health care

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A Pat On The Back

The New York Times offers us a good editorial this morning about the fuss being made over the potential loss of health care coverage for retirees now that the new reform law eliminates a subsidy that used to given to business.

It is a non-issue.

The subsidy being eliminated is one where companies were allowed to deduct, for tax purposes, an expense that they did not actually incur out of pocket. Instead the deduction was for payments by the government that were funneled through the businesses. It was government cash paying for the service, but because it passed through company hands it became tax deductible for the company in question.

In other words it was a rip-off of the taxpayer.

Guess when it was passed into law? That’s right during the Bush era. At the same time he was preventing Medicare from using its bargaining power to get us all lower drug prices.

The rip off should never have been on the books in the first place.

The pat on the back?

That’s for me.

I told you about this last Wednesday. The NYT: all the old news fit to print.

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Corporate Losses Due To Health Care Reform?

You may have read that some big companies are announcing very large charge-offs in their quarterly income statements due to the passage of health care reform. AT&T, for instance, took a $1 billion hit to its income. 3M, Boeing, Caterpillar, Deere, and Prudential are all among the companies who have announced similar charge-offs.

So, you should ask, is reform damaging our big comapnies the way that the Chamber of Commerce says it is?

Not at all.

In fact it is revealing the extent to which our old system was propped up by government subsidies.

Here’s what’s going on:

Under the old system companies who provided prescription coverage to their retirees received a government hand out to cover the cost. But they could also take the amount they paid to provide that coverage as a tax deduction. This was an enormous loophole in the old system. Basically the government turned a blind eye to the tax dodge in order to induce the companies to continue covering prescription costs to retirees. The alternative would have been for the coverage to lapse and the retirees to have been left high and dry.

Obviously the companies loved the deal. They received cash that they used to provide coverage, and then took the tax deduction even though they had never used any of their own cash anywhere in the process. A sweet deal if ever there was one.

Unfortunately for the Chamber of Commerce, the new law closes the loophole and disallows the tax dodge. Companies still get the taxpayer cash so that they can provide prescription coverage, but they can no longer pretend that it was their money, and so they can no longer take the tax deduction.

Its called the government running a tight ship. Something we are not used to.

The surprising size of the charge-offs is due to the conservative nature of the accounting rules, and not to the size of the various prescription plans.

Basically the accounting rules force companies to recognize the loss in the same year as the law changed – 2010 – and also to take a sufficient hit to cover losses over the expected life of the program. Because the program, i.e. the provision of prescription coverage to retirees, is clearly linked to the life expectancy of the retirees, companies have to estimate the future lost tax dodges and add them all up. Then they have to take the accumulated charge this year.

Hence the AT&T charge-off of $1 billion. I have been told that the actual loss to AT&T this year is only $40 million. The rest of the charge-off relates to the next twenty-nine years, which presumably is the life expectancy of the youngest AT&T retiree.

No one on Wall Street or in the stock market sees this as big deal. Tax dodges are constantly being revoked and changed, which means companies are forever recalculating things like this. Just to prove that the market doesn’t care: AT&T’s stock actually rose a little today. So this is not a problem.

Where it could get some traction is on the political front where the Chamber of Commerce is trying to rally opposition to reform.

My guess is that this issue will simply die away, and that after a few weeks of charge-off announcements we will all forget about it.

Meanwhile we can watch the Chamber of commerce huff and puff, while the Tea Party crowd hunker down for the end of civilization.

Again.

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Funny Math: Federal Debt Style

Politics can intrude all over the place. No more so than in the aftermath of the great health care fracas. The losing side seems hell bent on stirring up anger over the legislation and, equally, on totally misconstruing it. The simple fact is that the health care reform as it has been signed into law is a great boon to small businesses, the middle class, the elderly, and those who previously who were uncovered. The only people who come out worse off are the highly paid folks – those with over $250,000 in annual income – who will see a modest tax increase, and the insurance companies who will have to make more pay outs than they used to.

There is no question that, over time, most voters confusion and anger will subside, and that health care reform will be as accepted as Medicare and Social Security already are.

