Please ensure Javascript is enabled for purposes of website accessibility

Tag: Healthcare Reform

Here’s Why No One Needs to Get Worked Up Over the Healthcare Reform Earnings Hit

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

The brouhaha over the hits to earnings from the new healthcare law that companies are announcing is much ado about very little.

First of all, the charge is an estimate of future costs and will have no immediate impact on cash flow. And the estimate is unusually large because the accounting rules require costs that would otherwise be reported in the future to be reported now, simply because they are the result of a change in tax treatment.


As my former colleague Marie Leone reports at CFO.com, such “true-ups” over differences in tax and book accounting practices are just that. The real cost will be spread out over many quarters.

More importantly, the hit is the result of a loss of a major taxpayer subsidy. Maybe it made sense before to provide that. But given all the concern about the federal deficit, it seems to me that asking shareholders to bear a bit more of the burden for retiree drug benefits is hardly unfair.

And in the greater scheme of things, the hit may be so small as to have little impact on companies’ valuations, as a Credit Suisse analyst pointed out the other day. General Electric didn’t even break out its estimate for that reason, calling the cost “immaterial.”

The question is whether companies will stop paying for the benefits because of the cost, and that’s unlikely unless they’re willing to compensate for the loss with higher wages, as economist Dean Baker reiterated to me in an email late last week.

“The standard economist view is that the cost of health care comes overwhelmingly out of wages,” Baker wrote. “If they have to pay more in taxes, then it will mostly come out of workers’ pay and have very little impact on their costs and ability to compete.”

If on the other hand, a decline in healthcare costs leads to higher wages, that would mean a stronger economy, so I don’t see how either taxpayers or shareholders will lose here in the long run.

Yes, that’s a big if, but as I’ve said before, the new healthcare law is the biggest effort to rein in costs undertaken to date. Of course more must be done, but the law will provide a big impetus to those efforts.

Hopefully, all this will become clearer as a result of the hearings Rep. Henry Waxman plans to hold next week on this issue, but I’m not holding my breath.

Accounting News Roundup: Accounting for Healthcare Reform Begins; Should Small CPA Firms Partner with Large Firms on Projects?; Lawsuits Against Accounting Firms Rising Fast in UK | 03.28.10

• The healthcare party is over – now comes the (accounting) hangover [FT Alphaville]
Now that healthcare reform is behind us, the matter of sorting out the impact on corporations now falls to the accounting professionals in those companies as the first quarter winds down this week.

FT Alphaville notes that AT&T, for one, has already filed an 8-K that states that it will “take a non-cash charge of approximately $1 billion in the first quarter of 2010 to reflect the impact of this change.” The change that the company is referring to is the “Medicare Part D subsidy” which, under the new law, is no longer eligible for a write-off against a company’s taxes. The subsidy is given to companies to help to pay prescription drug benefits to its employees.


FTA cites a report by Credit Suisse that shows many companies’ (including Goodyear Tire, International Paper and The New York Times) first quarter earnings will be impacted significantly by new healthcare legislation. And it also appears that it will cause companies to take a second look at the benefits they currently provide to employees, as Ma Bell stated in its filing that it “will be evaluating prospective changes to the active and retiree health care benefits offered by the company,” as a result of the legislation.

• Why solos and small firms shouldn’t “partner” with larger CPA firms on projects [Fraud Files Blog]
Tracy Coenen recently had a large firm approach her to see if she’d be interested in helping them out with some “Fraud Risk Assessment services.”

The larger firm asked her if she would be interested in “a partner/subconsultant” arrangement. Tracy explains why this isn’t a good situation for solo practitioners like herself, “[T]he consulting firm doesn’t have the know-how necessary to provide their client with the services they need. But they’re not about to let something silly like competence stand in the way of collecting fees! They will find a way to do it.”

Tracy says that the larger firm will ask you to discount your billing rate, train their staff, and ultimately, give them the secrets to your practice, “Don’t lose money by discounting rates, training someone else’s staff for those discounted rates, and creating a competitor for yourself who uses your proprietary methodology.”

• U.K. Accounting Suits Reached 5-Year High Last Year, Study Says [Bloomberg BusinessWeek]
The number of lawsuits filed in the UK against accounting firms in the past year is greater than the last five years combined according to Bloomberg. The thirteen suits filed in 2009 is more triple than the four suits filed in the previous five years. Although the number of suits is considerably smaller than the 61 suits filed after the collapse of Enron, et al. in the 2002-2003 time period, Jane Howard, a partner at Reynolds Porter Chamberlain LLP, is quoted that it’s not clear whether things are just getting started, “What is still hard to tell is whether this sudden rise in claims will subside quickly or whether accountants will face a higher number of claims over the coming years.”

PwC pretty much admits that they are…

prostie.jpg…whores for the insurance industry.

The firm issued a statement today after nearly every news outlet called them out as corporate trollops after the release of their report on the Baucus healthcare reform bill yesterday.


Per Politico:

America’s Health Insurance Plans engaged PricewaterhouseCoopers to prepare a report that focused on four components of the Senate Finance Committee proposal:
· Insurance market reforms and consumer protections that would raise health insurance premiums for individuals and families if the reforms are not coupled with an effective coverage requirement.

· An excise tax on employer-sponsored high value health plans.

· Cuts in payment rates in public programs that could increase cost shifting to private sector businesses and consumers.

· New taxes on health sector entities.

The analysis concluded that collectively the four provisions would raise premiums for private health insurance coverage. As the report itself acknowledges, other provisions that are part of health reform proposals were not included in the PwC analysis. The report stated on page 1:

“The reform packages under consideration have other provisions that we have not included in this analysis. We have not estimated the impact of the new subsidies on the net insurance cost to households. Also, if other provisions in health care reform are successful in lowering costs over the long term, those improvements would offset some of the impacts we have estimated.”

