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The True Cost

March 29, 2012

A tax on medical devices and equipment tucked into the 2,400-page 2010 Patient Protection and Affordable Care Act illustrates the negative impact the legislation is already having on the U.S. economy. Quite simply, nothing is free.

Many Democrats were hiding in the weeds Friday as the unpopular health-care overhaul marked its second anniversary, though a few people touted the many “free” services it is providing. But the 2.3 percent tax, part of $500 billion in new taxes that make up the funding mechanism for these “ freebies,” is already killing jobs and hurting U.S. businesses.

Take Michael Esch, profiled by the Associated Press last week: The Warwick, N.Y., father of three says he’s glad that his oldest daughter will be able to stay on his health insurance to age 26 under Obamacare. But he’s now working for less money and paying out of his pocket for COBRA insurance, after he lost his good-paying middle-management job at Stryker Corp. The medical-device maker laid off workers in anticipation of the new tax taking effect in January 2013.
How’s that for free? And how will these new regulations and taxes affect Esch’s daughter’s ability to find a good job? Employers cite the health-care legislation as a major dampening factor on hiring.

In Ohio, about 20,000 workers are employed by medical-device and equipment manufacturers. A few large companies are affected, including Cardinal Health in Dublin and Invacare in Elyria. But industry-wide, 80 percent of these businesses have fewer than 50 employees. Since the tax is on all revenue, not profits, small companies are particularly worried that they’ll be put out of business by it.

InfraRed Imaging Systems, a small Marysville startup that’s using technology developed at the Air Force Research Laboratory at Wright-Patterson AFB to make infrared-light equipment to guide the insertion of needles into veins and arteries, should be an Ohio success story. President and founder Dale Siegel, though, says the pending tax could well hinder the company’s ability to expand and prosper in the U.S. Investors will put their money elsewhere, and foreign companies will undercut his prices, Siegel says.

The U.S. leads the world in medical-device manufacturing. These companies make devices that need to meet the highest standards of purity and safety. The jobs lost here and elsewhere are the true cost of the “free” health care some think they’re getting from the health-care overhaul.