Thursday, March 25, 2010

Okay, one health care bit.....

There are so many flaws in this legislation that it seems almost pointless to pick on just one of them, but I think this is a great example of how government minds think. This is a little complicated, so I'll explain it as best I can.

My daughter Erin got married last year, and her father-in-law works for Verizon. (I'll keep his name out of this, just to protect him.) Tuesday, just hours after the health care bill was signed, he posted on his Facebook page that Verizon employees got a communication from the company telling them that their insurance costs were likely to go up because of the new law.

I was intrigued by this, and yesterday I learned more when one of National Review's contributors got a copy of the Verizon memo and posted it. I'm going to focus on one part of it.

One of the nice things Verizon does is provide prescription drug coverage for its retirees. It's not really just a nice gift from Verizon to its retirees, because the federal government rewards Verizon (and other companies that do the same thing) with a subsidy. When the government added a prescription drug benefit to Medicare (called Medicare Part D) a few years ago, they were afraid too many retirees would sign up for the benefit, and so they created an incentive for businesses to give their retirees a prescription benefit.

The Medicare drug benefit costs, on average, $1,209 per person. So the government offered companies a subsidy of about $665 per person if the company would continue to offer a drug benefit. The government thinking was that it's cheaper to pay the subsidy than to have retirees enrolling in Medicare Part D. Verizon was one of the companies that chose to take the subsidy and continue offering the benefit.

But now, as they assembled the health care "reform" package, the Obamaniacs had to find some revenue so that they could claim the bill wouldn't increase the deficit. So they decided to put a 35% tax on the presecription drug subsidy for retirees. By doing this, they got the Congressional Budget Office to estimate that the government would receive $5.4 billion in new revenue.

As Verizon wrote in the memo, the new tax makes the subsidy "less valuable to employers, like Verizon, and as a result, may have significant implications for both retirees and employers."

In other words, Verizon and most other companies are likely to decide that its easier to stop offering retiree drug benefits than pay a 35% tax. It won't matter to the retirees if Verizon drops the benefit, since they can simply enroll in the Medicare Part D to get the same benefit. So now the government - instead of paying $665 per retiree in subsidy - will now pay $1,209 per retiree through Medicare.

And that $5.4 billion in new revenue? Gone.

Bottom line: This part of the bill, which Obama, Pelosi and Reid said would reduce the deficit, will instead add billions to the cost of Medicare while adding no new government revenue. Nice work, eh?


  1. It's amazing to me how this stuff works and how the govenment calculates the "savings" to spin it the way they want to see it. This just confirms what I feared that the savings numbers are all made up and this will end up costing far more in the end. And we're doing all this to insure a very small percentage of the population that isn't already insured. Frustrated!

  2. Thanks for the research Tim!

  3. And is anyone surprised??? This is obama-nomics at it's finest (or worst...)

    TFMH :{