- The Washington Times - Monday, January 19, 2004

Now that Congress has finally released the details of the Medicare prescription drug bill, it is worse than one’s remotest fears. A coalition of 50 conservatives groups had opposed the bill for its $7 trillion unfunded price tag, its lack of market reforms and its incentives for employers to throw retirees on to the government plan to reduce their own costs.

Well, the trillions of liability survived the final drafting and market reforms were few and mostly limited to impractical demonstration tests, but billions of new subsidies were written in at the last moment to buy off big business.

Does it surprise that it takes a month after the congressional vote to know what was in the bill? One of the few truthful books on the legislative process was authored by a state senator named H.L. Richardson and called, “What Makes You Think We Read the Bills?” Of course we do not. It was generally known the drug bill would provide an employer reimbursement for 28 percent of the drug costs spent for retirees insurance plans, up to $1,330 per employee. What the midnight language added was that the subsidy would be calculated on the basis of both the employer and employee health insurance premium contribution.

Get it? The employer can shift the premium costs to the employee and still receive the whole subsidy for itself — quite a deal. The tendency has already been for employers to shift costs to their retirees, but this new incentive will cause an avalanche. The Wall Street Journal reported that benefits consultants were already designing plans for the 65 percent of large firms that now pay for senior health coverage to transfer the costs to retirees and nevertheless rely upon the subsidies to build corporate profits. Employers now will have the option of taking the 28 percent subsidy without paying any of the premium costs or saving 72 percent more by throwing the retirees entirely on the government plan.

Eventually, the government will pay for it all, socializing the remaining one-third of the senior health insurance market now in private hands.

This is not chump change for the firms. Last week, the Financial Accounting Standards Board gave permission for businesses to book the value for these anticipated subsidies in 2003 financial statements even though the government will not pay for another two years. As a result, the Journal predicted many big companies will report big earnings gains for this past year that would not have otherwise been possible. Gainers include General Motors, Lucent Technologies, Dow Chemical and SBC Communications. No wonder these businesses and others organized the Employers Coalition on Medicare to lobby quietly for this enormous gain for their bottom line.

The hope in Washington is that no one will notice. If the members of Congress did not care to read the bill, why should average voters? Most of the unpleasant provisions do not kick in until after the election, so who will know? The Democrats can hardly complain that the Republicans are subsidizing health care and forcing retirees into a government-run plan since that is their goal. And, as noted by Sen. Edward Kennedy, Massachusetts Democrat, they can always make it more generous later. Republic members of Congress will keep quiet since they are the ones responsible and many of their constituents think they favor private solutions rather than forcing people who want private coverage into inadequate government plans.

No, the Republicans will not pay the price on this enormous rip-off bill that will force seniors with private drug coverage into a less generous government plan at higher cost to them until the 2006 congressional elections. The full plan not only kicks in then, it is the kind of issue that shows up against a legislative majority, as worked to the enormous benefit of the Republicans in 1994. Those who think the Democrats will let the GOP off the hook before then are on drugs themselves.

Donald Devine, former director of the U.S. Office of Personnel Management, is editor of ConservativeBattleline.com, the American Conservative Union Foundation’s journal of opinion.

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