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October 19, 2005

Big Backlash Brewing

From a WSJ article about health care worries:

Will the new Medicare prescription-drug coverage lower the cost of retiree health benefits?

Not for you. Some employers have decided to drop the prescription drug benefit they provided to retirees who qualify for Medicare. (See related coverage.)

Others will continue to provide the coverage, in exchange for billions of dollars in government subsidies. But your costs may still rise.

Here's why: Starting in 2006, the U.S. will reimburse employers for 28% of the cost of retiree prescription-drug spending over $250, up to $1,330 per retiree per year, tax-free.

The subsidy was supposed to encourage employers to continue offering retiree health coverage. But employers can collect the subsidy and continue to cut benefits. The rules, which were crafted with significant input from employer groups, allow employers to count retiree contributions towards the total that qualifies for the subsidy, and lets employers aggregate all their retiree groups.

As a result, an employer can completely eliminate the benefits for some groups, and still collect millions of dollars in government money, according to the federal Centers for Medicare and Medicaid Services. Thanks to the subsidy, GM cut $4.1 billion in retiree liabilities from its books, which represents the amount it anticipates collecting from the government over time.

I can't say that I blame GM and others for using a poorly written tax code to their advantage. They are just trying to survive. But as big companies continue to shuffle more and more of their health care costs to the federal government, wouldn't a better approach be to craft federal health care legislation that actually insures people, instead of picking up the tab in creative new ways for business's bottom line that don't actually increase the pool of insured or their coverage? It's been pointed out elsewhere, but GM and every other big and small business could take care of all of their healthcare problems with reform of the insurance system in America (doesn't necessarily have to be completely socialized either).

Maybe they should try giving most of their political contributions to Democrats for just one election cycle and see if it's actually good for business or not. Because clearly the past decade of Republican control of Congress has been neither good for business or people when it comes to health care policy.

Posted by Chris at October 19, 2005 03:32 PM

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