A little known provision in the George W. Bush admin 2003 Medicare Modernization Act which allowed corporations to collect a tax break on their retired employees’ enrollment in Medicare Part D recently became the focus of an investigation initiated by California Democratic Rep. Henry Waxman (chair of the influential Energy & Commerce Cmte.), who called for a special session with some of the largest corporate beneficiaries of such a provision.^[1] The intent was to address corporate concerns of the fiscal instability to their bottom lines brought on by the recent reform bill. Looks like it’s not happening at this time, as Waxman probably realizes the issue of corporate charges to fatten profits was more of a nonissue.^[2] From a memo [PDF] addressed to him and co-chair Bart Stupak (R-MI),

The 28% subsidy has been a lucrative subsidy. The [Retiree Drug Subsidy] program has paid $14.6 billion directly to businesses since 2006 to subsidize employer coverage of retiree drug benefits. For some companies, this subsidy has been worth many millions of dollars. Since 2006, AT&T has received $451 million, Verizon $332 million, Caterpillar $74 million, and Deere & Co. $56 million in federal subsidies under the program. These are merely the subsidy amounts and do not take into account the value of the tax deduction provided in the 2003 law.

Waxman’s kneejerk came as the result of a WSJ article which incorrectly noted that the new reform law would incur enormous costs for these major firms in the first year alone. The memo continues:

The new health reform law retains the 28% subsidy enacted in 2003, but it changes the policy regarding the deductibility of the subsidy. Under the new law, companies will no longer be able to deduct the value of the subsidy as a business expense effective in 2013.

Could it be that corporate was initially correct in saying that their accounting practices were always sound since Medicare Part D became policy in ’06? Looks that way.

1. AT&T, Caterpillar, and others [↩]
2. Suspected losses to major corporate firms as a result of the reform bill would not occur over a 12 month period, but would take “years” to be realized if not accounted for. [↩]

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