Most Devices Are Exempt from 2.3% Excise Tax at Both the Component Manufacturer & Patient Care Facility Level
AOPA is pleased to inform members that the Treasury Department has today released the final rule for the medical device excise tax. Broadly speaking, and most importantly, Treasury has confirmed what they had stated in the proposed rule-that “prosthetic and orthotic devices,” DO qualify for exemption from the 2.3 percent medical device tax under the retail exemption provided in the Affordable Care Act.
The technical jargon in the final rule confirmed “prosthetic and orthotic” devices as defined in 42 CFR 414.202, that do not require implementation or insertion by a medical professional; and “(T)herapeutic shoes,” as described in 42 CFR 414.228(c) qualify for the safe harbor provision” considered to be of a type generally purchased by the general public at retail for individual use” (and so, qualify for retail exemption). AOPA had several specific meetings and consultations with IRS and Treasury beginning nearly two years ago explaining why we believed O&P devices were eligible for this retail exemption.
Additionally, Treasury has responded favorably to the specific argument AOPA presented that this retail exemption required that the manufacturers of components (and potentially complete devices) should also be exempt from the 2.3% tax as to these products because otherwise the patient would be required to “…pay the excise tax as the tax would just be shifted higher up the distribution chain.” This is a dramatically important and favorable outcome for O&P in this final rule. It is clear that companies that manufacture components that are used by a patient care facility provider to fabricate an exempt O&P device (under the safe harbor rule) are also exempt, as to those components, from the medical device excise tax.
What does that mean for O&P patients?
Generally speaking all custom made orthotic and prosthetic devices that a patient would require will not cost us an additional 2.3% to build. This will allow us to keep patient co-pays, deductibles, and cost lower for you. Great news!
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Thanks for Reading, Team Green