Health Care Reform: The Democrats Strike Back
In a recent post, I outlined who I thought the winners and losers of the recently passed HCR bill. Much as I projected, businesses and their employees are among the first to be directly affected by the new regulations and taxes.
This article in the Wall Street Journal sums up, rather nicely, some of these early consequences of the congressional and presidential march towards socialism.
- Medtronics announced it may have to lay off up to 1,000 workers in order to pay for their new obligations. Rather ironic, considering that those employees probably considered their jobs to be safe. After all, Medtronics makes medical equipment – the last industry you would think would suffer layoffs from a health care bill.
- Verizon sent an email to all of their employees, suggesting that the company will likely have to reduce health benefits, due to increased costs incorporated in the new law. Yes, that’s right. People with quality coverage are losing that quality as a direct result of the “reform.”
- Caterpillar announced they anticipate $100M in extra health care costs.
- AT&T announced a $1B charge-off, directly resulting from increased medical expenses.
What is particularly troubling about these announcements are the industries they represent: medical technology, telecommunications and manufacturing.
Telecom: AT&T and Verizon are the nation’s two largest telecom providers. Their combined announcements represent a troubling issue for the industry as a whole. Given the fierce competition in this sector (in case you hadn’t noticed, per-subscriber rates have dropped by nearly 20% over the past 12 months, largely spurred by competition from smaller carriers) and that both are now in the middle of major technology upgrades, there really is nowhere else for them to turn to make up the shortfall except by whacking health benefits. The pressure on smaller or regional telecom providers will be even more intense.
Medical Technology: Medtronic’s announcement that up 1,000 employees may be forced to enter the worst job market in 30 years is particularly unnerving. Medical-related industries were supposed to be one of the drivers of both economic activity and job growth for 2010. If HCR is having the opposite effect, then the net effect of Obamacare on the economy may well be worse than anyone feared.
Manufacturing: In an industry that hasn’t had any good news in what feels like eons, Caterpillar’s announcement has to give even Paul Krugman pause. An additonal $100M in expenses represent 17% of their operating profit for 2009 – a year that saw both EPS and PPS results drop by nearly 80% from 2008. Worse, estimates for this year only had Cat realizing $285M in operating profit. If forced to take a charge (which our byzantine accounting rules will require, if they need to write down the increased costs), that $100M represents a 35% reduction in operating expenses. As with any industry, reductions of that magnitude invariably lead to lower stock prices, which lead to a whole raft of financial problems.
Of course, the Democrats who dreamed up this “reform” have taken notice. The last thing they want is any bad news related to HCR on your evening news or in your morning paper. After all, by now, we’re all supposed to be madly in love with O-care and worshiping at the altar of socialism. As pointed out here, Henry Waxman has sent letters to the Chairmen of the companies mentioned here, all but demanding that they appear before Congress to repent of their collective sin. You know, the sin of minding their respective company’s bottom lines.
I suppose this is how socialism slowly overrides free markets. One day, you complain that a lack of corporate responsibility has led to the Great Recession. The next, you complain that corporate responsibility is undermining public trust in your great socialist experiment. I guess Rep. Waxman and his fellow Democrats are hoping that we’re either too dumb or naive to recognize this blatant power-grab for what it is: an all-out assault on freedom, liberty and the pursuit of happiness.