GM DEAL: Cries of pain mix with sighs of relief
By Michael Ellis
Detroit Free Press
October 21, 2005
The UAW unveiled details of the much-anticipated health plan Thursday. Under it, retirees would have to pay monthly premiums and annual deductibles.
Active hourly workers at GM would defer $1 an hour from pay increases they were due in 2006, or about $2,000, into a fund to pay for their health care. By the end of 2006, that deferral would increase by 2 cents an hour every quarter.
With the concessions, GM hourly retirees would pay a maximum of $752 per family each year for health care, or $370 annually for an individual, plus co-payments for prescription drugs.
The package would create a defined contribution plan to help pay for health care costs. GM plans to contribute $3 billion — with $1-billion payments in 2006, 2007 and 2011. Wage deferrals by hourly workers would help fund the plan, which the UAW would administer.
“It’s a concrete demonstration of the health care crisis in our country,” said Richard Block, a labor professor at Michigan State University. “Everybody’s getting poorer because of health care.”
http://www.freep.com/money/autonews/gm21e_20051021.htm
Comment: This is the end of an era. The auto industry is the largest and the last of private employers to have provided complete health care coverage as a benefit of employment. They have now introduced cost sharing and defined contribution funding which transfers to the employee some of the responsibility for funding care.
The changes are quite modest compared to what has already happened to employer-sponsored coverage in other industries and services. Larger deductibles, the shift to coinsurance from co-payments, defined contributions in segregated accounts, innovative reductions in benefits, and other measures have all served to shift more and more of the costs from the employer to the individual.
All of this is in the name of making health coverage more affordable to the employer. The obvious trade-off is that it makes health care less affordable to the individual. This shift addresses the employers’ concerns over escalating health care costs, but in shifting those costs to the employees, it does absolutely nothing to address the fundamental underlying problem. Health care costs continue to skyrocket. Shifting those costs to the hapless employee can have only one outcome: the employee and his or her family members will be empowered to not receive the health care that they can no longer afford.
Although it seems that this is simply the end of the era of 100% coverage, we are really witnessing a process that will end the role of the employer as the guarantor of health care services. As the cost of coverage continues to rise, employers will further reduce or even eliminate benefits. The financial burden shifted to individual employees will be truly excessive and the entire employment-based system will collapse.
Anticipating this, many policymakers are encouraging a shift to the individual insurance market, a market that is characterized by underwriting requirements, greater administrative costs, Spartan coverage, higher cost sharing, and a relaxed regulatory environment. Individual coverage, as a universal or near-universal system, will never fly because it will be so heavily weighted down with financial burdens that it cannot possibly get off the ground. The reason that our fragmented system of individual and group plans is doomed is that they are unable to address the overriding issue: escalating health care costs.
To control costs, a system must be in place that is targeted to cost excesses. The tremendous administrative waste can be dramatically reduced by using a single, efficient administrative payer. Wasteful high-tech excesses can be reduced by ensuring appropriate capacity through planning of capital improvements, budgeted by a single payer. Greater efficiency can be established by strengthening our primary care infrastructure through incentives established by a single payer. Excessive pricing can be reduced through negotiation with a single payer.
Although the employment-based system is self-destructing, and the individual market will never get off the ground, the good news is that we can achieve affordable access to comprehensive care for everyone. As the current system continues to implode, the logic of a single payer becomes ever more apparent.