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Baucus health reform bill would stick Indiana companies with fees

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On The Beat Industry News In Brief

The health reform bill sponsored by U.S. Sen. Max Baucus, D-Mont., would help pay for expanded health insurance coverage by levying fees of $13 billion a year on the health care industry.

The fees would deliver a hefty bill to just about all of Indiana’s major health care companies. But how they’re reacting to the fees is all over the map.

Here’s a breakdown of what some Indiana companies could pay, derived from each company’s share of the U.S. market. The market totals were calculated by U.S. News & World Report, using data from New York-based research firm Capital IQ:

• WellPoint Inc., $1.1 billion per year

• Eli Lilly and Co., $88 million

• Zimmer Holdings Inc., $88 million

• Biomet Inc., $61 million

The companies crying the loudest are medical-device makers, such as the orthopedics companies in Warsaw.

“We expect that this particular fee would wipe out about 20 percent of all the profitability in the medical-device industry,” Biomet CEO Jeffrey Binder told the “Nightly Business Report” Sept. 16. “And there’s absolutely no way that that will not affect employment.” Because of that potential impact, Indiana’s two senators, Evan Bayh and Richard Lugar, have objected to the fees. Also, Indiana Gov. Mitch Daniels joined four other governors in writing a letter to Baucus, slamming his proposed fees as a job killer.

“Many of these are high-paying, basic science and engineering jobs that must be preserved and increased for a sector that provides an important economic engine for our country and states,” they wrote.

In the Warsaw area, the orthopedics industry pulls in $11 billion a year and employs 6,000 people. Indiana is also home to other medical companies, such as Bloomington-based Cook Inc., which does not disclose its revenue. Also, the state has been trying to nurture medical-device startups, such as Indianapolis-based Nico Corp.

Even though WellPoint would have a whopping bill, the Indianapolis-based health insurer and its peers haven’t opposed the fees too stridently. That’s because the Baucus bill would also give $452 billion over a decade in subsidies to help Americans buy health insurance.

If WellPoint gets the same share of the new customers as it currently holds—16 percent—it would mean more than $7 billion a year in new revenue. Paying $1 billion to get $7 billion in return is a slam-dunk for any investor.

Lilly isn’t squawking too much, either. Sure, it doesn’t watch $88 million fly out the door lightly, but more people with health insurance also means more people able to buy its prescription drugs.

Besides, Lilly is getting its top legislative goal, which is 12 years of exclusivity before biotech drugs face generic competitors. Legislation in both the House and Senate includes the provision.

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  1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

  2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

  3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

  4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

  5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

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