Government Bytes


NTU Campaign Warning About Medicare Part D Rebate Scheme Draws Ire, Misinformation, from Partisan Interests

by Douglas Kellogg / /

It looks like a tax, smells like a tax, walks like a tax, but unfortunately Austin-American Statesman’s “PolitiFact” felt the need to reach an unfair opinion on an NTU-sponsored ad warning of a new Medicare Part D “rebate” scheme that was little more than a tax in disguise. Now, it seems local Democratic Party activists are actively using PolitiFact’s article, and some dubious assumptions and claims about NTU, in an effort to mislead their neighbors on the negative impact the Medicare Part D rebate tax would have.

First of all, key facts were left unmentioned in the PolitiFact piece. For example, the fact that the rebate program fits with the Joint Committee on Taxation’s definition of an excise tax, or that NTU provided PolitiFact with numerous references either describing the measure as a tax or demonstrating its economic harm. Convoluted policy workings of Washington bureaucrats may make reality hard to decipher: the bottom line is that no matter what you call it, a mandatory 23 percent burden is the price that real, live people will pay in many ways.

Now, Letters to the Editor are popping up in local papers, written primarily by Democratic activists. These letters range from simply relying on PolitiFact’s verdict, to incoherent rambling and strange conspiracy theories. However, some of the accusations must be cleared up: NTU has no coordination with any candidates, nor do these issue-focused advertisements imply any endorsement of individuals. Any wild claims about “front groups” are just that, and designed to distract from the details of the issue at hand.

Several months before the ad ran, NTU cautioned that a Part D “rebate” plan was among several “disastrous debt ideas” bouncing around the Supercommittee. Members of Congress had advocated this debacle before, and President Obama included a version of it in his own Supercommittee recommendations. So we felt compelled to sound the alarm in a Dallas Morning News ad and make certain citizens kept encouraging lawmakers who might be opposed to the plan.

But even though PolitiFact gave some space to NTU's case for calling this proposal a tax, and seemed to concede some of the other points we made, the staff nonetheless branded our ad “false,” claiming “Obama's urged rebate remains that--money paid in return for a purchase or action/opportunity. One would have to connect more dots to make it a tax.” Well, here are some of the many dots NTU connected that deserved more mention in the piece.

PolitiFact’s central claim: “Outside experts said they’d never heard the Medicaid rebates -- or proposed Medicare rebates -- referred to as taxes.”

Yet NTU provided plenty of such references: Joseph Antos of the American Enterprise Institute who served on the Maryland Health Services Cost Review Commission, Guy King, former Chief Actuary for Medicare and Medicaid, former CBO Director Douglas Holtz-Eakin, and Grace Marie-Turner of the Galen Institute. Antos, for example, noted that, “The so-called rebate isn’t a rebate at all. For a large number of Part D patients, it’s going to function as a tax.” Holtz-Eakin, along with Michael Ramlet, wrote, “In the end, not only will the cost of a new government rebate, like any tax, be borne somewhere else in the economy, but … seniors will also be forced to pay much higher premiums for their prescription drug plans.”

PolitiFact duly reported our contention that the "rebate" is based on a percentage of price-per-unit, a lot like the way some excise taxes on products such as certain tobacco items work. But here's the rest of the story. Calling the proposal "money paid in return for a purchase or action/opportunity," as PolitiFact does, is an inadequate explanation. That's because the rebate is levied on an ad valorem basis, not in exchange for a service. This is an important consideration: the "rebate" is on the sale of a specific product, using a specified value of the product. That is the basic definition of how an excise tax works. In fact the Joint Committee on Taxation describes an excise as such: "taxes imposed on a per unit or ad valorem (i.e., percentage of price) basis on the production, importation, or sale of a specific good or service.”

But aren’t taxes mandatory when this rebate isn’t? Not when Washington rigs the rules. As we told PolitiFact, federal and state government programs are capturing an increasingly dominant share of the prescription drug market (about 30 percent for Medicare and Medicaid, more when VA and government employee programs are added in). This has been especially true since the creation of the Medicare Part D benefit. It's one reason why we opposed the Part D program in the first place. For Congress and the White House to legislate more influence over drug-purchasing in the United States, and then say, "well, if you won't pay our latest kickback demands you can't sell in the empire we've created" is coercive.

Transparent political mud-slinging is unfortunate, but predictable when an organization seeks to shine the light of truth on a destructive policy that has been cleverly buried in a complex bureaucracy to prevent citizens from realizing that they are about to be hit with an unfair new burden. When the people implementing this destructive change are the types who profit politically by touting their uncompromising stewardship of the program, unseemly political tactics are unavoidable.

Throughout NTU's 40-plus year existence, one central part of our mission has been calling politicians to account when they create a plan that works and hurts like a tax, but refuse to call it a tax. Our effort against the 23 percent rebate is certainly not the last time we’ll be fulfilling that mission.