Only in Washington would running out of money and prematurely limiting a program be considered a success. This Friday (May 6,) Obamacare’s first handout program will cease accepting new applications, but not before billions of dollars have been redistributed or promised from taxpayers to the political savy and well connected.
The Early Retiree Reinsurance Program (ERRP) was intended to bridge the time gap between Congress’s passage of the Patient Protection and Affordable Care Act (Obamacare) and the law’s implementation. But it has done much more than that. ERRP is saturated with handouts, inaccurate funding assumptions, and shifts an ever greater burden onto the taxpayer.
The Obama administration implemented ERRP on June 1, 2010, as a provision in the president’s health care law. The $5 billion dollar program was supposed to last until 2014, but it has already burned through almost $1.8 billion in less than one year. On March 31, the Department of Health and Human Services (HHS), which administers ERRP, announced that the program had doled out that sum to 1,300 participants.
Administered by the HHS, ERRP disburses funds to unions, corporations, and state governments who then subsidize early retirees’ health care, without any means testing. A business, union, or state simply needs to fill out an application and have workers retiring early–between the ages of 55 and 65–to qualify for the free money.
The funding is not required to lower the cost of health care for employees. ERRP funding is meant to lower the cost of health care for the employer. This in turn is supposed to lower the cost for all employees. Welcome to the Democrats’ version of trickledown economics.
Obamacare created ERRP to “provide financial assistance for health plan sponsors” in order to indirectly subsidize early retirees’ medical care. The program reimburses sponsors for a part of the cost of insuring early retirees and their families. It shifts the burden from the people in the plan and those administering it to all American taxpayers.
Recipients consist of many Fortune 500 companies, unions, and state and local governments. The United Auto Workers (UAW) Medical Trust received the largest handout, $206.8 million. The union’s main employers also made out nicely. General Motors received $19 million, Ford $7.1 million, Chrysler $3.3 million, and parts supplier Delphi $6.1 million. Almost all of this will go to subsidize UAW-member early retirees’ health care costs.
The UAW, GM, and Chrysler are no strangers to government bailouts. In 2009, GM received $50 billion of taxpayer money to keep the company afloat. Chrysler received $7.5 billion. The UAW Medical Trust got a 17.5 percent stake in GM and a 55 percent stake in Chrysler. Without the influx of cash from the federal bailout of these car makers, the UAW’s medical trust might not be in existence today.
The UAW has received two multi-million dollar taxpayer bailouts of their health care fund in less than two years. The UAW stake in GM and Chrysler is worth billions. However, this did not stop the union from taking full advantage of the ERRP handout, and receiving the largest sum of any employer.
Far below the $200 million plus handout to the UAW, the largest corporate recipient of ERRP money is AT&T, which received $140 million. Verizon came in third at $91.7 million. Next came the state government employee bailouts, including for the Public Retiree System of Ohio ($70.6 million) and the Teacher Retiree System of Texas ($57.9 million).
HHS says 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.”
Steve Larsen, senior director of Medicare and Medicaid, commented how “thrilled they [Obama administration] are with the success of the ERRP.” It is hard to believe a program intended to last until 2014 running out three years early could be considered a success.
On Friday, ERRP will cease accepting applications, but according to the Federal Register:
“Should circumstances related to the availability of ERRP funding change, we may decide it is appropriate to resume accepting ERRP applications. If this occurs, we will provide such notice in the Federal Register.”
This may indicate that the door is not closed to further appropriations to the program. ERRP has already burned through funds faster than congress anticipated. If ERRP is a precursor to Obamacare, the projected cost of U.S. health care will far surpass the amount the taxpayers can shoulder.
co-authored with William Kovacs
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