Unintended consequences of ObamaCare ... a continuing series

Comply... or get zappedBend over and say Dr. Z told you so.The title of this series is a work-in-progress. Perhaps intended consequences is better. Or predicted consequences. We might have to work on that, because President Obama and Congress are quickly proving to be either charlatans or fools (and it's just as likely they are both.)

As I noted here Wednesday, the negative reaction of the private sector to the schemes of the America's new health care central planners did not take long to materialize. In fact, reacting to Verizon's notice to employees that the regulatory and tax burdens of ObamaCare will result in a decrease in benefits due to increased corporate costs, I wrote:

[This] story will be repeated thousands of times in the coming months.

"Months" is turning out to be a slow-walk prediction. According to Bloomberg News, AT&T "will book $1 billion in first-quarter costs related to the health-care law signed this week by President Barack Obama."

American industry giants John Deere ($150 million), Caterpillar Inc. ($100 million), AK Steel Holding Corp. ($31 million), Valero Energy (up to $20 million), and 3M Co.($90 million) have also come out with their legally mandated earnings and costs estimates, and they ain't pretty. Overall, consulting firm Towers Watson estimates health-care costs may shave as much as $14 billion from U.S. corporate profits. Based only on AT&T's estimate — and the fact that corporations try to give the sunniest "negative" numbers legally possible to stockholders and the Securities Exchange Commission — I'm guessing Towers Watson will be upping that estimate down the line.

Why all the gloom and doom? Well, the corporate tax increases are one reason. Another, especially for Verizon and AT&T, is that the tax break those corporations got for crafting their own prescription drug plans for retirees was immediately eliminated in ObamaCare. So, without that tax break to the eeeeeviiiil corporations, they'll have to dump those folks into the inferior government-backed Medicare Part D prescription drug plan. Multiply those actions by AT&T and Verizon by thousands and we'll get a "donut hole" blown through the rigged and sunny CBO ObamaCare cost projections. Why?

The Employee Benefit Research Institute notes that the tax break would have "cost" taxpayers $665 per person next year, but dumping them into Medicare will cost $1,209 per person. Nice going. This is what happens when you don't read the bill, or — more to the point — don't care what's in it as long as it centralizes government power.

This was all predicted by ObamaCare opponents, such as Rep. Paul Ryan (R-Wis.) — most prominently at Obama's ballyhooed "Health Care Summit" a while back. Ryan said the cost curve would not bend downward, but upward. Obama blew him off. Reality now laughs in the president's face, and it's not at all funny.

But now Congressional Democrats are childishly stamping their feet. Rep. Henry Waxman (D-CA), chairman of the House Energy and Commerce Committee, has fired off a nasty letter to those companies. He's demanding they appear before his committee on April 21 to answer for answering to fiscal reality. The legal obligation of these companies to immediately and publicly estimate the fiscal impact of new legislation, Waxman says, "appears to conflict with independent analyses, which show that the new law will expand coverage and bring down costs."

"The Business Roundtable, an association of chief executive officers from leading U.S. companies, asserted in November 2009 that health care reform could reduce predicted health insurance cost trends for businesses by more than $3,000 per employee over the next 10 years," Waxman wrote.

That's the thing about "independent analyses." They are hard to control. As Bruce McQuain notes at the libertarian Q&O blog:

You’ve got to love it – Waxman’s strongest case is an association comprised of some CEOs who “asserted” – got that? “asserted” – that health care reform “could” – again, “could” – reduce cost trends.

In other words, instead of actually doing the work of checking with authoratative sources that could have actually run the numbers and vetted the requirements of the law, he, Waxman, went with the assertions of a bunch of CEOs because they said what he wanted them to say. Reminds you a bit of the IPCC, doesn’t it?

Actually, it reminds me of government bullying — the kind the left decries as McCarthyism. Waxman is going to haul these CEOs before his committee and berate them for telling the fiduciary truth they are required by law to tell. He'll be, in essence, bullying them to lie about what the real-world impacts of ObamaCare will be on American companies — and, naturally, the Americans who work for those companies ... otherwise known as us.