Meanwhile we live in a fantasy world of the opposition’s making. Apart from the ludicrous charges leveled against reform, things such as ‘death squads’ and so on, one criticism that seems to have resonance with the public is the impact it has on the Federal deficit, and, by extension, on the national debt.

Let’s not belabor the point: such criticism is flatly incorrect.

The passage of health care reform reduces the debt, and it reduces the deficit. Cumulatively over the next ten years this reduction is expected to be approximately $138 billion. In the context of our total debt this is not a vast amount, but at least it is moving in the right direction.

Yet the hysteria continues. Articles are pouring out of various right wing pens full of the doom and gloom about the fiscal irresponsibility of the Obama administration and its vast new burden on the poor American taxpayer. Typical of this rubbish is Robert Samuelson’s article in the Washington Post. Samuelson’s main point is that the new law adds about $900 to ‘an already bleak budget outlook’. But he never mentions why that budget outlook is so bleak. Perhaps it’s because he supported all the policies that made it so. Then again maybe he suffers from amnesia.

His thinking is a great illustration of the funny math the Republicans are reduced to in order to foist the debt problems we have on Obama.

Let’s think this through a little more objectively.

In the past decade we have witnessed a number of key policy implementations that have had a material impact on the long term fiscal outlook that Samuelson says is now so bleak.

Here are the high points:

  1. The Bush tax cuts. Impact: increase the deficit by about $1,825 billion.
  2. The Iraq war. Impact: increase the deficit by about $750 billion.
  3. Health Care reform. Impact: reduce the deficit by $138 billion.

Hmmm.

Fiscal rectitude is a subject that anyone who supported the first two of these initiatives should not make a big deal of.

Setting all of this within the current crisis makes it a little easier for faux deficit hawks to make their case. After all we have just plunged deeply into the red in order to bail ourselves out of what could have been a nightmare. Yet the hawks fail to see it that way. They decry spending of any kind. The purpose of the spending is irrelevant to them, they simply oppose it. The fact that spending is the only policy we have to fend off depression is something they deny. They are still mired in market worship, of the Ayn Rand kind, a deeply mystical place where the market weaves magically to overcome all and every problem – even those the market itself caused.

Market magic is now debunked rubbish, but it still has a hold on the kind of conservatives who are repelled by all government spending.

Meanwhile they resort to funny math to cover their real motivation. Their scare stories about the ‘bleak debt outlook’ are a subterfuge. If they were truly scared of debt they would have risen in revolt at the Bush tax cuts and would have demanded that the Iraq escapade be paid for by raising taxes or cutting spending elsewhere. Based upon the evidence we have at hand their opposition to government spending is not that it adds, potentially, to the debt. It is that sometimes the spending is socially beneficial. That they cannot abide. The notion that – gasp – someone is better off as a result of a government program is anathema to them. Keep up with such programs, and before you know it America looks like those funny European countries who look after their poor and wretched citizens.

Nothing should rile Samuelson more than the French President’s comment yesterday. He remarked that he failed to understand the health care debate and the opposition. His reaction to the new law was that he welcomed America to the club of countries who cared for their poor. At last.

So scared are the conservatives that people might end up liking the reform that they are forced to twist the numbers about and talk as if they actually cared about deficits. They clearly forget their hero Dick Cheney’s famous dictum: ‘deficits don’t matter’. And they neglect to comment on those devastating tax cuts. Instead they weep and gnash about the horrors Obama has unleashed and his fiscal irresponsibility.

Unfortunately, we are stuck with an uncritical media that trots out the same garbage. We still read of a ‘$940 billion health care cost’ in the New York Times. It’s as if we all look at our expenses and not at all at our income when we discuss how we are doing financially. The reform law has a $940 billion cost over the next ten years. That’s why the same law covers those costs by legislating new revenues. So well crafted is the law that it ends up showing a profit. It’s called being fiscally responsible.

Only funny math can make that into a reckless thing.

Only funny math can distort reality to make Obama into someone deserving of the kind of accusation Samuelson makes.

