Posted on January 8, 2007

Health Care for All: Big Business to the Rescue?


As unlikely as it seems, big business may be the force that brings about universal health insurance.

By Daniel Gross
AARP Bulletin
January 2007

“It’s an outrage that any American’s life expectancy should be shortened simply because the company they worked for went bankrupt and abrogated health care coverage. And now we have a company like Ford virtually being bankrupted by the problem of rising health care costs, and yet you’ve got tens of millions of people with no health insurance.”

These words of frustration weren’t uttered by a union leader standing on a picket line. Instead, they came from billionaire Wilbur L. Ross Jr., number 322 on the Forbes 400, the former chairman of the International Steel Group and a major investor in U.S. textile, coal and auto parts companies. Ross made much of his fortune in recent years by restructuring bankrupt industrial companies, many of which were swamped by the escalating costs of insuring their aging work forces. He sees a need for some kind of government involvement in health care, and he’s not alone.

As unlikely as it seems, big business could emerge as the force that finally brings about universal health insurance. In the first week after the November elections, the CEOs of General Motors, Ford and Chrysler met with President Bush to discuss issues they faced, including health care costs. That same week, America’s Health Insurance Plans, a trade group of large insurers, released a 10-year, $300 billion proposal to provide health insurance for all children and 95 percent of adults—through a combination of tax breaks for individual taxpayers and the expansion of government programs such as Medicaid.

“I think we’re getting to a tipping point where this country is going to be willing to move on health care,” said Wal-Mart CEO Lee Scott in an appearance on the Charlie Rose show last year. “Business and labor are going to have to participate and probably play even more of a leadership role than government … and then bring the political side along with them.”

To Ross, the solution to America’s health care crisis is relatively simple. “We need some form of universal coverage that would be funded centrally by the government, but delivered privately through existing mechanisms like HMOs,” he said. The program, he suggested, could be funded by a tax on imports.

The discussion is clearly being prompted by bottom line issues: Soaring health care costs are a major problem for business. Companies in the United States compete against rivals in developed countries (Japan, Germany and France) where the government funds health care, and against developing countries (China, India) where neither business nor society at large is responsible for health insurance. Either way, American companies that provide health insurance are at a competitive disadvantage.

In 2005 money-losing General Motors spent $5.3 billion to cover the health costs of 1.1 million employees, retirees and dependents. Ross noted that, on a per-car basis, General Motors spends more money on health insurance than on steel. But Old Economy behemoths like GM aren’t the only ones suffering. “Since the beginning of this decade, health insurance premiums for average employers have increased 87 percent, compared with overall inflation of 18 percent,” said Joel Miller, vice president of operations at the Washington-based National Coalition on Health Care (NCHC), a nonprofit alliance of business, unions and consumer groups. These higher costs cut into operating margins and reduce the capacity of businesses to grow.

Thus far, the response from business has been to pass costs on to employees and reduce coverage. According to U.S. Census statistics for 2005, nearly 47 million Americans lacked health insurance, up from 40 million in 2000. And only 60 percent of Americans had job-based coverage, down from 63.6 percent in 2000—this after five straight years of robust economic growth.

Business leaders have traditionally been reluctant to call for a national effort to confront the issue. “We have people who map the genome or conquer the Internet who seem rather timid about speaking out on what’s good for the country,” said Andy Stern, president of the 1.8 million-member Service Employees International Union.

That reluctance began to change in 2004, when the NCHC—which includes large employers like Exelon, General Electric, Duke Energy and American Water—issued a report calling for comprehensive universal health coverage. The report laid out a range of options, such as expanding government programs like Medicare or letting people or businesses buy into the federal worker health plan. But while the organization’s corporate members endorsed the plan, its prominent CEO members haven’t publicly called for universal health care.

Experts like Drew Altman, president and CEO of the Henry J. Kaiser Family Foundation, say that personal ideology and lack of knowledge tend to block discussion on the subject. Case in point: Business leaders savaged the Clinton administration’s fruitless effort to create universal coverage in 1993. “Another factor,” said Altman, “is that these business leaders spend a small amount of time on the complex issue of health care. And many don’t really understand it.”

In addition, because most CEOs are focusing on creating returns for shareholders—and not on producing benefits for society at large—they tend to approach the question of rising health care costs as a business problem, not a social or political one. Some companies experiment with chronic disease management, ban smoking, invest in wellness programs, and depend on technology to manage costs. Others implement so-called “consumer-driven” reforms, like high-deductible policies or health savings accounts, which place responsibility for spending decisions in the hands of individuals, not insurers. The theory: Turning patients into consumers will help contain costs.

But now there are signs—including the NCHC report—that business is coming out of its shell and taking a receptive look at universal health care. Among the most vocal is Howard Schultz, chairman of Starbucks, which in May 2004 sponsored the Robert Wood Johnson Foundation’s “Cover the Uninsured Week.” “We can’t be the kind of society we aspire to be when we have 50 million people uninsured,” Schultz told Fortune recently. “It’s a blemish on what it means to be an American.”

Daniel Gross writes the Moneybox column for Slate and is a regular contributor to The New York Times.