Plug the health care drain
Spiraling insurance premiums threaten the state’s economic security. Moving to a single-payer system - public funding, private providers - just makes sense.
By Ron Forthofer
The Rocky Mountain News
March 24, 2007
Although health care is the top domestic concern of Americans, neither the Bush administration nor congressional leaders are willing to provide the leadership necessary to solve the crises confronting uninsured and underinsured Americans and U.S. businesses. Leading politicians continue to put campaign contributions from the health insurance and pharmaceutical industries ahead of the interests of other businesses and the American public. However, as U.S. businesses are faced with ever increasing health insurance premiums, more are willing to tackle the crisis and become a part of the solution.
In an October address, Dr. Henry E. Simmons, president of the National Coalition on Health Care, the nation’s largest health care alliance, said: “The escalation of health care costs is no longer only a health care issue. It has now created a gigantic national economic problem. For as these costs rise, they slow the rate of economic growth. By cutting into corporate operating margins, they reduce the capacity of firms to grow by investing in research, plant and equipment. And they put American firms at a steep disadvantage in world markets, where they have to compete against companies in countries with much lower health care costs.”
Ever-increasing health insurance premiums put small businesses in a bind. They often face the impossible choice of providing jobs or health insurance. In addition to the direct costs of insurance, each small business pays staff to deal with health insurance brokers/companies. Employers who can’t afford a staff person often conduct negotiations themselves. All this time and money spent on the complex array of health insurance “gotchas,” multiplied across thousands of small businesses in Colorado, represent millions of dollars that could be invested elsewhere.
Health insurance coverage also impacts the ability to attract and retain employees:
- If a small business doesn’t offer health insurance, potential employees may not consider its job openings.
- A business that offers insurance must be careful whom it hires since one person with a serious health problem could drive premiums sky high.
- A business providing health insurance is likely to have higher labor costs than a nonproviding competitor, putting it at a disadvantage in bidding situations.
Large businesses also are stymied. S. Gary Snodgrass, executive vice president of Exelon Corp., one of the country’s largest public utilities, said health coverage for its employees and retirees is its fastest-growing expense. Between 2001 and 2004, he said, those costs rose 70 percent, forcing the company to shift more of the burden to workers.
Ford Motor Co. spent almost $12,500 per hourly employee and retiree on health care expenses in 2002. William Clay Ford Jr., executive chairman of the board, said the rising cost of health benefits is the “biggest issue on our plate that we can’t solve. Health care is out of control. It’s a system that’s broke.”
In the fall of 2002, the Big Three automakers in Canada said: “The (Canadian) public health care system significantly reduces total labor costs for automobile manufacturing firms, compared to the cost of equivalent private insurance services purchased by U.S.-based automakers; these health insurance savings can amount to several dollars per hour of labor worked. Publicly funded health care thus accounts for a significant portion of Canada’s overall labor cost advantage in auto assembly, vs. the U.S., which in turn has been a significant factor in maintaining and attracting new auto investment to Canada.”
In June 2005, Toyota placed a new plant in Ontario instead of the United States, and health care costs were a key consideration.
The Canadian system reduces the role of the insurance industry - and, hence, the administrative burden on the health care system. Applying the Canadian model to the U.S. means that instead of having more than 1,200 private health insurers - each with its own costly bureaucracy and concomitant expenses - there would be only one group in each state dealing with administration. The Canadian health care delivery system is private, but the financing is public. It is a tax-based system costing far less than we pay in the U.S.
Health care expenses in the U.S. consume about 16 percent of our GDP vs. about 10 percent in Canada. The U.S. “system” is wasteful, with as much as 25 percent of premiums used for things other than health care. More importantly, the Canadian system covers everyone with comprehensive medical care, whereas our “system” fails to cover almost 47 million Americans, and another 30 million to 50 million are underinsured.
Studies by the Government Accounting Office and the Congressional Budget Office show that the single-payer system - public funding and private health care - can provide universal comprehensive coverage here and save money over the current failed market-based approach. These studies are supported by a May 2005 report by Kenneth Thorpe for the National Coalition on Health Care. Thorpe is the former top economist at the Department of Health and Human Services and now is chairman of the Health Policy and Management Department of Emory University in Atlanta. The report projected a saving of $1.1 trillion in the first 10 years under a universal, publicly financed system - even while insurance coverage is extended to every American and stronger quality measures are put in place, a far larger savings than other proposals for reforming the U.S. market-based health insurance system.
Under the single-payer approach, business saves because it would not waste resources researching health insurance decisions, and workers compensation costs would drop due to removal of the health care component. The playing field would be leveled in hiring and in competitive bidding. Uncertainty about health care costs would be eliminated. Large companies would boost their competitiveness in international markets.
Business can best protect its interests by supporting the single-payer bill now in Congress, H.R. 676. Among the 55 co-sponsors of this bill, none is from Colorado. If major surgery is not performed on the U.S. health care system, U.S. businesses and tens of millions of Americans will continue to pay a steep price for the failure to act.
Ron Forthofer is a retired professor of biostatistics at the University of Texas School of Public Health in Houston. A resident of Longmont, he was the Green Party candidate for governor of Colorado in 2002 and won 4 percent of the vote in Colorado’s 2nd Congressional District in 2000. He can be reached at ron_forthofer@yahoo.com.