Stanley Feld M.D., FACP, MACE Menu


Unintended Consequences Are Rolling In


Stanley Feld M.D.,FACP,MACE


Over the years congress has made many deals with the secondary stakeholders. The new rules were made to correct previous rules. They did not work and made the healthcare system worse.

Americans are information junkies. Information is important to decision making. The wrong information leads to making wrong decisions

The traditional media is usually fed the wrong information by vested interests. It, in turn, feeds the public a short version of the wrong information. The result is faulty decisions.

President Obama’s healthcare bill was finalized last Thursday. On Friday AT&T and several other corporations took required tax write downs as a result of the bill’s passage

The returns for the healthcare reform bill are already rolling in. AT&T announced that it will be forced to make a $1 billion tax write down due solely to the health bill, in what has become a wave of such corporate losses.”

The tax write downs have been announced by Deere & Co., $150 million; Caterpillar, $100 million; AK Steel, $31 million; 3M, $90 million; and Valero Energy, $20 million.

Other write downs have not been announced in the media. Corporations must declare the increase in healthcare related tax liabilities to the SEC immediately.

President Obama has used every tax trick in the book to make the new healthcare entitlement look affordable and deficit neutral.

An Increased tax liability to these corporations occurred when congress placed the new rule on top of the rule providing a tax subsidy.

The government provides a 28% subsidy to corporate America for continuing the drug benefit for their retirees as incentive to continue retirees’ drug coverage plans.

The twist of the tax law permitted these companies to deduct 100% of its drug benefit expense. In effect corporations were getting 28% free money while retaining the ability to deduct the 28% as an expense.

This is called double counting. It is difficult to follow the tax accounting. It represents a large tax benefit. The tax rule saved AT&T $100 billion dollars a year. It also saved most corporations large amounts of money. The savings went directly to its bottom line.

With the passage of the healthcare reform bill, corporations will not be allowed to deduct the subsidy.

“Black-letter financial accounting rules require that corporations immediately restate their earnings to reflect the present value of their long-term health liabilities, including a higher tax burden. Should these companies have played chicken with the Securities and Exchange Commission to avoid this politically inconvenient reality?”

It appears Henry Waxman and other House Democrats were unaware of this unintended consequence. If they were, the healthcare reform bill is more sinister than it looks.

“ Mr .Waxman announced his committee will call for a hearing demanding these companies explain their action because their judgment "appears to conflict with independent analyses, which show that the new law will expand coverage and bring down costs."

Media coverage and analysis of these write downs have been minimal. Why?

I do not think the media understands the consequences.

President Obama has said repeatedly, “if you like your insurance you can keep it. If you like your doctor you can stay with him.”

Nancy Pelosi said; “After the bill is passed we will understand it.”

You bet we will.

This rule will precipitate several consequences. Corporations have been trying to eliminate healthcare benefits for employees and retirees for years.

The new rule provides an excuse to drop the healthcare insurance benefits. The government will also eliminate the pretax benefit of private healthcare insurance.

If corporations eliminate the healthcare insurance benefit for employees, employees will be forced to buy individual insurance policies. The individual healthcare insurance plans will be unaffordable.

The government public option will be affordable because the government will subsidize the premiums. The healthcare insurance mandate will increase an entitlement burden to the states who presently have deficits. It means increased state taxes.

Corporations will be happy to pay the penalty for not insuring employees. The penalty is less than the insurance premium.

If a corporation chooses not to eliminate the healthcare benefit it will increase prices. The result is inflation. Corporations will also decrease its work force resulting in increased unemployment.

The public option as a sole source of healthcare insurance is only a matter of time. Then the government will fully control the healthcare system.

Regulations such as these will be President Obama’s back door approach to government control of the healthcare system.

However, President Obama overlooked the increase in unemployment and a decrease in people insured. Few people would be able to keep their own doctor, individual insurance premiums will be unaffordable and the deficit will escalate.

A prominent physician, who understands all this, sent me a copy of a letter he wrote to the President of the AMA opposing the AMA’s position on President Obama’s healthcare reform bill. He said;

“Surely, you didn’t arrive on a load of turnips yesterday.

Doc, the congress is the same wonderful group that gave us Medicare and Medicaid in the first place and then endlessly tinkered with it for nearly 50 years, and also gave us the SGF, and a host of other ill-considered acronyms that did our patients and the physicians (not the providers) of our country no good at all.”

He then wrote;

“It is a sad situation, not just for the docs but for their patients.

So, now what?  Until cast of characters in the congress, assorted criminals, tax dodgers, and others of ill repute, is changed, I am afraid we are all screwed.  That includes the patients, more is the pity.

My own suggestion is that the AMA seize the moral high ground and take on the role of being the advocate for the patient (not the consumer) and view any effort to reform the reform  through the lens of what is best for all of our patients.

If the AMA were to do that, physicians would find that they will come out well, I am certain. While we are it, it would be a good thing to advocate for a reasonable and sane system of pricing so that what is done for people is simply costed at acquisition plus a reasonable margin of profit and the retail price is then the same for all patients.” 

This physician has said it all. Consumers owning their healthcare dollar and driving the healthcare system is the only way to accomplish affordable universal care with the government subsidizing or paying for the uninsured with the ideal medical savings account.  It will be less costly and give consumer incentive to be responsible for their health and healthcare dollars.

Both physicians and patients must wake up
and protest this folly
at the polls and to their congresspersons immediately during the Easter recess.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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