What Waxman will actually be doing, however, is highlighting the kind of fraudulent and fantastical accounting that only government can get away with. How dare these corporations defy the word of Obama and Pelosi and Reid and Waxman that the laws of economics are what the government says they are! If we say ObamaCare will reduce costs, they will. THEY WILL!!!! Who are you to say different?! And I'm going to use the power of government to set you straight.

Awesome. This is today's America: The private sector dragged before Congress and berated to agree they believe in the Tooth Fairy.

I'd love one of those CEOs to ask Waxman what color is the unicorn he rides to work each day. I'll settle for: "Have you no sense of decency, sir."

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Welcome to Venezuela

Z, I see Waxman summoning CEOs to Washington where he will haul them before the Kleig lights and berate them as nothing more than bullying, as you say (and it may soon lead to stronger steps, such as even more punitive taxes and regulations).

Maybe the titans of industry remain villains in the public mind. But I think they'll fight back.

Then you see news stories, like this one, chiding companies for hoarding cash and not sharing the wealth with workers. The story uses one sentence to suggest that big companies may be hanging onto some green in anticipation of the higher costs of ObamaCare. But you think Henry Waxman cares? He'll say, Pay up boys, before we get really rough with you.

RE Dr. Z

Wow, you look really great in that picture Dr. Z. Have you been tanning? Luckily you live in SoCal and can do it the natural way and avoid that tanning salon tax that has John Boehner, as Peter Sagal of "Wait Wait... Don't Tell Me!" put it, "Orange with rage."

RE: RE Dr. Z

Yes. Spring is here in Southern California. I spent some time in the yard this weekend in the glorious fun, so my tan was tax free.

Re: ObamaCare

You know, I enjoy the right's linguistic trick of naming their opponents programs. Like ObamaCare. I wish that we on the left were as persistently clever: Just think what we could've done with BushWar, BushHurricane and BushDeficit!

That said, I'll outsource further commentary on Z's complaint to Ezra Klein, which I feel compelled to reproduce at length:

Take the corporations arguing that the Affordable Care Act is wrecking their balance sheets. AT&T says it's writing off a billion dollars. Caterpillar took a $150 million hit. But what's going on here isn't a new mandate or a hefty tax, but the elimination of a subsidy that advantaged firms who provide drug benefits to retirees.

What happened was this: When George W. Bush and the Republican Congress passed Medicare Part D in 2003, they were presented with a problem: The fact that the government was now offering prescription drug coverage might encourage these companies to dump the prescription drug coverage they were already offering employees. So Congress gave them a kickback: Companies that provide retiree drug benefits get a subsidy of about $1,300 per retiree per year in order to keep companies from ending their retiree drug plans at once and dumping everyone into Medicare. This subsidy is not just tax free but also tax deductible. Let me make sure that's clear: Not only did companies get a subsidy, but they could also deduct that subsidy from their taxes. Sweet deal.

This looked a bit nuts in retrospect, so Democrats ended the subsidy's deductibility. Again, let's be clear: They didn't end the subsidy. And they didn't make it taxable. They just said that it couldn't be used as a tax deduction. And ultimately, this doesn't raise that much money: About $4.5 billion over 10 years (the sums look large on the corporate side because they're writing down the deduction's expected future value, not just its annual value).

Emphasis added.

RE: Taxes and subsidies

I don't like the fact that Medicare Part D provided a subsidy to businesses for providing prescription drug plans to retirees. That's corporate welfare, and I'm against that on principle. In fact, I was against Bush's new entitlement from the start. But that's beside the point.

Eliminating a tax deduction, even if one thinks its "a bit nuts," is a tax hike — no matter what Klein writes. Higher taxes are a cost to business, and ObamaCare supporters said their plan would bring down health-related costs to businesses, and the president himself said if you like your plan, you can keep it. Both are not true.

