Despite Obamacare’s Best Efforts, Medical Device ETF Soars

Even with the federal government’s best efforts to hinder the industry, the iShares U.S. Medical Devices ETF (NYSEArca: IHI) continues to be a stalwart among health care ETFs.

IHI is trading modestly lower Thursday, but the ETF hit a new all-time Wednesday. Year-to-date, IHI is up 12.7% after surging nearly 38% last year. IHI’s stellar showing over the past 21 months is made all the more impressive when considering a stealth tax on medical device manufacturers hidden in the Affordable Health Care Act (Obamacare) went into effect at the start of 2013.

When the medical device tax was initially revealed, some independent, non-partisan groups projected the tax would lead to tens of thousands of cut jobs and billions of dollar lost GDP for the U.S. [Obamacare is Unhealthy for Medical Device ETFs]

Fortunately for investors in medical device companies and IHI, the health care sector has been a market leader since the start of 2013. The Health Care Select Sector SPDR (NYSEArca: XLV), the largest health care ETF, and IHI are up 62.4% and 51.2% since the start of 2013 compared to a 41% gain for the S&P 500 over that period. [Investors Still Love Health Care ETFs]

In addition to overall ebullience toward health care stocks, IHI has benefited from other catalysts, including and perhaps not surprisingly, incompetence on the part of government revenue collectors. It was expected that the Obamacare medical device tax would generate $1.2 billion in tax revenue between April and September 2013, but the real figure was just 75% of that, reports Sally Pipes for Forbes.

Again, not surprisingly, the medical device tax has proven to be more of a mess than useful revenue-generating tool. As Forbes reports, some companies are paying too much on the tax, some are not paying enough while others are being erroneously fined.