 10 years.

Proponents say device makers will sell more devices and reap more profits when an additional 30-some million potential customers gain health coverage and can afford them.

Most experts, including the nonpartisan Congressional Budget Office, expect at least some of the cost of the tax on manufacturers of medical devices to be passed on to consumers via higher health insurance premiums.

Wanda Moebius, a spokeswoman for AdvaMed (Advanced Medical Technology Association) released a statement to us saying, “The IRS is still determining the implementing regulations but it is clear that this tax will have a damaging effect on medical R&D (research and development), hiring within the industry and also will likely lead to higher healthcare costs by taxing a wide array of medical products.”

Repeated Republican Target

This isn’t the first time Republicans have used the medical device tax in an attack ad. In June, the National Republican Congressional Committee released a 90-second video that encouraged viewers to sign an “I Want Repeal” petition. The video claims the health care law includes “taxes on heart attacks, sick puppies and even new babies.” Those are all references to the medical device tax. We looked into those claims and found they were stretch, particularly the one about taxing sick puppies. (FlackCheck.org, our sister site, did its own take on the sick puppy claim).

And back in September 2009, the Republican National Committee released a Web ad attacking the health care law that pictured a wheelchair. We noted then that the manual wheelchair pictured in the ad — classified as a Class I device — was specifically exempted from the device tax in the version of the law under consideration at that time.  The section of the law that mentioned exemptions for Class I devices was later scrapped and replaced with language that explained “‘taxable medical device’ does not include eyeglasses, contact lenses, hearing aids, and any other medical device determined by the Secretary to be of a type that is generally purchased by the general public at retail for individual use.”

The Romney ad also includes the misleading claim that the health care law will “raid” $716 billion from Medicare. The law seeks to cut that amount from the future growth of Medicare spending over the next 10 years to extend the life of the program, an issue we explored in length in our Aug. 24 item, “Medicare’s ‘Piggy Bank.'”

The ad also claims the health care law would “[raise] taxes on families making less than $120,000.” That’s only for people who decline to purchase insurance. According to the Congressional Budget Office projections, in 2016, about 4 million people will pay a penalty — which the Supreme Court labeled a tax — and 76 percent of those who would pay the penalty for not having insurance would earn under $120,000. The average annual penalty is $667 for those individuals.

— Robert Farley