The news: several companies, including 3M, John Deere, and Caterpillar, have already announced that due to the health-care plan recently (and with incredible tumult) signed into law, they'll see raised expenses this year, which could be tough in this economic environment. But all of those companies' added expenses combined don't add up to half of AT&T's proposed problem, announced on Friday and reported by The New York Times: the telecommunications giant says they'll see a whopping $1 billion "noncash accounting charge" this year. In other words, AT&T will have $1 billion less in 2010 than in 2009, explicitly because of this bill--and such a big change in the books may mean AT&T will pass on the loss to its employees, possibly resulting in a loss of health-care benefits for retirees.I heard about this on the Rush Limbaugh program. This was the first time I listened to his program in some months!
Specifically, the cuts in benefits will come in retiree drug coverage, which is an all-too-real problem. Retired AT&T workers may suddenly find themselves unable to afford medication, due to the passing of this bill. That sounds very bad for the pro-health-care side, and like a ready-made talking point for those against health-care reform, but it's not nearly that simple. The question is: Why did a dollars disappeared from AT&T's coffers?
The 2003 Medicare prescription drug bill, still in effect, gives a tax deduction to companies that provide prescription drug benefits for retirees. In fact, these companies, including AT&T, can deduct 100%--every single penny--of the money they spend on prescription drug benefits from their taxable income. Thus, AT&T gets to keep a whole chunk of money from being taxed, which basically means they get to pocket more of it. The government even goes one step further and subsidizes (read: pays for) a whopping 28% of those prescription drug benefits in the first place, to make prescription drug benefits as affordable as possible for the companies. The companies get both a 28% discount and a nice tax break, all to encourage them to provide prescription drug coverage.
But there's a loophole in the law big enough to drive a Chevy Suburban through. These companies get to write off the entirety of their prescription medication plan, even though they're actually only paying for 72% of it. The new health-care bill simply closes that loophole, and says that companies can still deduct every penny they pay on prescription drug benefits from their taxes--but only the money they've paid, not the 28% that the government hands them. That's where the billion dollars comes from: AT&T is no longer allowed to deduct things they didn't pay for in the first place.
It was also mentioned that US Rep. Henry Waxman (D-CA and chair of the US House of Representative's committee on energy and commerce) sent a letter to those various companies who have posted losses due to this new health care entitlement:
Rep. Henry Waxman (D-Calif.), chairman of the House Energy and Commerce Committee, fired off a letter to top executives at John Deere, Caterpillar, Verizon and AT&T, calling them to testify about the announced earnings losses caused by a new tax on retiree drug benefits.On a lot of fronts, this fight over a bill that was signed into law a week ago is about to get ugly.
"The new law is designed to expand coverage and bring down costs, so your assertions are a matter of concern. They also appear to conflict with independent analyses," said the letter to AT&T President Randall Stephenson, who announced the company would charge off $1 billion in earnings.
The three other CEOs got letters signed by Waxman and Rep. Bart Stupak (D-Mich.), chairman of the oversight and investigation subcommittee that will grill the executives April 21.
13 states so far has filed lawsuits against the federal government with regards to this law:
The legislative battle over health care reform is over. Through procedural tricks, the Obama administration succeeded in passing historically intrusive legislation.Well, let's see what happens, shall we?
Recognizing that Congress failed to protect individual freedoms, Americans must now turn to the states and the courts to defend our constitutional liberties.
Appropriately, 13 states filed suit against the federal government last Tuesday asserting that, “the Constitution nowhere authorizes the United States to mandate, either directly or under threat of penalty, that all citizens and legal residents have qualifying health care coverage.”
Over the past week, other states continued to join the fray, either by filing independent suits or by joining the original lawsuit. As a Pennsylvanian, I am proud that Pennsylvania state Attorney General Tom Corbett was one of the original 13 plaintiffs. A candidate in the Republican gubernatorial primary, Corbett said he is pursuing the suit as “a 10th Amendment issue” and that he would be doing so whether he were running for governor or not.