Then again through the lens of funny math people like Reagan and Bush can appear to have been conservative. The two most profligate presidents of all time.

Funny. As in hilarious.

That’s funny math for you.

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Health Care Reform: A Budget Bargain?

I pity the poor folks at the Congressional Budget Office. They are constantly being thrown into politically sensitive situations, and then expected to retain impartiality. From what I know of them they try very hard to maintain their non-partisan status. So their involvement in the health care reform debate must be testing their neutrality to the limit.

The CBO analysis of the latest health care reform proposal – the one being voted on this weekend – was eagerly awaited because it represented a last gasp for both sides to rally their respective troops. So when it weighed in with a result that suggests reform will reduce the budget by around $138 billion in the next ten years, the sigh of relief on the left was palpable, and the torrent of derisive scorn on the right ratcheted up even more.

Read it yourself on their website.

Any forecast over a period of ten years is simply a guideline rather than an accurate portrayal of actual outcomes, so it best to round all these numbers off to the nearest few billion. Nonetheless the reform does deliver on its stated goal of reducing spending on health care. There is no way around that fact. To this extent the reform as it stands is a triumph for Obama – he always approached health care as a budget problem as well as a moral/social problem, and he delivers.

The CBO analysis shows that the cost of the various proposals is about $794 billion over ten years, a figure that includes a tax on the so-called ‘cadillac plans’ so abhorrent to the unions. But this huge cost expansion is more than offset by cost cutting elsewhere.

The cost savings are so detailed and widespread that they include the reduced cost of Postal Office usage because of the increased use of internet and office technologies. They also take into account the impact of the reform on the Social Security Trust Fund. But the major cost reductions – over half the total – come from the modifications being proposed to Medicare to make that program more viable and cost effective.

Overall these cost reductions weigh in at a hefty $913 billion over the same ten years.

You will notice that $913 billion less $794 billion is not $130+ billion. It is only $119 billion. The difference is made up from smaller incremental savings that are found in attached legislation also part of the total reform package going through reconciliation. Confusingly the CBO report keeps all this analysis separate, one result of its meticulous attempt to be neutral, but it makes for heavy lifting to sort out the total impact.

So, according to the CBO’s cover letter attached to the analysis the total impact is around a $138 billion savings over the period 2010 through 2019.

A further major feature of the analysis is the calculation of the number of extra people who would now be covered. That figure is now 32 million, up slightly from earlier versions of the legislation. A different way of looking at the reform’s impact is to look at the huge drop in the uninsured: that figure declines dramatically after 2014 from around 50 million to around 23 million, meaning that the total percentage of the population then covered would rise to 92% – or 95% if we exclude illegal immigrants.

This huge extension of coverage, at a reduced cost, adds a second major component to the overall success of reform. It provides a second vindication for the passage of the proposal.

All this sea of numbers is very dull to review in this manner, but the CBO analysis is a crucial step towards reform. It provides strong neutral endorsement of the claim that reform is a budget benefit and rebuts the right wing claim that reform produces a ‘big government’ mess. The truth is that the government is made smaller by reform, which while counter-intuitive, is now borne out by the numbers.

Naturally nothing is resolved by the CBO report. The back room politicking still has to roll on until the actual vote and the opposition will raise its voice even more vituperatively as its defeat looms larger. But from my perspective the report simplifies things a great deal. If our starting point is the fiscally unsustainable nature of our current system, which I think is the best place to begin any discussion of health care reform, then we should greet the CBO figures as a welcome and positive moment in our thinking. Clearly the proposal rises to the challenge of fiscal responsibility. For me, that clinches the deal.

I doubt, however, that it will assuage the more extreme opponents of reform, but it should be enough to push a few wavering middle of the road votes in Congress into the ‘yes’ column.

Reform is looking more and more likely.

About time.

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Health Care and GOP Lies

Allow me to rant:

OK enough. Those of us who care about civil discourse are being drowned out by a torrent of diversion and outright lies propagated by Republicans who know better, but appear comfortable adding fuel to an already volatile mix.

I am referring to the myth being spread that Obama is trying to ram health care reform down the throats of the American public despite their manifest opposition.

