Double Dippers vs. Healthcare Reform: Attack of the Corporate Welfare Queens

Last Updated Apr 1, 2010 6:08 PM EDT

Big businesses are mad as hell about healthcare reform, saying it will cost them money. Specifically, that is, because they won't be able to take income-tax deductions on lucrative government subsidies Congress awarded them in 2003. Those subsidies -- intended to convince companies to keep retiree drug coverage when Medicare starting covering prescription drugs -- were already tax-free, by the way.

That's what's behind recent headlines about corporations writing off billions of dollars related to the new reform law, which essentially just closes that double-dipping tax loophole. In other words, don't feel too sorry for these corporate welfare queens. And even if you were so inclined, remember that long-term relief from healthcare reform is likely to outweigh any pain business is feeling now.

Some 300 companies have pressed the Obama Administration to repeal the drug-subsidy tax provision, claiming that it would hurt corporate profits and deter employers from hiring workers. AT&T has already announced a $1 billion write-down for the new tax, followed by Deere & Co. -- ($150 million), Caterpillar ($100 million) and 3M ($90 million). These companies say they're simply abiding by the accounting rules, but it seems pretty clear that their announcements are also designed to build pressure on the White House.

However, the administration is defending the provision, saying that it closes an overly generous tax loophole and that the reform legislation will save businesses $150 billion over the next decade by reducing healthcare inflation.

Corporate America opposed the reform bill as a whole, claiming that it would increase health care and benefit costs. But the business community has never clearly stated how it would do that. Aside from the retiree drug subsidy tax, it's possible that corporations, like some insurers, believe that the reform law's Medicaid expansion will lead to more cost-shifting to private payers. But as I've pointed out, adding more people to Medicaid will reward healthcare providers who now provide charity care to many of those folks.

The small-business lobby is a bit more articulate than its bigger brethren. The National Federation of Independent Business (NFIB) states that the reform bill's tax credit for providing insurance is insufficient, that the new insurance tax will be passed onto employers, that small construction firms have been unfairly singled out, and that the increase in the Medicare tax for the wealthy will hit many small business owners.

The corporate lobby, in contrast, presents a mass of contradictions. On one hand, big corporations claim that reform will raise their costs, and the U.S. Chamber of Commerce is readying an all-out assault on the law's regulatory language and on the Democrats who voted for it. On the other hand, the Business Roundtable -- which represents the largest corporations -- says that health costs represent the number one challenge for its members and that the reform law is a step in the right direction. Similarly, while the National Business Group on Health opposed reform, an article coauthored by Helen Darling, president of the NBGH, embraces many of the ideas that are embodied by the legislation, as well as the health IT provisions of the stimulus package that Congress passed last year.

It's always hard for corporations to take the long view, since their stock prices and the compensation of their top executives are tied to quarterly earnings. But perhaps it's time for corporate executives to take a deep breath and recognize that their long-term financial health is tied to the health of their fellow Americans.

Image supplied courtesy of mediaspin.com.

  • Ken Terry

    Ken Terry, a former senior editor at Medical Economics Magazine, is the author of the book Rx For Health Care Reform.