It seems as though P. Dubs is trying to clarify that, “We know we’re whores. We even said so in our report. We’re the classy type of whore though. We won’t do anything unless the money is right but we are good at pleasing our clients.”

What we’re wondering is why PwC would go to the trouble of putting out a report that they knew was one-sided and then their client dances around like the report was brought down by Moses from Mount Sinai. Maybe the firm wasn’t expecting such an enthusiastic response.

WTFK but something tells us that AHIP may not be enjoying their PwC Experience as much as they were yesterday.

PWC statement — Not so helpful for AHIP [Live Pulse/Politico]

PwC Lends a Hand to the Insurance Industry

Thumbnail image for pwclogo.thumbnail.jpgWe’re confident that you all enjoy talking about healthcare reform. If it wasn’t for the long hours you had to work, we’d be reading about all the accountants showing up at the town hall meetings to bring sanity to what otherwise appears to be a meeting of escaped mental patients.
Now, just when you thought that the debate had saturated the country into submission, America’s Health Insurance Plans has put out a new report, courtesy of P. Dubs, that states that the costs of health insurance would rise significantly under the plan submitted by Senator Max Baucus of Montana.
Continued, after the jump


From the executive summary:

There are four provisions included in the Senate Finance Committee proposal that could
increase private health insurance premiums above the levels projected under current law:
• Insurance market reforms coupled with a weak coverage requirement,
• A new tax on high-cost health care plans,
• Cost-shifting as a result of cuts to Medicare, and
• New taxes on several health care sectors.
The overall impact of these provisions will be to increase the cost of private health insurance coverage for individuals, families, and businesses. The net impact of these increases on households would include the impact of these increases and the new subsidies provided under the bill.

The report states that on average, costs will go up 79% under the current system between 2009 and 2019 and 111% for the same time period if the provisions are implemented.
Politico calls bullshit, “The industry, which didn’t like last week’s [Congressional Budge Office] report, bought its own analysis and will tout the PricewaterhouseCoopers findings in new ads.”
On the one hand, you can’t really expect PwC to do put out a report like this for nothing but did anyone really expect them to come to a different conclusion?
As we pointed out recently, accounting firm reports typically don’t get lots of attention but when they do, it’s usually over something that causes people to get all crazy for their particular side.
PwC will certainly be perceived as the insurance industry whore here but since they aren’t actually an insurance company, the firm won’t likely receive the worst of the populist chastisement and will just enjoy some free publicity.
Insurers, docile till now, go to war [Politico Pulse]
Potential Impact of Health Reform on the Cost of Private Health Insurance Coverage [PwC Report]

Barry Salzberg’s Imaginary Advice for the President on Healthcare

Barry Salzberg.jpgWe’re not going to debate about healthcare here because after about one-tenth of a nanosecond we’d consider jumping out the window. What we would like to discuss is Barry Salzberg, CEO of Deloitte-period, giving imaginary advice to the President on how to proceed with his strategy in getting support behind his reform efforts.
Check out some real advice, after the jump
Bar lays out his advice for B to the O in classic accountant fashion, ” I would counsel more patience.” and “Measured haste, you might call it. My advice to the president would be to find that balance of urgency and patience.” Haste. Balance. VOMIT. Wouldn’t you like to see one of these stoic Big 4 CEO’s just give completely batsh!t crazy advice on something, JUST ONCE?


Like if Salz advised that Obama’s strategy should consist of hosting Lebowski Fest at the White House. Bowling, white russians, chicks in viking costumes. That’ll get the people behind your plan Bam.
Measured haste. Pfffft. Is it any wonder everyone thinks accountants are boring? Feel free to discuss your favorite Big 4 CEO and all their words of wisdom they’re constantly bestowing upon you.

UBS Names Needed so We Can Pay for Healthcare Otherwise We’ll Have to Print More Money

obama_point.jpg“Rich people, I want your money.”
No, seriously. Hand it over.
We’ve covered the failure (so far) of the IRS to get UBS to name names on 52,000 Americans and we’ve heard some good suggestions but maybe chocolate isn’t what the Service is interested in.
The House passed a pricey healthcare proposal yesterday and B to the O wanted it to be “budget neutral” which means, “We’re in a deep hole you clowns. Don’t make it deeper.”
Charged with said task, they went to a cocktail party got to work and came up with a solution that they super-duper rich will foot the bill via taxes. That means, IRS, get your shit together, because Nancy Pelosi has had enough of rich people, that aren’t her, not paying their fair share of taxes. Swiss bank account holders beware, here are the gory details that you’ll be getting in on if your name gets dropped:

Under the $1.2 trillion plan passed by the Democratic-controlled House of Representatives, the wealthiest 1.2 percent of U.S. households would have to pay an additional $540 billion in taxes over the next 10 years via an income surtax of between 1 and 5.4 percent. For the super-elite, those in the top 10th of 1 percent (and presumably the type of taxpayers who have Swiss bank accounts), that works out to an additional $280,000 a year in taxes on an average annual income of $2.3 million a year, according to the Tax Policy Center.

So basically it looks as though the IRS needs to close the tax gap because…wait for it…there’s shit to pay for! We’re not slapping healthcare on the Federal Reserve credit card, no, no. Right here and now we start paying for stuff out of our own pockets. So get on these Swiss banks and get the names because they’re avoiding their patriotic duty.
Obama’s self-defeating war on the wealthy [James Pethokoukis/Reuters]