Instead of giving campaign-style speeches about raising taxes and increasing the debt limit, President Obama should be focusing on cutting needless programs that do nothing more than redistribute the wealth of hard-working Americans.
In less than a year, the Obama administration has given nearly $2 billion to some of the largest corporations and unions in America, as well as to a multitude of states. Section 1102 of the Patient Protection and Affordable Care Act — better known as Obamacare — created the Early Retiree Reinsurance Program (ERRP), a $5 billion taxpayer-subsidy program for early-retirement medical costs. The program is about to run out of money, which is good news for everyone — except, of course, Congress’s favorite special-interest groups.
#ad#According to HHS, Congress designed ERRP to “provide financial assistance for health plan sponsors.” It reimburses these sponsors for a part of the cost of insuring early retirees — those aged 55 to 65 — and their families. The goal of the program is to reduce insurance costs to other participants in the plan by subsidizing early-retiree medical care. In other words, the program shifts the burden of early-retiree medical costs from certain corporate employers to all American taxpayers.
According to a March 31 CCIIO progress report, 1,300 participants have received a total of $1.8 billion through ERRP since the enactment of the program. In the first three and a half months of 2011, ERRP shelled out $1.3 billion on top of the $535 million it spent in the last half of 2010.
The top corporate recipients of ERRP funds were AT&T ($140 million), Verizon ($91.7 million), and General Electric ($36.6 million.)
Bailouts of deficit-ridden state and local governments are unpopular with the American public (anti-bailout bills and resolutions have been introduced in both houses of Congress). Yet ERRP enabled HHS to redirect money to even healthy administrations. At least 44 percent of ERRP funds went to government and government unions, including the Public Employees Retirement System of Ohio ($70.6 million), the Teacher Retirement System of Texas ($68 million), and the chronically underfunded California Public Employee Retirement System ($57.8 million).
The largest recipient of ERRP funds was the United Auto Workers (UAW) Retiree Medical Benefits Trust, which got $206.8 million. UAW Trust chief financial officer Mary Beth Kuderik even helped push ERRP in an HHS video touting the program. In the video, she sat next to HHS secretary Kathleen Sebelius lauding the benefits of the free money.
The program also helped UAW members through subsidies to their main employers: General Motors ($19 million), Ford ($7.1 million), Chrysler ($3.3 million), and parts supplier Delphi ($6.1 million). Add those funds to the amount taxpayers already spent to bail out GM and Chrysler in 2009 and the continuing cost of subsidizing cars like the Chevy Volt.
The UAW was not the only labor organization receiving ERRP funds; other unions include the International Brotherhood of Teamsters (nearly $16 million, including funding for its severely underfunded Central States Pension Plan), and the United Food and Commercial Workers (nearly $9 million).
Encouraging people and businesses to apply for free money isn’t exactly difficult, so it’s not surprising that HHS is boasting that it “has received applications from more than 50 percent of Fortune 500 companies, all major unions, and government entities in all 50 States and the District of Columbia.”
It is also not surprising that ERRP is one of the first major spending programs under Obamacare and that it’s about to run out of money prematurely. The program was supposed to last until 2014, but with money running low, administrators announced this month that they would not accept new applications after May 6, 2011. At the current rate of spending, the program may not last past 2012.
This is not the first time the Obama administration has lavished millions in taxpayer dollars on politically savvy corporations and unions. ERRP is a harbinger of the future of Obamacare. Funding for this program is on pace to run out twice as fast as planned. This raises the question of how high the federal government’s tab for the nation’s health-care costs is likely to run — and how much it could add to the debt.
When politicians talk about cutting the deficit, programs like ERRP that dole out goodies to favored constituencies should be the first to go.
— F. Vincent Vernuccio is labor-policy counsel at the Competitive Enterprise Institute. CEI research associate William Kovacs contributed to this article.
editor’s note: This article has been amended since its initial posting.