The Medical Device Excise Tax: A Legal Overview

Andrew Nolan
Legislative Attorney

On December 7, 2012, the Department of the Treasury and the Internal Revenue Service issued final regulations explaining the scope of the medical device excise tax created by the Health Care and Education Reconciliation Act of 2010 (HCERA), which modified the Patient Protection and Affordable Care Act of 2010. The new regulations were issued less than a month before the 2.3% excise tax took effect on January 1, 2013. This report provides a brief overview of the recently enacted Treasury regulations, analyzes the legal implications of the regulations, and answers frequently asked questions about the medical device tax.

The Treasury regulations on the medical device excise tax explain both who is subject to the excise tax and the scope of the statutory exemptions provided for the tax. Specifically, the regulations incorporate by reference the general definitions for a “manufacturer, producer, or importer” outlined in the Internal Revenue Code, meaning that the excise tax will be directly paid by manufacturers, as opposed to consumers or others that use a given medical device.

Furthermore, the regulations attempt to clarify the limits to the medical device excise tax. Beyond the statutory exemptions created for eyeglasses, contact lenses, and hearing aids, the law created a “retail exemption” to the excise tax, excluding from the tax medical devices that are “generally purchased by the general public at retail for individual use.” The Treasury regulations attempt to simultaneously provide certainty to potential taxpayers as to which devices are subject to the retail exemption, while allowing the government the flexibility to properly apply the retail exemption to the variety of devices that could be exposed to the excise tax. The regulations provide a flexible two-prong test to determine whether a device should fall within the retail exemption, applying the exemption when the device is (1) regularly available for purchase by non-professional consumers and (2) not primarily intended for use by medical professionals. The regulations provide several factors to consider when applying the two-prong test. To provide some certainty to the scope of the retail exemption, the regulations also included several “safe harbor” provisions, explicitly acknowledging that certain devices, such as “over-the-counter” devices, fall within the retail exemption.

The new Treasury regulations on the medical device excise tax, while providing some certainty with respect to what devices will be exempt from the tax, generally favor a more flexible approach to defining the scope of the central exemption to the tax. As a consequence, uncertainty remains as to which medical devices will be subject to the tax. Indeed, Treasury, in releasing the medical device excise tax regulations, notes that further clarification on various issues implicated by the tax is still needed. As such, the regulations constitute only the first step in defining the limits of the medical device excise tax.

Date of Report: October 11, 2013
Number of Pages: 16
Order Number: R42971
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Tax-Advantaged Accounts for Health Care Expenses: Side-by-Side Comparison, 2013

Carol Rapaport
Analyst in Health Care Financing

Four types of tax-advantaged accounts can be used to pay for unreimbursed qualifying medical expenses: health care flexible spending accounts (FSAs), health reimbursement accounts (HRAs), health savings accounts (HSAs), and medical savings accounts (MSAs). Qualifying unreimbursed medical expenses are defined in the Internal Revenue Code (IRC) and typically include deductibles, copayments, and goods and/or services not covered by insurance. The goods and/or services can include medical services rendered by physicians, surgeons, dentists, and other medical practitioners. The costs of equipment, supplies, diagnostic devices, and prescription drugs are also qualifying medical expenses.

Although these four tax-advantaged health accounts share some common features, they also differ in important respects. This report provides brief summaries of the tax-exempt accounts and compares them with respect to eligibility, contribution limits, use of funds, and other characteristics for tax year 2013. A basic discussion of the four accounts is followed by a sideby- side comparison of their key features. The accounts can be summarized as follows, where all accounts reimburse qualifying medical and dental expenses not covered by insurance.

• FSAs are employer-established accounts that reimburse employees for qualifying expenses. They are usually funded through salary reduction agreements under which employees receive lower monetary wages in exchange for equivalent contributions to their FSAs.

• HRAs are employer-established arrangements that reimburse employees for qualifying expenses. Contributions cannot be made through the employees’ salary reduction agreements; only employers may contribute. Health reimbursement accounts and health reimbursement arrangements are synonyms.

• HSAs are savings accounts that the account holders use to pay for qualifying expenses. They are established by individuals who must hold high-deductible health plans (HDHPs) in order to establish or contribute to the HSA. Contributions to the accounts can be made by any individual or firm.

• MSAs are accounts that the account holders use to pay for qualifying expenses. They were established by individuals who held high-deductible health plans (HDHPs) in order to establish or contribute to the MSA. Individuals generally cannot open MSAs after December 31, 2007, but those who had accounts by this date may maintain them. MSA eligibility was limited to people who were selfemployed or employed by an employer with fewer than 50 employees. Contributions may be made by the employer or account holder, but not both in the same year. 

The report concludes with a brief discussion of the usage in these four accounts. Comparing usage is difficult because no single data source contains comparable information on all four accounts and the years of data availability differ across data source. In broad terms, 40% of all civilian workers in 2012 had access to a health care flexible spending account. Of those private firms offering health benefits in 2012, 26% offered an HSA-qualified HDHP. 

Date of Report: October 18, 2013
Number of Pages: 16
Order Number: RS21573
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The Mental Health Workforce: A Primer

Elayne J. Heisler
Analyst in Health Services

Erin Bagalman
Analyst in Health Policy

Congress has held hearings and introduced legislation addressing the interrelated topics of the quality of mental health care, access to mental health care, and the cost of mental health care. The mental health workforce is a key component of each of these topics. The quality of mental health care depends partially on the skills of the people providing the care. Access to mental health care relies on, among other things, the number of appropriately skilled providers available to provide care. The cost of mental health care depends in part on the wages of the people providing care. Thus an understanding of the mental health workforce may be helpful in crafting policy and conducting oversight. This report aims to provide such an understanding as a foundation for further discussion of mental health policy.

No consensus exists on which provider types make up the mental health workforce. This report focuses on the five provider types identified by the Health Resources and Services Administration (HRSA) within the Department of Health and Human Services (HHS) as “core mental health professionals”: psychiatrists, clinical psychologists, clinical social workers, advanced practice psychiatric nurses, and marriage and family therapists. The HRSA definition of the mental health workforce is limited to highly trained (e.g., graduate degree) professionals; however, this workforce may be defined more broadly elsewhere.

An understanding of typical licensure requirements and scopes of practice may help policy makers determine how to focus policy initiatives aimed at increasing the quality of the mental health workforce. Although state licensure requirements vary widely across provider types, the scopes of practice converge into provider types that generally can prescribe medication (psychiatrists and advanced practice psychiatric nurses) and provider types that generally cannot prescribe medication (clinical psychologists, clinical social workers, and marriage and family therapists). The core mental health provider types can all provide psychosocial interventions (e.g., talk therapy). Administration and interpretation of psychological tests is generally the province of clinical psychologists.

Access to mental health care depends in part on the number of mental health providers overall and the number of specific types of providers. Clinical social workers are generally the most plentiful core mental health provider type, followed by clinical psychologists, who substantially outnumber marriage and family therapists. While less abundant than the three aforementioned provider types, psychiatrists outnumber advanced practice psychiatric nurses. Policy makers may influence the size of the mental health workforce through a number of health workforce training programs.

Policy makers may assess the relative wages of different provider types, particularly when addressing policy areas where the federal government employs mental health providers. Psychiatrists are the highest earners, followed by advanced practice psychiatric nurses and clinical psychologists. Marriage and family therapists earn more than clinical social workers. The relative costs of employing different provider types may be a consideration for federal agencies that employ mental health providers.


Date of Report: October 18, 2013
Number of Pages: 24
Order Number: R43255
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