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Eye on the News

Paul Howard
The Union Rules
What better to call the White House’s latest handout?
19 January 2010

At the rate that congressional Democrats and the White House are handing out special deals, exemptions, and payoffs in their health-care “reform” legislation, there’s a real danger that pundits will run out of snarky phrases to describe them. So as my own modest effort to help headline writers, I move that we call the $60 billion White House cave-in to the AFL-CIO “The Union Rules.” That phrase would henceforth describe the various union demands that President Obama has agreed to: exempting public and private unions for five years (from 2013 to 2018) from a 40 percent excise tax on high-cost health plans; deducting dental and vision benefits from the excise tax; and negotiating higher thresholds under the excise tax for plans that have a higher number of retirees or older workers, as unions do.

True, “The Union Rules” isn’t quite as catchy as “The Louisiana Purchase” ($300 million in new federal Medicaid money to the Cajun State, courtesy of Senator Mary Landrieu) or “The Cornhusker Kickback” (the promise extracted by Senator Ben Nelson that the feds would pick up Nebraska’s new Medicaid costs for eternity). But many backroom deals have gone without names of any kind: for instance, Vermont senator Bernie Sanders’s wrangling of $10 billion for community health centers. (“Billions for Bernie,” perhaps?) Then there are Senators Ben Nelson and Carl Levin, who won exemption from an insurance tax for the Blue Cross Blue Shield plans in Nebraska and Michigan, respectively. Vermont and Massachusetts got millions more for their own Medicaid programs, and New York, Pennsylvania, and Florida got special protections for their Medicare Advantage plans. We’re bound to hear about more shenanigans when the negotiations to draft the final House-Senate compromise bill are completed, so if you’d like to try your own hand at giving these “compromises” the shady descriptions they so richly deserve, you’ll have plenty to choose from.

But the union deal really takes the cake. Economists generally agreed that the “Cadillac tax” on high-cost health plans was the centerpiece of the Senate bill’s cost-control efforts, one of the few provisions that would help lower the rate of health-care inflation. But after the Senate bill passed on Christmas Eve, the unions threatened to withhold their support from Democrats in November. Obama blinked—unsurprisingly, since unions had donated $400 million to Democrats in the last election cycle. It turned out to be money well spent, for the unions at least. But their excise-tax exemption will cut by 40 percent the revenues designed to pay for insurance subsidies under the Senate bill. That money will have to be recouped from somewhere else, which likely means yet more tax hikes that will discourage work and investment in the middle of a recession.

Of course, Democrats will grumble that Republicans did just as much deal-making when they ran the show. And that’s true. But it’s exactly why we should take health-care decision-making power out of Washington and put it into people’s hands. Until that happens, keep your thesaurus handy and your expectations low.

Paul Howard is director of the Manhattan Institute’s Center for Medical Progress.

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