Friday, March 26, 2010

ObamaCare and America's Global Economic Influence, ctd.

A few weeks ago, I opined on whether the passage of ObamaCare was, as some in the commentariat claimed, the only thing that can save American global economic influence.  As you can imagine, I heartily disagreed, and part of my argument was that pretty much everything in the current healthcare legislationlaw indicated that it was going to harm US companies' global competitiveness, not help it:
[W]hile rising healthcare costs are indeed an issue for US businesses, the latest estimates show that ObamaCare will increase burdens on US employers, not reduce them - hence why both the US Chamber of Commerce and National Federation of Independent Business vehemently oppose the current bills (and why Wal-mart sneakily supports them).
Unfortunately, it's taken all of three days for my statements to have proven true (not that I was the only one saying them, of course).  Here's the AP with the awful, totally expected news (emphasis mine):
The health care overhaul will cost U.S. companies billions and make them more likely to drop prescription drug coverage for retirees because of a change in how the government subsidizes those benefits.

In the first two days after the law was signed, three major companies — Deere & Co., Caterpillar Inc. and Valero Energy — said they expect to take a total hit of $265 million to account for smaller tax deductions in the future.

With more than 3,500 companies now getting the tax break as an incentive to keep providing coverage, others are almost certain to announce similar cost increases in the weeks ahead as they sort out the impact of the change.

Figuring out what it will mean for retirees will take longer, but analysts said as many as 2 million could lose the prescription drug coverage provided by their former employers, leaving them to enroll in Medicare's program....

For the government, the tax changes are expected to raise roughly $4.5 billion over the next decade to help pay for the health overhaul. Some of the savings would be negated by retirees enrolling in the Medicare plans....

American industrial companies that are struggling to compete globally against companies with much lower labor costs are particularly likely to eventually drop retiree coverage, said Gene Imhoff, an accounting professor at the University of Michigan.

"Anything that they can use to justify pushing something away from the employees, pushing it back on the employees or the government, they're going to do it," Imhoff said. "I'm not sure you can really blame them for trying to do this."...

Nationwide, companies would take a $14 billion hit on their financial statements if all of the roughly 3,500 companies receiving the subsidies continued to do so, according to a study by Towers Watson, a human resources consulting firm.

That financial hit will be a one-time cost as companies report a new cost estimate for the benefits over the life spans of all retirees.

Deere and Caterpillar were among a group of 10 companies that sent a letter to congressional leaders in December warning of the cost increases. The others were Boeing Co., Con-Way Inc., Exelon Corp., Navistar Inc., Verizon, Xerox Corp., Public Service Enterprise Group Inc. and MetLife Inc....
Faaaaantastic!  AK Steel ($31 million), 3M ($85-90 million) and AT&T ($1 billion) also recently reported having to take massive hits to their bottom lines and/or dropping parts of their employees' insurance.  And more companies are expected to make their distressing announcements in the coming days.

Of course, if the United States didn't have the second highest corporate tax rate (39%, incl. state taxes; 35% federal) in the world, such tax hits might not matter that much, but, well, we do, so they hurt like hell and further hinder American companies' ability to compete with their global competitors.  Even worse, these hobbled US companies can expect less help from private investors because the new health bill also imposes myriad new taxes on "high-income" (over $250k) investors, causing them to pull their money out of the market and move it offshore or to municipal bonds.

Is it any wonder why some US companies move operations offshore?  Why deal with this insane government-induced squeeze from the top, bottom and middle?  Of course, not all companies are screwed, as the aforementioned AP article reports: "Consumers Energy, a Michigan gas and electric company with 2.9 million customers, said it will not take a big first-quarter charge because, like most utility companies, it can try to recover the added costs from its customers through rate hikes."

Oh, so consumers will take the hit.  That's much better.  (<---sarcasm) 

But hey, ObamaCare might suck for US companies and consumers, but it's not all bad news, as this story from the Christian Science Monitor tells us:
With 22 pen strokes, President Obama signed into existence not just a historic healthcare reform law but also monumental piles of paperwork: New member registration forms. More claims. Ever-expanding databases. And on top of that, pressure to cut costs.

The bulge in administrative work may look like a nightmare to American insurance firms and government employees. But to outsourcing executives here in India, it’s heaven-sent. A number of Indian companies are already anticipating an increase in workload thanks to Obama's healthcare law.

The addition of 32 million insured Americans is “very significant” for Indian outsourcers, says Ananda Mukerji, chief executive officer of Firstsource Solutions in Mumbai. Companies like his will see “increased opportunities” as US health insurers and hospitals scramble to reorganize to comply with the new law, he wrote in an email to the Monitor.

This extra work will include processing new enrollments, organizing bigger member databases, processing more claims, providing more support services, and managing more revenue, he says.

In particular, outsourcers can expect to benefit from insurers’ need to minimize administrative costs, Mr. Mukerji says, citing a recent Deloitte Center for Health Solutions study showing that up to 41 percent of the cost of a health plan is administrative.
Feel that Stimulus!  Now, to be fair, the CSM article does go on to say that some of those administrative jobs are coming back to the United States, but that's because they can't be outsourced due to regulations like Buy American which prohibit foreign work on government contracts.  That's hardly "good news" because it just means even higher costs for consumers and businesses (i.e., it's government-forced, not market-based).

What a debacle.  And we're only in the first week.

No comments: