Progress Pond

Cost of Medicare D(isaster) Corporate Welfare

Ambulances parked in front of the U.S. Capitol Building in Washington DC.

Previously, the following question was asked:  

How much is Medicare D(isaster) really costing the taxpayers?

 A partial answer was provided:

  •   $400 million spent on the sales pitch to convince people that Medicare D(isaster) is the next best thing to sliced bread;
  •  $325,000 spent on the ad with the Valentine;
  •  the subsidies that are given to certain employers, the question that has not been adequately asked nor answered;

But, the NYT provided an answer today.  According to a new study by Credit Suisse First Boston, billions will be paid so that companies will not discontinue providing health care coverage.  The report states, in part, that

[Companies that fear they have promised more benefits than they can deliver] “are actively trying to pass the buck.” [This means trying to shift costs] “to anyone who will bear them: their retirees, active workers, the U.S. taxpayer, etc..”

“If they succeed…it’s a giant transfer of risk from corporate America to the work force, and retirees.”

David Zion and Bill Carcache, who prepared the study, demonstrated to investors how successful corporations are shifting the cost of their retiree health plans onto others.  

Instead of increasing corporate profits in a given year, the subsidies are supposed to free up cash that the company would otherwise have to spend on health care…This effect would show up on corporate cash-flow statements…after the Financial Accounting Standards Board completes its current project on pension accounting, retiree medical plan activity might make its way onto corporate balance sheets.

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Some of the recipients of these government subsidies:

were among those listed.  Others were 3M, Unocal, International Flavors and Fragrances and Avaya.

According to the NYT, one of the rationales for such subsidies is an incentive for cooperations to provide health care benefits to retirees, as opposed to their participation in Medicare D(isaster).  

The goal is to save the government money, even after the subsidies, while giving the retirees a better deal than they might get if they were pushed into Medicare.

 One of the requirements to qualify for a government subsidy is that a company must offer retirement plans with coverage that is comparable to Medicare.

Jerry Dubrowski, speaking for General Motors said,

“This is an important first step in reforming the whole health care system.”

Thirty-eight years later, the words of the late Walter Reuther are somewhat being recognized by corporate America:  

“We must first free ourselves of the illusion that we really have a health care system in America. What we have is a disorganized, disjointed, antiquated, obsolete non-system of health care. Consumers are being required to subsidize a non-system that fails to deal with their basic health care needs and the cost of that system is continuing to skyrocket.”

And, the cost to the taxpayers of susidizing that “disorganized, disjointed, antiquated, obsolete non-system of health care” has been estimated by Credit Suisse at $25 billion for the duration of corporate/retiree health care plans.  However, CMS spokesman Mark Hamelburg claimed that is a misleading figure as about $14 billion over the next four years will go to all employers, both employers, private and public.

Despite the sums that are being spent, there are still 46 million people in this country without health insurance.  Instead of more corporate welfare to some that do not need it, let’s go single payer for some real health care reform!

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