There is sure to be much discussion to a provision in the U.S. Senate’s version of Health Care Reform which would impose a tax (penalty) on elective cosmetic procedures. With a tax rate of 5%, the measure presumably will raise close to $6 billion of the projected $850 billion price tag of the healthcare bill. (everyone knows that this projected cost is fancifully low)

Given the name of “Botax” by many, the intent of it is to clearly tax those who can ‘afford’ to pay it…some call it a tax on the wealthy. But those who do so clearly have no idea who really makes up the cosmetic population. The Botax name is a clever variation of Botox facial injections which have become the beacon procedure for non-surgical or office procedures used for wrinkle reduction. In theory, the Botax could impact about 12 million cosmetic procedures and surgeries performed each year in the U.S..

As one would expect, all sides of the cosmetic surgery industry from physicians to patients are voicing opposition. Their argument is that such a tax unfairly targets the middle class and working women in particular. Statistics from the American Society of Plastic Surgeons (ASPS) show that only a minority of people who undergo any form of cosmetic surgery has a household income greater than $90,000 per year and the vast majority (greater than 80%) are women between the working ages of 18 to 65. Clearly this is not a tax on the wealthy and is a discriminatory tax that falls largely on women.

While the idea that it is a tax on the wealthy is fallacious, it is a tax on the healthy. Contrary to what many would guess, the vast majority of cosmetic procedures are done are health conscious individuals. Most are already reasonable fit and are appearance focused. Obese, smokers, and other ‘unhealthy’ patients make up just a fraction of whom ever undergo cosmetic procedures or surgery. This proposed discriminatory tax is targeting those who do take care of themselves to help some who have made poor health choices along the way. It would make more sense to tax unhealthy food items, for example, that have incredibly high fat content…and it would bring a hundred fold increase in revenue to support health are reform.

This tax idea is not new as one currently exists in the New Jersey. Using a tax rate of 6% since 2004, tax revenues have fallen far short of projections. Other states such as New York, Illinois, Texas, Washington, Arkansas, and Tennessee have had similar legislation proposed or introduced but none has passed to date.

This type of tax bill is also troubling because it treds on choppy waters that health insurance companies have trouble deciphering.  What is the official or tax definition of a cosmetic procedure? IRS rules for tax deductions state that any procedure necessary to treat a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease is a medical procedure. Anything else is a cosmetic procedure. Some delineations are quite clear…Botox for wrinkles or migraines for example. But what about a tummy tuck to treat the effects of pregnancy. Are the effects of childbirth on a woman’s stomach a cosmetic or reconstructive procedure?

Supporters of this tax proposal state that this is no different than taxes on luxury goods and services. These are not viewed as medical procedures even though they should and are generally performed by licensed physicians.

With some many differences between the House and Senate Health Reform bills, it is difficult to say what will eventually shake out. But this hidden tax will largely penalize health conscious women. It is a troubling signal of how far reaching your legislators will go to get more of your hard earned money. And once again the beneficiaries of your ‘generosity’ will likely be those that have sacrificed less.

Dr. Barry Eppley

http://www.eppleyplasticsurgery.com

http://www.ologyspa.com

Clarian North Medical Center, Carmel, Indiana

Clarian West Medical Center, Avon, Indiana

Indianapolis

Americans who choose to spend money on cosmetic surgery and procedures have been considered to be taxed for their indulgences. In an effort to fund treatment for those who cannot afford basic healthcare, some members of the White House and Congressional groups have proposed a 10% excise tax on elective cosmetic surgery procedures. This has been called, somewhat humourously, the Botax.

The proposed cosmetic surgery tax is theoretically a progressive tax on the wealthy. But the reality is many people who undertake cosmetic procedures today are not wealthy but middle-class Americans. Financing on cosmetic surgery is at an all-time high, suggesting that the boom in cosmetic surgery in recent years is not coming from the wealthy. In addition, such a tax would disproportionately be levied on women. Women make up over 90% of cosmetic surgery patients, according to statistics gathered by the research arm of the American Society for Aesthetic Plastic Surgery. They looked at in-office injectable treatments which showed that the typical aesthetic patient is a married working mother between the ages of 41 to 55 with a household income of less than $100,000.

The broader picture is that injectable treatments do not make up the majority of money spent on cosmetic surgery, accounting  for about  3 billion of the 10 billion or so spent on these elective endeavors per year.The amount of money spent on any surgery is obviously much higher ($3,000 to $15,000) versus any in-office based treatments. ($300 to $ 1,000) The proposed excise tax, however, appears to be intended to apply to all cosmetic surgery and treatments.

This is not the first time that cosmetic surgery taxes have been proposed. A number of states have considered taxing certain cosmetic surgery procedures, including face-lifts, tummy-tucks and Botox injections in the recent past. New Jersey passed the first cosmetic surgery tax law in 2004.  (a bill to repeal the tax was vetoed in 2007) Since then, lawmakers in states including Texas, Illinois, Washington, Arkansas, Tennessee and New York have introduced bills or budget proposals to install similar taxes, although none of those states has passed the taxes into law. Proponents of these taxes say that since they are levied on elective procedures, they are painless ways to raise money for state programs.

The taxing of certain cosmetic medical procedures is based on the stated premise that they would only be on procedures that are directed at improving one’s appearance and not those procedures that promote the proper function of the body or prevent or treat illness or disease. Given the history of insurance companies defining this same distinction, one should be very concerned about what any such proposed taxes laws may mean in regards to one’s general health. Such tax propositions set a dangerous precedent for the government to consider subsequently taxing patients who need elective procedures such as lasik vision correction, bariatric weight loss, orthopedic joint surgery,  and other similar medical procedures (which has been determined to be elective) based on a body of elected officials, rather than a physician’s, interpretation of  what constitutes medical necessity.

Such excise taxes are also conspicuously at odds with the global goal of spreading the tax burden as neutrally as possible over a broad tax base. This avoids a discriminatory tax to be borne by a few selected individuals. Excise taxes on cosmetic procedures do exactly that creating a discriminatory tax burden that will drive the patient to seek other methods to service that need or avoid that need altogether. As New Jersey has found out, the projected revenue collections was nearly 75% less than projected the first year after it was enacted.

Selective excised taxes are not new and the arguments against them have always been that they are discriminatory and are not effective in the long-term.  Much of any revenue gained is largely offset up by administrative and collections costs, particularly when the overall number of taxed items is relatively small. While for now, a cosmetic surgery tax has apparently been ‘tabled’, I would not be surprised to see it resurface as we head into the health care reform debate this fall.

Dr. Barry Eppley

http://www.eppleyplasticsurgery.com
http://www.ologyspa.com
Clarian North Medical Center, Carmel, Indiana
Clarian West Medical Center, Avon, Indiana
Indianapolis