Plastic Surgery
In Little Rock, Arkansas
Proposed Cosmetic Surgery Tax
As of now the cosmetic tax has been removed from the Senate bill. However it could sneak back in as the bill goes forward. Be vigilant! Let your Congressmen know how you feel about this and the Health Care Reform Bill in general.
Senate Heath Reform Bill proposes 5% tax on cosmetic procedures to be paid by you, the patient, starting January 1, 2010
PLEASE HELP US STOP THIS!
PROPOSED COSMETIC SURGERY TAX
The proposed Senate Health Reform bill includes a 5% tax on cosmetic surgery defined as “any procedure which is directed at improving the patient’s appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease”. This could include surgery, Botox, fillers, cosmetic dentistry, teeth whitening, some orthodontics, spider veins, permanent make-up - anything they want to tax!
There are many reasons to be against this tax. Number one on the list is that a cosmetic surgery sales tax was tried in New Jersey and was such a failure that the New Jersey Senate and Assembly voted unanimously to repeal the tax. If you read nothing else on this page, scroll down to the letter below from New Jersey Assemblyman Joseph Cryan to Senate Majority Leader Harry Reid.
There are other reasons it is unfair and discriminatory.
AFFECT ON PATIENTS
A tax on cosmetic procedures is not a luxury tax. According to the 2004 Cosmetic Surgery National Data Bank Statistics, 46% of people considering plastic surgery have household incomes less than $50,000/year. For most patients this is a once-in-a-lifetime investment. Many patients will save for years to have a single cosmetic procedure performed.
The tax discriminates against women who constitute 91% of the patients who receive cosmetic procedures.
Patients are extremely sensitive to the price of cosmetic surgery. The number of cosmetic surgery procedures decreased by 15% between 2007 and 2008 due to a faltering economy. The number may be even lower when the 2009 statistics are released. An additional 5% increase due to a 5% sales tax would further reduce the number of cosmetic procedures performed. Some doctors may reduce their fees to offset the tax. However tax collections would fall again as the tax would be calculated on a smaller fee. Patients may wait another year to have surgery or just have the surgery performed out of the country where it may be cheaper. Both will result in tax revenues falling short of estimates.
The enforcement and auditing of a cosmetic surgery tax creates an enormous patient confidentiality issue. To enforce the tax and resolve any disagreement between the physicians and the government over what constitutes a cosmetic procedure versus a medically necessary procedure, the patients’ charts must be made available to government auditors. Cosmetic surgery charts routinely contain photographs of patients in various states of undress. In my opinion, this constitutes a government mandated breach of patient confidentiality and an intrusion into the doctor – patient relationship.
THE NEW JERSEY EXPERIENCE
New Jersey is the only state that has implemented a cosmetic surgery tax. The New Jersey Division of Taxation experienced almost a 75% shortfall in first year collections. It was anticipated the tax would generate $26 million annually but only collected $7 million.
This shortfall in cosmetic surgery tax revenues may be due to misinterpretation of the Cosmetic Surgery National Data Bank Statistics because the total expenditures on cosmetic surgery may be considerably overstated. When collecting the data, the society does not ask how much revenue a practice collected in the past year. They ask for the number of cases performed and the average charge for all procedures. They then calculate the total expenditures by multiplying these two figures.
However, this is not the way an actual cosmetic surgery practice works as it does not take into consideration the following:
- Many of the numbers of cases reported by physicians are estimates only. There is a natural tendency to overestimate.
- Revision surgery which is often done at a nominal fee or a greatly discounted fee.
- Secondary or multiple procedures performed on a single patient are often discounted.
- Because of a price sensitivity effect, the surgeon who charges a lower fee is likely to do a higher volume of cases. This causes the average fee paid by all patients to be lower than the average fee among all surgeons.
- Performing these procedures at tax-exempt not for-profit institutions or by surgeons employed by tax exempt non-profit institutions further reduces tax revenues.
ADMINISTRATIVE CHALLENGES
Who determines what a medically necessary procedure is? The patient? The physician? The government? The distinction between cosmetic surgery and reconstructive surgery is often unclear. Every cosmetic procedure has a functional component and every reconstructive procedure has an aesthetic component. That is the essence of the specialty of plastic surgery. Will the government provide a resource for appeals for patients who feel their procedure is reconstructive but the government has deemed it cosmetic? Will there be a means to determine tax liability on a case-by-case basis?
Will this bill tax all services associated with the performance of a cosmetic surgical procedure? Who defines associated? Does it include only the surgeon’s fee? Or does it also include anesthesia fees, facility fees, prescriptions for analgesics and antibiotics or other medications, lab work, mammogram, a referral to a family physician or consultant to confirm health status prior to surgery, treatment of complications from cosmetic surgery, and hospitalization after cosmetic surgery?
Who decides how cosmetic and medically necessary procedures are segregated when they are combined in the same operative setting. A plastic surgeon may perform a cosmetic procedure at the same time that another specialist is performing a medically necessary procedure. It is also common for a plastic surgeon to form cosmetic and reconstructive procedures and a single operation such as rhinoplasty combined with septoplasty. Who will decide what percentage of the operation is taxable or not? It can be like asking your home builder to decide how much of the cost of your house is cosmetic and how much serves the function of providing shelter.
THE BOTTOM LINE
The numbers just don’t work. This 5% tax is supposed to collect $5.8 billion over 10 years, or $580 million a year. New Jersey collects $7 million annually with a 6% tax and 2.8% of the US population. Extrapolating these figures to the entire US population gives gross annual collections of $206 million. That number would be further reduced by administrative and auditing expenses resulting in far less than $2 billion over 10 years. In fact they would probably experience the same 75% shortfall that New Jersey experienced. Do you ever wonder if anyone in Washington is doing the math on any of this?
PLEASE HELP US TAKE ACTION NOW
To contact your Senator, click below:
Arkansas Senator Blanche Lincoln:
http://lincoln.senate.gov/contact/email.cfm
Arkansas Senator Mark Pryor:
http://www.pryor.senate.gov/contact/
If you prefer to fax your Senator, you may use this form:
The Cosmetic Surgery Tax Senate Bill Amendment:
View Cosmetic Surgery Tax Senate Bill Amendment
Plastic Surgeons Respond to Proposed Cosmetic Surgery Tax:
American Society of Plastic Surgeons Press Release
New Jersey Assemblyman Joseph Cryan Letter to Senate Majority Leader Harry Reid:
