An industry-funded report says a 2.3 percent excise tax on medical device manufacturers set to go into effect in 2013 could endanger almost 43,000 U.S. jobs while making health care slightly more expensive to consumers.

In a report released Wednesday, the Advanced Medical Technology Association, a trade lobby, said the coming tax will cut into companies' revenues and force them to move manufacturing facilities offshore in order to escape the growing U.S. tax burden.

"The device tax could cost thousands of jobs, depending on the cutback and what percent of the industry moves offshore," Diana Furchtgott-Roth, co-author of the report and a senior fellow with the Manhattan Institute, a New York-based think tank, told reporters on a call Wednesday. "We assume a loss of about 43,000 jobs in the medical device industry, if for example just 10 percent of manufacturers' activity moves offshore."

The group also warns that the tax could stifle U.S innovation and give a leg up to foreign competitors. Also, because the tax applies to revenue, and not profits, companies with smaller profit margins could be devastated, and end up owing Uncle Sam money despite operating at a loss.

The tax was included in the Affordable Care Act and is meant to raise $20 billion over the next decade to help pay for the costs of health reform -- that is, adding millions of new Americans to the insurance rolls. Earlier versions of the bill included a higher tax on device companies, but it was brought down for the final bill.

Direct-to-consumer and retail products like contact lenses are exempt from the tax, although it's unclear if it applies to home equipment, like motorized wheelchairs.

While the actual guidelines have to be finalized, the study, "Employment Effects of the New Excise Tax on the Medical Device Industry," tried to calculate the effect on employers when the tax comes online, from what's known now.

Naturally, when faced with the tax, companies will try to make up for it by raising prices and cutting costs. That is, part of the tax would be passed on to consumers: the researchers estimate after-tax prices for devices could rise about 1 percent. But also, companies could shift some amount of employment overseas.

The authors say under "reasonable assumptions" up to 10 percent of jobs could move abroad, resulting in U.S. job losses of 43,000 and labor compensation losses of about $3.5 billion.

In 2009, the domestic device manufacturing industry employed over 400,000 people, who earned about $33 billion in labor compensation, according to the study.

Medical device manufacturing is one of the few U.S. manufacturing sectors to have emerged relatively unscathed from the past recession and to maintain a favorable balance of trade. It also offers decent-paying jobs, the study said.

Should the tax actually hurt employers, the hardest hit states would be medical manufacturing hubs like California, Indiana, Massachusetts, Colorado and Minnesota, the study said.

Politicians from those states have already launched aggressive efforts to repeal the bill, and several bills are circulating in the Capitol. Two of the main advocates of scuttling the tax include Rep. Erik Paulsen, a Republican from Minnesota, and Sen. Scott Brown, a Republican from Massachusetts.

Unease about jobs

AdvaMed's report comes just as President Obama unveiled a $300 billion program to create new jobs, and during a time of national unease about the jobs situation.

"We got the news from August that no jobs were created, and the unemployment rate remains above 9 percent. GDP growth is slowing, and some people think that we are already in another recession," Furchtgott-Roth said.

Still, the actual impact of the tax on companies is unknown.

Because the tax also applies to foreign companies selling products in the U.S., it's not clear why by itself it would encourage companies to move their manufacturing bases elsewhere, as it would not help them avoid the tax for U.S. sales. Also, it's possible the tax could be deductible. (The Internal Revenue Service did not respond by press time to DOTmed News' request for clarification.)

However, AdvaMed said the excise tax would just be an additional burden on U.S. companies, on top of America's higher corporate tax rate and stiffer barriers to getting devices approved by U.S. regulators.

"I would look at the device tax as the last straw on the camel's back," J.C. Scott, senior executive vice president of government affairs with AdvaMed, told reporters.

Furchtgott-Roth co-wrote the report with her husband, Harold Furchtgott-Roth, founder of Furchtgott-Roth Economic Enterprises and a former commissioner of the Federal Communications Commission.

In addition to being a Manhattan Institute fellow, Diana Furchtgott-Roth is the former chief economist with the Department of Labor, and has served as an economic and policy adviser under three presidents (the two Bushes, and Reagan).