Major companies warn of massive new health care costs

Posted on March 29, 2010

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A series of major American companies disclosed the substantial hits they anticipate they’ll take in the wake of the passage of health care reform last week. John Deere estimates it will take a $150 million hit this year, and Caterpillar believes it will cost an additional $100 million in expenses. AT&T expects additional expenses of $1 billion – that’s billion with a “b” – and Verizon sent a letter to its employees warning that costs would likely filter down to its employees.

The issue is the health care bill’s elimination of a tax deduction for drug benefits offered by companies like the ones above. So these numbers address only the increased cost for one item in the bill, and while the revenue loss is a one-time adjustment, it still represents $1.2 billion that three companies won’t be using to pay new employees.

I have seen ridiculous charges that these CEOs are simply Republicans that want to embarrass Congress by overinflating their expenses. There’s a small problem with this analysis – it’s not in a company’s financial interest to falsely broadcast a loss in profitability. I highly doubt these companies would take stock hits just to satisfy some political leanings.

In any case, the news has the White House hopping mad, and Henry Waxman (along with Bart Stupak) will be dragging the CEOs to Capitol Hill next week to grill them on their balance sheets. It just won’t do to have any negative effects of the bill discussed by anyone, so a public and face-saving smackdown is in order for those evil CEOs who would dare suggest that everything won’t be entirely rosy with the new health care regulations.

Expect more stories like this in the coming weeks. The cost to our economy has been vastly downplayed by the law’s boosters, and it’s all to insure 32 million more people by 2019, while leaving 24 million still without insurance. We could have done this better, but it was more important to get a political victory than to actually craft sound policy. We’ll all end up paying far more in the end than anyone anticipated.

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Posted in: News, Politics