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Viral Post Alleging Obama-Era Device Tax Caused Current PPE Shortage Is Way Off

Victoria Knight “Let me be clear, I signed the medical appliance tax bill that forced companies to outsource manufacturing of masks, gowns, gloves and ventilaors [sic] to China, Europe and Russia to avoid the tax.”

A viral picture circulating on social media in April, attributing this assertion to President Barack Obama

A social media post, which in April was shared extensively on Facebook and made appearances on a conservative on-line dialogue discussion board, asserts that former President Barack Obama signed laws that triggered firms to fabricate medical units abroad, together with gadgets important for the present coronavirus pandemic.

This story was produced in partnership with PolitiFact.

This story may be republished at no cost (details). Alongside a photograph of Obama, the textual content of the Facebook put up says: “Let me be clear. I signed the medical appliance tax bill that forced companies to outsource manufacturing of masks, gowns, gloves and ventilaors [sic] to China, Europe and Russia to avoid the tax.”

The picture piqued our curiosity as a result of it mixed a number of hot-button points. First, the priority that the U.S. is experiencing a scarcity of ventilators and private protecting gear, or PPE, like masks, robes and gloves to assist shield front-line employees from coronavirus. Second, points associated to commerce imbalances and the outsourcing of American manufacturing overseas are prone to be frequent themes on the presidential marketing campaign path. So we determined to dig in.

Though the picture didn’t embody sourcing or sponsorship info, its goal — the “medical appliance tax bill” — gave the impression to be a reference to the medical system tax (extra formally generally known as the medical system excise tax) that turned legislation as a part of the Affordable Care Act. Additionally, a lot of the social media put up tracked intently to statements made by conservative radio host Rush Limbaugh throughout an April 2 episode of his speak present, which included a dialogue of the medical system tax.

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A Critical Error

Before we get into the specifics of the medical system tax, two vital parts of the put up have to be addressed. First, did Obama ever say something like what the viral picture claims? We checked with Eric Schultz, a senior adviser to the previous president. In an electronic mail he replied: “President Obama obviously didn’t say this!”

A key piece of proof that helps Schultz’s assertion is using the time period “medical appliance device tax bill.”

Bottom line: We couldn’t discover another reference — both official or unofficial — to a chunk of federal laws bearing this identify or nickname. And, although the consultants we spoke with agreed the social media put up was seemingly directed on the system tax included within the ACA, none had ever heard it referred to by that moniker — a degree that provides extra skepticism to the picture’s declare.

And What Is The Medical Device Tax?

In order to pay for the ACA’s enlargement of well being protection, taxes have been elevated for numerous industries — together with the medical system trade — that may profit from extra individuals getting medical health insurance. The tax was controversial and triggered appreciable pushback.

The measure set a 2.three% excise tax on medical units, offered within the United States starting in January 2013. The tax utilized to each home producers and importers of medical units.

But, it didn’t apply to gadgets made within the U.S. for overseas export, stated John McDonough, a professor on the Harvard T.H. Chan School of Public Health who additionally served as a senior adviser through the Obama administration and helped write the Affordable Care Act.

“The tax was designed deliberately” to keep away from forcing producers to maneuver their manufacturing abroad, McDonough wrote in an electronic mail.

Opponents of the tax argued that it was a extreme monetary burden on medical system producers. They additionally estimated that it could have resulted within the lack of greater than 20,000 full-time home jobs within the trade.

Joseph Antos, a well being coverage scholar with the American Enterprise Institute, stated that the tax was punishing on the medical system trade as a result of it was applied on “gross sales rather than profits,” which raised points for small system companies.

However, a 2015 Congressional Research Service report stated that the medical system tax appeared to have solely “fairly minor effects” on jobs with “output and employment in the industry falling by no more than two-tenths of 1%.”

Antos stated that although the tax “clearly” had an impact on the trade, he wasn’t conscious of any research or statistics that confirmed manufacturing and gross sales transferring abroad due to it.

But Paul Van de Water, a senior fellow and skilled in well being coverage on the Center on Budget and Policy Priorities, a left-leaning assume tank, took a fair tougher line on the social media picture’s assertion. “It’s absolutely false on the face of it,” he stated. “There was no way the tax provided any incentive to shift production overseas.”


