Government Bytes


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

by Douglas Kellogg / /

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

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

Now, Lettersto the Editor are popping up in local papers, written primarily by Democraticactivists. These letters range from simply relying on PolitiFact’s verdict, toincoherent rambling and strange conspiracy theories. However, some of theaccusations 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 distractfrom the details of the issue at hand.

Several monthsbefore the ad ran, NTU cautioned that a Part D “rebate” plan was among several“disastrousdebt ideas” bouncing around the Supercommittee. Members of Congress hadadvocated this debacle before, and President Obama included a version of it inhis own Supercommittee recommendations. So we felt compelled to sound the alarmin a Dallas Morning News ad and make certain citizens kept encouraginglawmakers who might be opposed to the plan.

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

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

Yet NTUprovided plenty of such references: JosephAntos of the AmericanEnterprise Institute who served on the Maryland Health Services Cost ReviewCommission, Guy King, former Chief Actuary for Medicare and Medicaid, formerCBO Director DouglasHoltz-Eakin, and GraceMarie-Turner of the Galen Institute. Antos, for example, noted that, “Theso-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 anytax, be borne somewhere else in the economy, but … seniors will also be forcedto pay much higher premiums for their prescription drug plans.”

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

But aren’ttaxes mandatory when this rebate isn’t? Not when Washington rigs the rules. Aswe told PolitiFact, federal and state government programs are capturing anincreasingly dominant share of the prescription drug market (about 30 percentfor Medicare and Medicaid, more when VA and government employee programs areadded in). This has been especially true since the creation of the MedicarePart D benefit. It's one reason why we opposed the Part D program in the firstplace. For Congress and the White House to legislate more influence overdrug-purchasing in the United States, and then say, "well, if you won'tpay our latest kickback demands you can't sell in the empire we'vecreated" is coercive.

Transparentpolitical mud-slinging is unfortunate, but predictable when an organizationseeks to shine the light of truth on a destructive policy that has beencleverly buried in a complex bureaucracy to prevent citizens from realizingthat they are about to be hit with an unfair new burden. When the peopleimplementing this destructive change are the types who profit politically bytouting their uncompromising stewardship of the program, unseemly politicaltactics are unavoidable.

ThroughoutNTU's 40-plus year existence, one central part of our mission has been callingpoliticians 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 iscertainly not the last time we’ll be fulfilling that mission.