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Medical Taxes Push Device Production Out of Country

Spark News lately has been talking a lot about how the health care industry is booming. It is still a promising industry to enter into, but like many other things, when something is great it can’t be great forever.

According to Bloomberg, a year from now we will see an enforced tax hike on medical devices. Anything from tongue depressors to imaging machines will be taxed highly which is already resulting in lost jobs for many. Stryker Corp, a manufacturer of medical products such as artificial hips and knees has already announced that it will let go of 1,000 of its workers as a result of the future tax hike. Another company, surgical instrument manufacturer Covidien PLC, plans to lay-off 200 workers in the United States and move to other areas such as Costa Rica and Mexico because of the tax.

Other companies plan to make moves similar to those of Stryker and Covidien, or intend to expand their businesses in other locations outside of the United States to avoid the tax without explicitly citing the tax as the reason. Some may argue that the weak economy is to blame for these businesses expanding outside of the U.S., but as Bloomberg states, the medical-device industry has done significantly well considering. While the job market in U.S. manufacturing as a whole decreased its employee base by 4.8 percent, the medical-device industry lost only 1.1 percent of its employees. According to a study conducted by AdvaMed, the increased tax could result in the loss of more than 45,000 jobs in the industry.

The United States is also a net exporter of medical devices and the increase of the tax might change that completely. This will not only mean less manufacturing in the U.S. but it also points to increased medical costs across the board. According to Richard S. Foster, the Medicare chief actuary, if this tax is passed onto consumers the cost of health care will increase $18.2 billion by the year 2018.

Democrats proposed the tax in order to raise money towards the increasing deficit. Stephen L. Ferguson, the chairman of the board of Cook Group, a medical-device maker based in Bloomington, Indiana believes that targeting one industry, the healthcare industry, will result in growth in all other areas but in the U.S. “You don’t want to say to your workforce that you’re going to lay people off,” he says. “The tax is going to result in growth in another location and not in the U.S.; that’s the way I see the impact on Cook.” How many more companies will choose to conduct their business elsewhere and how badly will that effect our economy? Many don’t want to stick around until 2013 to figure out the answer.

SOURCE: Bloomberg
IMAGE: Courtesy of Dreams Time

Nicole Nicholson

Nicole is the Content Editor for Spark Hire and mainly writes for and edits the work for the Spark News blog. She graduated in 2010 with a BA in Journalism from DePaul University in Chicago, Illinois. She has a passion for writing, editing, and pretty much anything to do with content. In her free time she frequents the Chicago music scene and writes reviews on shows for her own personal blog. Connect with Nicole and Spark Hire on Facebook and Twitter