Henry Waxman and fellow Democrats are shocked!

Henry Waxman (D. Ca.) and other House Democrats intend to haul the CEO’s of several major companies before Congress on April 21 , and demand explanations about recent disclosures by those corporations concerning the true costs of Obamacare.  Actually, the true cost of Obamacare to these corporations is sizable, but that apparently was supposed to be kept a secret.

Here is what happened.  AT&T, John Deere, Caterpillar, 3M, AK Steel, and an assortment of other companies offer prescription drug coverage to their retirees.  The estimated costs of providing that future coverage must be reflected on the companies’ balance sheets as a long term liability. 

In 2003, when Congress passed it’s prescription drug coverage for those on Medicare, Congress was concerned that many companies would simply drop their retiree prescription drug coverage, thus forcing those retirees into the government plan, obviously driving up the government’s cost.  So, what Congress did was to provide certain subsidies and tax deductions to those companies to encourage them to keep providing those benefits.   From an accounting standpoint, when the government did that, the companies had to change their balance sheets to reflect the long term “income” from the government subsidies and deductions as an offset against the long term cost of providing the care. 

However,  Obamacare changed all that.  It significantly decreased the tax deductions that the companies will be able to take in the future, which means that the companies will have to change their balance sheets to reflect the lower deductions.  In accounting parlance, this change is called a “writedown of a deferred tax asset”.

Why does any of this matter, you ask?  Well, generally accepted accounting principles require that this entire writedown must occur in each companies’ next quarterly financial statement.  Thus, AT&T will be forced to incur a $1 billion writedown, John Deere, a $150 million writedown, Catapillar, a $100 million writedown, and on and on.  And, these writedowns, in turn, also reflect the long term additional cost to these companies to continue prescription drug coverage for their retirees because of the lower tax deduction.

This is not what the administration wants to hear, particularly when one of the alleged “selling points” of Obamacare was  that it would be just great for business because it would reduce the cost of providing health coverage to their employees and retirees.

Enter Henry Waxman…he apparently wants to beat up on the companies because he believes that what they are doing,

appears to conflict with independent analyses, which show that the new law will expand coverage and bring down costs.

Of course, if the companies don’t do what they plan to do, they will be in violation of federal law, and will be charged by the Securities and Exchange Commission with preparing and filing false and misleading financial statements.

Hum, the April 21 hearings should be interesting.

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The Sound Off Sister was an Assistant United States Attorney for the Southern District of Florida, and special trial attorney for the Department of Justice, Criminal Division; a partner in the Florida law firm of Shutts & Bowen, and an adjunct professor at the University of Miami, School of Law. The Sound Off Sister offers frequent commentary concerning legislation making its way through Congress, including the health reform legislation passed in early 2010.


  1. donh on March 28, 2010 at 10:41 am

    By the time April 21 rolls around there is going to be a lot more economic blood spilled. The Big Lie used to plunder the will of the people in passing this bill will now  be used to cover up the genocide to take place. We cannot expect the news media to cover ANY of the casualties. It is up to the individual to record ,bear witness , and speak the truth.

  2. winnifredthewoebegon on March 28, 2010 at 11:22 am

    This plan is going to prove to be corporate lethal injection.  Is that the blue pill or the red pill?

  3. GdavidH on March 28, 2010 at 12:02 pm

    Maybe congress can pass Cap and Trade quickly enough to further help big business this year.

  4. Dimsdale on March 28, 2010 at 5:16 pm

    Just more proof (as though you needed any) that politicians, particularly Democrats, absolutely do not know what they are doing, and worse, have no understanding whatsoever of the long term implications of their feel good legislation.  Those that do count on their flying monkeys in the media to do the heavy work of covering up the Grand Canyon sized flaws in their plans, repeating the spin (lies) and talking points (obfuscation) over and over until it "must be true" in as pure propaganda, the likes of which has not been seen since Josef Goebbels ran the Third Reich, or Pravda was the only "qualified" (where have I heard that before?) media outlet for officially "approved" news.


    I hope they drag these execs up to Capitol Hill, and they lay it out for these Democrat apparatchiks.  As mentioned before, the media will bury it for the next celebrity divorce…

  5. pauldow on March 29, 2010 at 5:05 am

    >>Hum, the April 21 hearings should be interesting.<<

    Only if the people testifying have the guts to tell congress that they work for them, and tell them the truth instead of top-toeing around the real issues.

  6. comanchepilot on March 31, 2010 at 5:55 am

    Hey guys-  the financial effects RIGHT NOW being announced by corporations are ONLY non-cash charges JUST for the loss of the Medicare part D subsidy.  One very SMALL part of the HCB . . .

  7. Erik Blazynski on April 5, 2010 at 4:20 pm

    I think that we will see a lot of unintended consequences with this legislation.

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