San Francisco Chronicle
Wednesday, October 19, 2005
And so the demolition derby that is the U.S. health care system shifts into high gear.
Mighty General Motors, the world's largest automaker and biggest private-sector purchaser of health insurance, said this week that it'll slash its $5.6 billion annual health care spending for workers, retirees and their families by about $1 billion a year.
For its part, the United Auto Workers, one of the nation's most powerful unions, is apparently prepared to swallow this hit to organized labor's most sacrosanct benefit to forestall additional job cuts.
We have reached a critical turning point in the decline of health care in the United States, one almost certain to expand the already appalling figure of 45 million people lacking health coverage nationwide.
"It's not just a breaching of the social contract that's existed between companies and workers," said David Autor, an associate professor of economics at the Massachusetts Institute of Technology. "It's a reflection of how health care costs are out of control.
"Hopefully this will be an opportunity for government and companies to rethink how health care is provided," he added. "The old system is clearly breaking down."
Since World War II, the old system has been predicated on the notion that employers will bear the primary cost of insuring U.S. workers and their families.
That system, as the GM announcement plainly illustrates, is no longer viable in the face of double-digit annual increases in health care costs. Businesses have responded by insisting that workers -- and especially retirees -- shoulder more of the burden of their health coverage.
To be sure, GM has been rewarding its more than 750,000 union members, retirees and their dependents with an uncommonly generous benefits package. The company also faces numerous other issues that affect its profitability (or lack thereof; GM reported a staggering $1.6 billion loss for the latest quarter).
But health care is undeniably one of the automaker's biggest headaches. GM estimates that health care adds about $1,500 to the cost of every vehicle it sells in North America.
The company's chief exec, Rick Wagoner, told employees on Monday that health care is an issue "of great importance for the future of overall U.S. competitiveness."
He also all but pleaded with political leaders to do something about the situation.
"We would welcome a more proactive role from elected officials at the national and state levels in broad-based strategies to address the U.S. health care crisis," Wagoner said.
Helen Darling, president of the National Business Group on Health, a nonprofit organization composed of some of the country's largest employers, told me that more and more companies will follow GM's example and significantly scale back health coverage for workers.
For example, Ford and DaimlerChrysler are already negotiating similar concessions from the UAW.
"There's no one in the business world who doesn't share the position that the U.S. health care system has a crisis," Darling said. "The issue here isn't General Motors. The issue is the unaffordability of health care."
So what do we do about it?
I've written repeatedly about how a single-payer health care system could provide universal coverage for all Americans at a long-term cost to taxpayers well below what's now paid annually by employers and workers.
Single-payer systems are the norm in virtually all other developed democracies. While far from perfect -- long waits for treatment are a frequent complaint -- such systems ensure that any citizen can receive care from any doctor at any hospital.
There are no co-pays or deductibles, no private-sector premiums soaring year after year.
"The basic system is quite good," said Steffie Woolhandler, an associate professor of medicine at Harvard University. "We just need to fund it adequately."
As it stands, she said about a third of all health care spending in this country is now squandered on bureaucratic overhead. Under a single-payer system, savings from streamlined paperwork alone would be sufficient to provide coverage for all Americans.
"The meaning of GM's announcement is that even people working for a powerful company can have their health care cut," Woolhandler said. "Anyone who gets health insurance from an employer or former employer should be worried."
The right message: Speaking of the auto industry, senior execs at Delphi, the largest automobile supplier, have said they'll take voluntary pay cuts until the company emerges from bankruptcy.
The company's CEO, Robert Miller, will reduce his base salary from $1.5 million to just $1 annually and won't receive any bonuses. Delphi's president, Rodney O'Neal, will take a 20 percent pay cut, and other execs will forgo 10 percent of their salaries.
Declared Miller: "Delphi's transformation message must be unambiguous and marked indelibly by the commitment of Delphi's leadership."
Compare that with the top brass at PG&E, who last year handed themselves $83 million in bonuses while the San Francisco utility was still mired in Chapter 11 proceedings.
"It's become standard to reward executives for sticking around during bankruptcy," said Kirk Hanson, executive director of the Markkula Center for Applied Ethics at Santa Clara University.
"Cutting your pay sends a strong message to employees that management understands they're suffering," he said.