Center on Budget and Policy Priorities, “Keep the Medical Device Tax,” April 22, 2015

Congressional Research Service, “The Medical Device Excise Tax: Economic Analysis,” Updated June 18, 2015

Email trade with Mark Brager, vice chairman of communications, AdvaMed, April 23-24, 2020

Email trade with Ethan Schultz, senior adviser to Barack Obama, April 23, 2020

Email interview with John McDonough, professor of public well being follow, Harvard T.H. Chan School of Public Health, April 24, 2020

Email interview with Peter Petri, professor of worldwide finance, Brandeis International Business School, April 26, 2020

Facebook post, April 23, 2020

Federal Register, “Taxable Medical Devices,” Dec. 7, 2012

Forbes, “Medical Device Tax Is History After Trump Signs Repeal,” Dec. 21, 2019

Healthcare Finance News, “Senate Repeals Medical Device Excise Tax in Move Applauded by Med-Tech Manufacturers,” Dec. 19, 2019

Internal Revenue Service, “Medical Device Excise Tax: Frequently Asked Questions,” Updated March four, 2020

Internal Revenue Service, “Repeal of Medical Device Excise Tax,” Updated Jan. 30, 2020

NBC News, “Trump’s Trade War Exacerbated Shortage of Medical Equipment,” March 27, 2020

Peterson Institute for International Economics, “US-China Trade War Tariffs: An Up-to-Date Chart,” Feb. 14, 2020

Peterson Institute for International Economics, “COVID-19: China’s Exports of Medical Supplies Provide a Ray of Hope,” March 26, 2020

Phone interview with Paul N. Van de Water, senior fellow, Center on Budget and Policy Priorities, April 24, 2020

Politico, “Lawmakers Put New Focus on China Export Rules,” April 21, 2020

Rush Limbaugh Radio Show, “Does Anyone Remember the Obamacare Medical Device Tax?” April, 2, 2020

Vox, “Why America Ran Out of Protective Masks — and What Can Be Done About It,” March 27, 2020

Phone interview with Joseph Antos, scholar in well being care and retirement coverage, American Enterprise Institute, April 30, 2020

Van de Water additionally stated that whereas there was some shift of producing abroad whereas the tax was in impact, there have been different components main that push, corresponding to competitors and strain to cut back prices.

“There’s no way to attribute that to the device tax itself,” he added.

And, there’s one other complication. Congress acted to place the medical system tax on maintain on the finish of 2015 — partly attributable to vital lobbying by the medical system trade, in addition to opposition to it from each Republican and Democratic members of Congress who had medical system firms headquartered of their states. In December 2019, President Donald Trump permanently repealed the tax when he signed a bipartisan federal spending bundle.

“The tax was only in effect for three years, from 2013 to 2015,” stated Van de Water. “Even if it [the medical device tax] had some effect, that effect would have ended in 2016. We’re now four years later.”

Other Factors

Finally, does the now nonexistent medical system tax have something to do with our present PPE scarcity within the face of the coronavirus pandemic?

The reply to that can also be no, stated the consultants.

The present private protecting gear scarcity may be attributed to the dearth of a stockpile reserve of PPE, an initially sluggish response by the U.S. and the tariffs imposed in opposition to Chinese items by the Trump administration, stated Peter Petri, a professor of worldwide finance at Brandeis University outdoors Boston.

AEI’s Antos thought-about it a difficulty of the massive demand for this stuff, which has made replenishing stockpiles harder.

According to a latest report from the Peterson Institute for International Economics, in 2018 China was the supply of 48% of U.S. imports of PPE. Seventy p.c of the United States’ mouth and nostril protecting gear, corresponding to masks, got here from China in 2018. Overall, China is a serious provider of PPE to nations worldwide.

Petri stated this is sensible since China is a low-cost producer of those comparatively easy merchandise. But it additionally turned an issue as soon as the White House began implementing tariffs on Chinese products.

“For nearly a year, U.S. buyers have been moving their PPE business away from China to other countries because of the Trump tariff wall,” Petri wrote in an electronic mail.

But these producers in different nations weren’t capable of scale up their manufacturing to make up for the quantity of provides wanted when the coronavirus hit.

“Meanwhile Chinese suppliers were turning to markets in Europe. The U.S. could not have chosen a worse time to turn its back on the world’s largest PPE producer,” stated Petri.

China’s huge manufacturing capability did enable it to scale up manufacturing to account for the coronavirus pandemic, however as a result of it had already established companies in different locales and in response to the imposed tariffs, Petri urged, it’s unlikely that China can be as receptive now to U.S. requests for PPE.

Our Ruling

Nothing on this viral picture is correct. There is even a spelling error.

Obama didn’t signal something into legislation referred to as the “medical appliance tax bill.” A moratorium was positioned on the medical system tax he did signal into legislation as a part of the Affordable Care Act in late 2015. Therefore, that tax was placed on maintain in 2016 and ultimately repealed by Trump in 2019.

Instead, consultants we consulted agreed that the present PPE scarcity is extra aptly linked to the insufficient nationwide emergency stockpile of PPE, elevated demand for the merchandise and the Trump administration’s Chinese commerce insurance policies.

Our ruling is Pants on Fire.

Kaiser Health News (KHN) is a nationwide well being coverage information service. It is an editorially unbiased program of the Henry J. Kaiser Family Foundation which isn’t affiliated with Kaiser Permanente.

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