The Impact of Taxing Medical Supplies
Medical supplies are essential for the prevention, diagnosis, and treatment of various diseases and conditions. However, the cost of medical supplies can be a significant burden for health care providers, patients, and governments, especially in low- and middle-income countries. One way to reduce the cost of medical supplies is to exempt them from taxation, or to apply lower tax rates than other goods. This can have positive effects on health outcomes, health equity, and health system financing.
Taxation of medical supplies can have negative impacts on health outcomes by reducing the affordability and availability of these products. For example, a study by the World Health Organization (WHO) found that a 10% increase in the price of insulin due to taxation would reduce its consumption by 6% in low-income countries, 5% in lower-middle-income countries, and 4% in upper-middle-income countries. This could lead to increased morbidity and mortality among people with diabetes. Similarly, a study by Avalara found that the 2.3% federal excise tax on medical devices in the United States, which was repealed in 2019, reduced the sales of these devices by 3.8% and reduced their research and development spending by 4.7%. This could have negative effects on innovation and quality of medical devices.
Taxation of medical supplies can also have negative impacts on health equity by disproportionately affecting low-income and vulnerable populations. For example, a study by the Texas Comptroller of Public Accounts found that sales taxes on over-the-counter (OTC) drugs and medicines are regressive, meaning that they take a larger share of income from poor households than from rich households. This could exacerbate health disparities and reduce access to essential medicines for common ailments. Similarly, a study by SalesTaxHandbook found that sales taxes on durable medical equipment (DME) vary widely across states in the United States, ranging from 0% to 10.25%. This could create inequities in the availability and affordability of DME for people with disabilities or chronic conditions.
Taxation of medical supplies can also have negative impacts on health system financing by reducing the revenue available for public health programs and services. For example, a study by the WHO found that health taxes on tobacco, alcohol, and sugar-sweetened beverages (SSBs) are effective ways to raise revenue for health financing while also reducing the consumption of these harmful products. However, if medical supplies are exempted from these taxes, or taxed at lower rates than other goods, this could reduce the potential revenue that could be used for health promotion, disease prevention, or universal health coverage (UHC). For instance, the WHO estimated that increasing tobacco taxes by US$0.80 per pack globally would generate an additional US$141 billion in revenue per year.
In conclusion, taxing medical supplies can have negative impacts on health outcomes, health equity, and health system financing. Therefore, policymakers should consider exempting medical supplies from taxation, or applying lower tax rates than other goods, to promote health and well-being for all.
Works Cited
: WHO manual on sugar-sweetened beverage taxation policies to promote healthy diets. World Health Organization; 2022. https://www.who.int/health-topics/health-taxes
: Understanding the Medical Device Excise Tax [2020] – Avalara. Avalara; 2020. https://www.avalara.com/us/en/learn/whitepapers/medical-device-excise-tax.html
: Sales Tax Exemptions for Healthcare Items – Texas Comptroller of Public Accounts. Texas Comptroller of Public Accounts; 2020. https://comptroller.texas.gov/taxes/publications/94-155.php
: Are Medical Goods and Services taxable in California? – SalesTaxHandbook. SalesTaxHandbook; 2020. https://www.salestaxhandbook.com/california/sales-tax-taxability/medical-goods-and-services