You may not like the subsidy and the tax break that encouraged companies to take it. But it is indisputable that eliminating the tax break is destroying the incentive for companies to play along with Medicare Part D. (BTW, that incentive largely contributed to Medicare Part D being the only entitlement I can think of that came in below public cost projections.)

Bottom line: ObamaCare is causing a program that cost taxpayers $665 per recipient to now cost taxpayers $1,209 per recipient because companies are going to do the logical thing and dump those people back into the government's lap. This is typical of government regulators, who are either ignorant or willfully blind to the real-world effects of their polices.

RE RE: Taxes and subsidies

I'm going to preemptively apologize for my other post decrying the rhetoric in the original blog post. I still stand by what I said in general, but I don't want to provoke a degeneration of the debate. This response to Joel's comment is intelligent, well-written, and compelling. We would all do well to write more like Zaius did here. Well done, sir.

RE: Well done, sir.

Thanks, Khabalox. This response just made my day.

Besides

It's MY job to provoke degenerations of debate with Lakely!

K is right, though, Jim. Good response.

RE: Besides

Thanks, Joel.

RE Made my day

You're welcome, but don't take this as an acquiescence on your points. ;)

RE: RE Made my day

You're welcome, but don't take this as an acquiescence on your points. ;)

Heh. That does without saying :D

The consequences were

Higher premiums? Yup. Keeping your plan? Nope.

From an interview by Charlie Rose in Business Week with Aetna's CEO (HT: The Corner)

Will insurance premiums go up?

The answer is yes, and some of the things that will drive those premiums are significant additional taxes the industry will ultimately have to pay in the first year.

The President said that this bill would not have any impact on people who already had coverage, that it was about the uninsured, that there would be no change. Will this legislation change the coverage of people who are already paying for it?

My perception is, yes, things will change. You might not have a plan that includes the exact same doctors. You might have plans that have richer benefits, and therefore you're going to pay more for benefits you may or may not want. It would have been a better message to say, we're going to make certain you maintain your eligibility.

"Nasty" letters and McCarthyism.

Rep. Henry Waxman (D-CA), chairman of the House Energy and Commerce Committee, has fired off a nasty letter to those companies.

I take it you didn't actually read the letters. Here's an excerpt.

The Subcommittee on Oversight and Investigations will hold a hearing on April 21, 2010
at 10:00 a.m. in Room 2123 of the Rayburn House Office Building to examine the impact of the
new law on Deere & Company and other large employers. We request your personal testimony
at this hearing.
To assist the Committee with its preparation for the hearing, we request that you provide
the following documents from January 1,2009, through the present: (1) any analyses related to
the projected impact of health care reform on Deere & Company; and (2) any documents,
including e-mail messages, sent to or prepared or reviewed by senior company officials related to
the projected impact of health care reform on Deere & Company. We also request an
explanation of the accounting methods used by Deere & Company since 2003 to estimate the
financial impact on your company of the 28% subsidy for retiree drug coverage and its
deductibility or nondeductibility, including the accounting methods used in preparing the cost
impact released by Deere & Company this week.

I'm not sure how that can be characterized as nasty.

Actually, it reminds me of government bullying — the kind the left decries as McCarthyism. Waxman is going to haul these CEOs before his committee and berate them for telling the fiduciary truth they are required by law to tell. He'll be, in essence, bullying them to lie about what the real-world impacts of ObamaCare will be on American companies — and, naturally, the Americans who work for those companies ... otherwise known as us.

Once again, your overblown rhetoric is just so much hot air. Are you really trying to equate McCarthyism - the practice of subpoenaing individuals and coercing them to, at best, inform on the political beliefs of their peers, and at worst perjure themselves, with no regard for the available evidence or recognition of the lack thereof - with Waxman asking for the executives to provide the evidence that led them to a contradictory conclusion as to the financial impact of the health care law? If anything, you should welcome an open discussion where an alternative interpretation of the accounting is presented.

This type of stuff is why Atrios was right. It's easy to disregard the rantings of those like Aronymous and still have an intelligent discussion. But when an otherwise reasonable argument (with excellent points I might add) is laced with such hyperbole it makes it difficult for the other side to sit through it and stay sane. This is why Olbermann and Hannity preach to their choirs (and a few masochists).

