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Medical device makers try to stave off new tax

A high-speed CAT Scan sits empty at Beth Israel Deaconess Medical Center in Boston, Massachusetts.

The health care industry is counting down the final week to a new tax. It's part of the initial funding for the Affordable Care Act, which is widely known as Obamacare.

Makers of medical devices are warning that the tax will be a job killer. Several companies have already announced a few layoffs, blaming them on the need to pay for the added expense.

"In order to find the savings, we're either going to see layoffs, we're going to see reductions in research and development, or potentially you're going to see higher prices for health care," says J.C. Scott, head of government affairs for the Advanced Medical Technology Association, or AdvaMed.

The 2.3 percent tax is set to kick in with the New Year, on devices ranging from pacemakers to CT scan machines. Most consumer items -- eyeglasses, for example -- are exempt from the federal tax.

President Obama contends the device-makers will see increased business, as more Americans become insured. In an interview last week with Minneapolis television station WCCO, Mr. Obama declared, "It's going to be great for business."

"The health care bill is going to provide those medical device companies 30 million new customers," the president said. "So, this additional tax essentially comes back to them as customers."

Scott points out, however, that the promise of increased business is a long way off.

"This tax triggers January first, in a matter of days," he says. "The insurance expansion really won't get to its peak until, say, 2017."

The trade-group lobbyist says AdvaMed still hopes Congress will delay the tax, as part of its "fiscal cliff" bargaining.

About the author

Bob Moon is Marketplace’s senior business correspondent, based in Los Angeles.

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