AP: Say, guess what we just found in ObamaCare!

posted at 10:55 am on March 26, 2010 by Ed Morrissey

Congress passed the bill without knowing what was in it. Barack Obama signed it without reading it.  Now it looks as though the Associated Press reported on ObamaCare without comprehending its content.   Readers will have to scroll far down to discover that the elimination of a key tax break that kept retirees on company prescription-medication plans will mean dumping millions of seniors onto Medicare — and that the AP ignored it until now:

The health care overhaul will cost U.S. companies billions and make them more likely to drop prescription drug coverage for retirees because of a change in how the government subsidizes those benefits.

In the first two days after the law was signed, three major companies — Deere & Co., Caterpillar Inc. and Valero Energy — said they expect to take a total hit of $265 million to account for smaller tax deductions in the future.

With more than 3,500 companies now getting the tax break as an incentive to keep providing coverage, others are almost certain to announce similar cost increases in the weeks ahead as they sort out the impact of the change.

Figuring out what it will mean for retirees will take longer, but analysts said as many as 2 million could lose the prescription drug coverage provided by their former employers, leaving them to enroll in Medicare’s program.

Over the past year, I’ve repeatedly warned about the dangers of static tax analysis.  That process considers changes in tax policy without considering its impact on behavior.  The closure of this “loophole,” as Robert Gibbs called it yesterday, is a perfect example of this stunted thinking.

The Democrats in Congress argued that they would gain $5.4 billion in revenue by eliminating the tax break enacted in the 2003 Medicare Part D program as an incentive for businesses to keep their retirees out of the Medicare system.  Instead, they have given businesses a reason to dump their retirees out of the private networks and into the Part D system now.  Not only will the expected tax revenues never appear, but now we will have to spend a lot more money covering those prescriptions out of public funds.  The seniors in these programs will suffer most of all, as the Part D coverage is vastly inferior to the private plans offered by businesses in the private sector.

Who could have foreseen this?  Well, businesses have been trying to get attention to this problem for months, as the AP somewhat belatedly reports:

Industry groups say they lobbied hard against the change in the tax rules before it was added to the health care law over the winter.

“It was in all of our letters and communications that went up to the Hill, and the companies were heavily involved in that,” said Dena Battle, a tax specialist with the National Association of Manufacturers.

Nationwide, companies would take a $14 billion hit on their financial statements if all of the roughly 3,500 companies receiving the subsidies continued to do so, according to a study by Towers Watson, a human resources consulting firm.

For months, businesses have warned about the problem, and for months, Democrats have claimed this clause as a $5.4 billion revenue source.  One might think that the media would be interested in puncturing some bad assumptions.  Apparently not.

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Ed you put is brilliantly. According my paternity calendar the water is about to burst giving birth to socialism or communism.

MSGTAS on March 27, 2010 at 10:56 AM

I went back and looked over my 2009 tax returns. While the Mass state return only requires one FID number, the 1099-HC form that is copied to the state tax board has all the details on it.

There are sections for each person, listed by name, and includes every month of the year. So if the Federal is like Massachusetts, the IRS will know whether all the dependents on your return are covered under your policy.

So if you don’t have any FID number at all, there is no way to avoid the penalty unless you lie on your tax return and enter a bogus FID number. They are sure to catch you since they won’t get a matching 1099-HC. Whether or not the individual mandate is enforceable or not, there is no way to avoid it without committing fraud on your return and then it won’t matter if the IRS can enforce it because they’ll have you for perjury.

Jaynie59 on March 27, 2010 at 12:36 PM

Congress passed the bill without knowing what was in it.

Like that has never happened before.

percysunshine on March 27, 2010 at 1:53 PM

Remember the Big Schlep?
Well this is the Big Schtup!

RobCon on March 27, 2010 at 4:20 PM

This new law is going to be exterminating Democratic party members for decades to come. I’m beginning to warm up to Obamacare already!

leftnomore on March 28, 2010 at 4:31 AM