Health costs will cause more strikes
By David Lazarus
San Francisco Chronicle
Friday, December 23, 2005
The devastating transit strike that left New Yorkers trudging through the cold this week probably made more than a few Bay Area residents think, “Glad that’s not happening here.”
Think again. It will happen here.
Perhaps not involving BART or the Muni. Perhaps not involving transportation at all. But experts say a major strike in any of a number of vital industries is all but inevitable, and the reasons are the same as those that drove New York transit employees off the job.
Pensions and health care.
“Employee benefits are a very big deal in labor issues,” said David Cutler, a professor of economics at Harvard University. “Pensions and health are the main costs companies face, and they don’t know what to do about them.”
In fact, many companies are addressing the pension side of the equation by abandoning traditional defined-benefit plans and moving instead toward defined-contribution plans like 401(k) programs.
This may not relieve employers of their obligations to current and soon-to-be retirees, but will help limit future liabilities.
Cutler said health care is much trickier because spiraling costs are beyond the control of employers and employees.
“This is an issue that’s only going to get worse,” agreed Michael Chernew, an economist and professor of health management and policy at the University of Michigan.
“Health care costs are going to keep going up and somebody will have to pay for them,” he said. “This will be a fundamental challenge for the country for decades to come.”
While pensions emerged in recent days as the main point of contention, health care was one of several key issues at the heart of the New York transit strike.
The strike ended Thursday as workers and the Metropolitan Transportation Authority agreed to resume negotiations.
Prior to the settlement, the transit authority said it wants all employees to cover higher co-payments for prescription drugs and visits to doctors’ offices.
It also wants workers to pay a portion of their health insurance premiums. Workers now make no such contribution to their plans.
The transit agency said it wants to raise the retirement age to 62 from 55 and wants new employees to contribute more to their pensions.
It’s also offering a significantly lower wage increase than sought by workers, despite running a reported $1 billion budget surplus.
At this point, it’s unclear where the two sides stand on these matters, although reports Thursday indicated that workers are now prepared to discuss paying part of their insurance premiums.
“The big problem is that health care is getting expensive faster than wages and other compensation are going up,” said Pamela Farley Short, a professor of health policy and administration at Penn State University.
“We’re going to be using more health care, not less, in the future,” she said. “A particular difficulty is all the people who will be retiring soon who have high expectations for getting all the health care they desire.”
With medical costs rising by double digits annually, this will be increasingly hard for coverage providers to deliver. And major employers nationwide are already cutting back their health care obligations to workers and retirees.
In October, General Motors, the country’s biggest private-sector purchaser of health insurance, said it will slash its $5.6 billion annual health care spending by about $1 billion a year.
In July, a strike by BART employees was averted after workers agreed to increase their health care contributions from $25 to $75 a month starting in January. Their contributions will continue to increase by 3 percent annually.
Health care also figured prominently in the bitter strike by Southern California supermarket workers two years ago.
This is indeed a problem that’s going to get worse — much worse — before it gets better, with repercussions that will be felt throughout the economy, and by virtually all workers and consumers.
As it stands, each labor action, and each subsequent remedy, will only prolong our suffering by perpetuating a health care system that squanders billions of dollars every year in bureaucratic overhead.
About a third of the nearly $2 trillion in annual health care spending in the United States goes to clerical matters, not treatment, according to researchers at Harvard University. This is due primarily to the wide array of private insurers involved.
At the same time, U.S. census figures show that a record 45 million Americans lack health coverage of any kind — an extraordinary statistic for a nation that leads the world in medical research and technology.
I’ve written repeatedly about how a single-payer health care system, similar to Medicare, 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. They’re far from perfect, with long waits for treatment a frequent complaint.
But the state-run programs, in which tax money is allocated to medical facilities nationwide, ensure that any citizen can receive care from any doctor at any hospital.
“The devil’s in the details,” said Chernew at the University of Michigan. “It could be substantially worse than the system we have now or substantially better.”
Similarly, Penn State’s Short said the trick to making a single-payer system work in a nation as diverse as the United States is being able to accurately and fairly determine health care costs and the best allocation of medical resources.
“I don’t know if there’s anyone smart enough to do that,” she said.
My thinking is that we need an independent body similar to the Federal Reserve, which oversees U.S. monetary policy.
The health care system would be monitored and guided by an Alan Greenspan-like figure who is beholden to no special interests or political parties and who could innovate as required to keep the standard of treatment in the United States second to none.
These are tough issues, to be sure, requiring heretofore unimagined depths of political courage to make a reality.
On the other hand, if such a system currently existed in this country, it’s a fair bet that a whole lot of New Yorkers wouldn’t now be soaking their tired tootsies in hot baths.