NCPA - National Center for Policy Analysis


March 30, 2010

In 2003, Congress passed the Medicare prescription drug benefit.  However, in order to discourage American businesses from immediately dumping all their drug plans for retirees, Congress gave them a tax break equivalent to 28 percent of the cost of the plan.

Fast-forward to the dawn of the Obamacare utopia.  In one of many little clauses in a 2,000-page bill, Congress voted to subject the 28 percent tax benefit to the corporate tax rate of 35 percent.

On the day President Obama signed Obamacare into law, Verizon sent an e-mail to all of its employees warning that the company's costs "will increase in the short term." And in the medium term?  U.S. corporations that are able to do so will get out of their prescription drug plan and toss their retirees onto the Medicare pile, says Mark Steyn, author of New York Times best-seller America Alone

  • About 3,500 businesses presently claim the 28 percent tax break.
  • The cost to taxpayers of that 28 percent benefit is about $665 per person.
  • The cost to taxpayers of equivalent Medicare coverage is about $1,200 per person.
  • This means adding more to the ranks of Medicare as corporation's drop their retiree drug plans will roughly double the cost of covering an estimated five million retirees.

This single component of health care reform neatly encompasses all the broader trends about where America is headed -- not just in terms of increased costs and worse care, but also in the remorseless governmentalization of American life and the disincentivization of the private sector, according to Steyn.

Source: Mark Steyn, "Steyn: A healthy dose of catastrophe," Washington Times, March 27, 2010.

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