By Dr. Merrill Matthews
Even as the president traveled to Iowa City the other day to let everyone know Armageddon hadnt happened several large companies declared they would start health-reform-related write downs -- AT&T for $1 billion is example #1. I predict that one of the most common phrases in the American vocabulary over the next few years will be I didnt know the health care bill would do that. Democrats will be saying it the most.
Heres the back-story.
In 2003 Congress passed the Medicare prescription drug benefit. There was a concern among legislators that including that benefit might encourage large employers that provided retiree coverage to phase it out.
Republicans who controlled Congress decided to provide those companies with a subsidy spending about $665 per retiree to subsidize the employers plan but saving $1209 if the retiree had been dumped into Medicare. Most private sector employers
continued to offer their coverage and the government spent less than if the retiree had been dumped into Medicare.
Enter Obamacare.
Democrats needed to find some savings to hide the cost of their health care plan so they ended that $5.4 billion subsidy. So those companies have to immediately start writing down the money they wont be seeing in the future.
Most will likely phase out their retiree plans.
But how can the numbers still work? Wont those retirees moving from an employer plan to Medicare cost the government more?
Yes but in Obamaccounting you simply assert youre going to cut Medicare by $523
billion over 10 years and -- ta da -- everything balances.
As companies lined up the past few days to announce their write downs House Energy & Commerce Committee Chairman Henry Waxman (D-CA) expressed surprise. He had no idea that companies would start doing that.
He should have.
The Sarbanes-Oxley Law requires companies to publicly announce such material changes
in their position as quickly as they can be calculated under penalty of prison time.
We knew that Speaker Nancy Pelosi (D-CA) was telling the truth when she said we needed to pass the health care bill so the country could find out whats in it. We just didnt know she was referring to her own Energy & Commerce chair.
Todays TaxByte was written by the Institute for Policy Innovations Resident Scholar Dr. Merrill Matthews.
