31 March 2010

Consequences II

The new health insurance reform law, the one that was designed to cover more people and reduce the cost of health insurance is going to do neither. Oh more people may be insured because they will be forced to buy health insurance whether they want it or not because our beatified, beneficent, bureaucratic federal overlords know what is best for everyone. Or a working parents children will be covered until the children are 26 (note the operative word in the sentence).
More than anything, though, what tells us that congress and the president haven't the slightest idea what they're talking about when it comes to prices, costs and accounting is summed up exquisitely here by Megan McArdle. It seems the people with their hands on the tap of the federal fisc wouldn't pass Accounting I:

Here's the story: one of the provisions in the new health care law forces companies to treat the current subsidies for retiree health benefits as taxable income. This strikes me as dumb policy; there's not much point in giving someone a subsidy, and then taxing it back, unless you just like doing extra paperwork. And since the total cost of the subsidy, and any implied tax subsidy, is still less than we pay for an average Medicare Part D beneficiary, we may simply be encouraging companies to dump their retiree benefits and put everyone into Part D, costing us taxpayers extra money.
But this is neither here nor there, because Congress already did it. And now a bunch of companies with generous retiree drug benefits have announced that they are taking large charges to reflect the cost of the change in the tax law.
Henry Waxman thinks that's mean, and he's summoning the heads of those companies to Washington to explain themselves. It's not clear what they're supposed to explain. What they did is required by GAAP. And I've watched congressional hearings. There's no chance that four CEO's are going to explain the accounting code to the fine folks in Congress; explaining how to boil water would challenge the format.

Related: Don Boudreaux over at Cafe Hayek has a wager he'd like to make with some muckety-mucks over the actual cost of the stuff they've been shoveling.

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