The medical device tax is part of a suite of fees imposed on the health-care industry. The Affordable Care Act is expected to expand health insurance coverage to millions of Americans, which amounts to a windfall for health-care providers. The previously-uninsured will, all of a sudden, have health plans that cover trips to the doctor and hospital. That's expected to increase the consumption of health care.
When legislators drafted the Affordable Care Act, they asked each health industry to essentially give something up in return for the increased volume of patients they would now see. Health insurers, for example, will pay an industry-wide fee that generates $60.1 billion in revenue over the course of a decade. Pharmaceutical companies had a higher assessment of $80 billion.
As for medical device makers, they ended up with a 2.3 percent tax on sales. This will, according to the Congressional Budget Office, generate $29 billion in revenue over the course of a decade--which the health law plows back into expanding insurance coverage. The tax applies to devices such as defibrillators or pacemakers. Anything sold over-the-counter directly to consumers (think hearing aids, contact lenses and eyeglasses) is exempt.