I dunno, maybe you're not aware of hearings run by Waxman

Star Chamber is an adequate comparison (as shown here). Perhaps "nasty" is not the correct description for the letter. Still, he's not convening a hearing to have a civil colloquy with these folks. He wants to rake them over the coals for not doing what Bob Knight suggested.

Besides, what business is it of Waxman how any publicly held company does its business?

Unless we really are in Venezuela.

RE Star Chamber

Your example is of a different Representative on a sub-committee (of which Waxman is only a member ex officio). And I'm not sure how Markey (publicly - hey they found out about it didn't they?) asking a company to be investigated makes the committee hearing qualify as a Star Chamber. Surely if Waxman is as bad as you say he is you can find a better example. Perhaps even one that includes, you know, Waxman (in more than name only).

Who's business is this?

OK. Perhaps "angry" letter is better than "nasty." "Presumptuous" would also work.

Citing (again) Khabalox's citation of Waxman's letter.

To assist the Committee with its preparation for the hearing, we request that you provide the following documents from January 1, 2009, through the present: (1) any analyses related to the projected impact of health care reform on Deere & Company; and (2) any documents, including e-mail messages, sent to or prepared or reviewed by senior company officials related to the projected impact of health care reform on Deere & Company. We also request an explanation of the accounting methods used by Deere & Company since 2003 to estimate the financial impact on your company of the 28% subsidy for retiree drug coverage and its deductibility or nondeductibility, including the accounting methods used in preparing the cost impact released by Deere & Company this week.

What business is this of Waxman's? What legitimate public purpose is served by compelling John Deere to publicly reveal private email correspondence related to ObamaCare? And make no mistake, this is no mere "request" — itself troubling. Waxman's M.O. will be to subpoena these records and the executives of these companies.

I'm sure if before ObamaCare passed, Waxman had asked the Deere & Co. CEO to appear and give his estimates of the legislation's impact, he would have happily complied — and I'm guessing he'd have testified publicly much of what he's saying now. But Waxman was not too interested in hearing his views then because they would not have served the interest of selling America a lie about what impact it would have on private health arrangements between companies and their employees.

But now, after the fact, Waxman finds it suits his political purposes to haul these guys before his committee and berate them for being "wrong," while also insisting he has a right to use the power of government to grab a company's private email messages.

That is bullying and an abuse of Congressional power — and it doesn't even approach the neighborhood of proper, limited government oversight. I'd tell Waxman to stuff it.

you don't have to carry that anymore.

I wonder what Waxman is thinking, since its no longer necessary to lie, since Obama and Bacus have recently reiterated what this bill is about.

I wonder why the left thinks they have to also carry this water.

I wonder if any of Obama's minions believed that this was Private HC reform in the first place, and if so, how do they feel now that they know it isn't.

I wonder how long they will continue to lie and say that this bill will lower costs, raise the standard of care, and increase access, as costs rise, standards drop, and access requires longer and longer waits.

I wonder what solution they will offer to fix the mess that they create, but I know for a fact that they will not listen to anyone but themselves.

I'm Sorry; I See People Like Mr. Obama &

Mr. Waxman, and Speaker Pelosi, and that GOP Speaker guy before Pelosi -- I see all of them at work, and I swear the first thing that pops into my head is Yertle the Turtle.

P.S. I am awarding 35 quatloos to the faithful reader who can outline the connection between Yertle the Turtle and my signature quote, below!

"There's a reason we don't quote Hitler when we discuss highway spending. It just puts too much noise into your signal." Joel, 2010

Yertle the Fuhrer

Yertle was a metaphor for Hitler. Seuss couldn't draw Hitler very well, so he drew a turtle instead and made him a king.

Quatloos to You, Sir!

Do you think PayPal takes Quatloos?

"There's a reason we don't quote Hitler when we discuss highway spending. It just puts too much noise into your signal." Joel, 2010