The money is due to start flowing to employers this month as part of Medicare's new prescription drug benefit. When Congress authorized the Medicare drug benefit, it also agreed to start subsidizing the drug component of employers' retiree health plans, to keep them from shifting their retirees into the government program.
[T]he utility company Exelon, which seem able to afford their plans on their own but will nonetheless receive the federal payouts.
There are companies, too, like BellSouth, that have been setting aside money for retiree health care for years and have billions on hand.
The Credit Suisse analysts who conducted the study, David Zion and Bill Carcache, prepared it to show investors how successful, or not, companies had been in shifting the cost of their retiree health plans onto other payers.
Companies that fear they have promised more benefits than they can deliver "are actively trying to pass the buck," the analysts wrote. This means trying to shift costs "to anyone who will bear them: their retirees, active workers, the U.S. taxpayer, etc.."
"If they succeed," the analysts added, "it's a giant transfer of risk from corporate America to the work force, and retirees."
Instead of increasing corporate profits in a given year, the subsidies are supposed to free up cash that the company would otherwise have to spend on health care. Mr. Zion and Mr. Carcache said this effect would show up on corporate cash-flow statements. In the future, though, after the Financial Accounting Standards Board completes its current project on pension accounting, retiree medical plan activity might make its way onto corporate balance sheets.
[T]he company that will get the biggest boost from Medicare on a percentage basis is not G.M., but Genuine Parts, a distributor of auto replacement parts and office products that has rising sales and profits, and a much smaller health plan. The subsidy, estimated at $6 million over the next four years, will reduce its overall health care obligations to retirees by 62 percent, the study found.
The Credit Suisse analysts found that the big companies, over the life of their retiree health plans, expected to receive about $25 billion from the federal subsidy arrangement.
The government expects to pay all employers, private and public, about $14 billion over the next four years.
Source: "U.S. to Pay Big Employers Billions Not to End Their Retiree Health Plans" By MARY WILLIAMS WALSH - NY Times - 2/24/06
Next year, the federal government expects to provide about $130 billion for Americans to buy health insurance. The amount is substantial: it is equivalent to about 11 percent of all federal income tax revenue and more than a fifth of federal spending on Medicare and Medicaid. And it is growing fast: the bill is expected to surpass $180 billion in 2010.
Nonetheless, this financing remains under the political radar because it is provided indirectly - not as direct spending but as a tax break that allows workers to receive health insurance coverage from their employers without having to pay income taxes on whatever it costs.
This provides a powerful incentive to businesses all over the country. The subsidy - supplemented by an additional $11 billion in deductions for medical expenses and billions more in similar tax breaks for health insurance from states and municipalities - helps to explain why 64 percent of Americans under 65 get health insurance through their employers.
Although subsidizing health insurance may seem a worthy effort, a positive contribution to the goal of universal coverage, it is among the most inefficient spending in the nation's fiscal arsenal.
"If you had $150 billion to play with, you could come very close to universal coverage," said David Cutler, an economics professor at Harvard. One reason that we are 45 million people short of that goal is that the money isn't being spent on them.
According to President Bush's advisory panel on tax reform, about half of the tax break for health insurance accrues to families making more than $75,000 a year. More than a quarter goes to families making over $100,000.
Altogether, the health insurance tax break exacerbates America's medical dystopia: while the nation has the highest per-capita spending on health in the world - about $5,400 in 2002 - 18 percent of the population under 65 remains uninsured.
One simple [solution] would be to extend Medicaid coverage up to the desired income level and to require people above that point to buy into the system according to a price scale that rose proportionately to income.
Because Medicaid has lower administrative costs than private insurance, this would be efficient.
Source: "Health Care for All, Just a (Big) Step Away" By EDUARDO PORTER - NY Times - December 18, 2005
During the period of prosperity immediately following World War II, the US government implemented wage controls on US businesses. In an attempt to lure workers, businesses began offering incentive packages in lieu of higher wages. One of the principal inducements was health insurance.
Although these wage controls have long since disappeared, many employers still offer health insurance as a perk to employees. This has become the primary method by which Americans receive health insurance.
For each car we buy from General Motors, $800 goes to the cost of steel, while $1500 goes to the cost of health care for current and former employees.
Source: "This Week" on ABC - 5/8/05
One third of the U.S. population younger than 65 lacked health insurance at some point in the past two years, and most of those were uninsured for more than nin months.
The study found that 8.5 million Texas residents, or 43.4 percent of the non-elderly population there, did not have health insurance -- the higest rate in the country. The total for the nation was nearly 82 million.
Source: "82 million in U.S. uninsured in last 2 years" from Associated Press via Dallas Morning News - 6/17/04
The current system of employer provided health insurance has spawned a inefficient patchwork of health insurance programs that leaves millions of Americans with no health insurance at all.
Source: NY Times - 12/18/05