Rubbish.

It is this kind of lying that dirties politics to the degree that then validates insane and anti-social acts like flying small planes into IRS buildings. It is downright irresponsible for ostensible grown ups to play to the extremist crowd the way that Mitch McConnell and his buddies are doing.

Let’s get the facts straight:

  1. Health care reform has already been passed by both the House and the Senate. Both. By significant margins. In the Senate the reform passed with 60 votes. Even in our whacky world where the minority rules that 60 vote margin defeats the opposition. So reform is absolutely not being rammed down anyone’s throat. By the rules of play in place for decades it passed with stable and legitimate majorities.
  2. The process known as reconciliation is not some new trick devised by the Democrats to subvert democracy. Nor is it reserved for legislation that has broad bi-partisan support. The Bush tax cuts were passed on the basis of reconciliation despite the fact that they garnered only 50 votes in the Senate. Dick Cheney had to cast the deciding vote. Health care passed on a 60 – 40 vote. Those tax cuts passed on a 50 – 50 vote broken by a tie breaker. It is arrant nonsense for Republicans to cry about reconciliation: their biggest legislative victory of the Bush era passed with far less approval.
  3. It is equally absurd to claim that reconciliation should be reserved for only small items, or things that have marginal impact. The Bush tax cuts had a far larger impact on our budget than the health care reform bill has – by orders of magnitude. It is ridiculous and breathtakingly hypocritical to argue otherwise. The facts are in the books. Look it up.
  4. No one, absolutely no one, has suggested using reconciliation for the entire package of reforms. First it is unnecessary to do so since the reforms have been passed anyway. Second the only items for which reconciliation is being proposed are separate amendments. The accusation that entire package is being put through reconciliation is simply wrong and a distortion of epic proportions. It is a lie.

In reality, rather than in the odd universe of Fox news, we have a bill that has passed the House and the Senate and that now has to be merged into one package. There is nothing underhanded or unusual about this process. There is nothing in the processto engender the ferocity and hatred that is being stirred up by the lies the GOP plasters over the media. There is nothing anti-American in it. Nor does it break with the constitution. The methods being advocated by the Democrats conform to normal procedure, and have been used many times in the recent past by the Republicans on more controversial legislation.

I understand that politics gets fraught at times like these. I understand that the GOP has fought against health care reform for decades and that government involvement in the health care process is an anathema to its core ideology. None of this gives the Republicans the right to whip up the extreme right wing voter base – a base that is already smarting at the election of a non-white president with progressive ideas. The last election was a very clear mandate for health care reform: it was one of the primary topics debated during the election, and the candidate advocating reform won that election with ease. The country voted on this issue. Enough.

The effect of both the obstructionist attitude within the Senate and the subsequent, and constant lying about the procedural approach being used to get the legislation through, simply serves to inflame an already aroused extremist sentiment.

As a nation we need to be able to pass legislation like this without automatically running to the very edges of disobedience. If the nation is that fragile, if the Tea Party types are that alienated from the rest of us, and if the mainstream of the GOP is now that far out to the right, then we have a problem that extends way beyond health care reform. We have a nation that is united in name only.

Wiser and saner heads need to prevail before one of the Tea Party folks fly a plane into something and does a whole lot more damage than the demented criminal in Texas.

McConnell and his confreres need to take responsibility for their inflammatory words. They know exactly what they are doing. The issue I believe they have is that have lost the ability to shape the right of center agenda. They are constantly having to play catch up with the leaders of the extremists who are not constrained by Senate rules. The volatility in our politics is dangerous. The economic circumstances we built for ourselves contributed to that situation. People are angry and fearful. Responsible leadership, and responsible citizenship, do not add to that brew of hatred and strife. Even if laws are passed we do not like, we obey the rule of law we do not press our followers to flout the law.

That way is not a road we want to follow.

This is not a game. The GOP is playing with fire when it lies, as it is now doing.

Democracies thrive only when the opposition is loyal. Right now the GOP is bordering on disloyal. It should think hard before continuing along that path.

So ends my rant.

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