Bail Them Out? Why Not Take Over Their Healthcare Instead?
The auto industry bailout is stalled. Opponents can't seem to decide what's most objectionable: the lack of punishment for bad planning, or the idea that taxpayer money is being used to pay decent wages. There's a proposal to force UAW workers to accept the wage levels paid in the US by foreign auto companies, but that only amounts to about $3 per hour or so. The average cost for employee health care in the US is more than that.
So here's another idea: Let's have the government assume the cost of providing health care to auto workers, and have it take the lead in deciding how those health dollars are spent. The financial picture for these companies would improve significantly if the government pays these costs for five years. And imagine what would happen if Tom Daschle directed the autoworkers health plan in his dual role as HHS Secretary and health reform chief. He could ensure that taxpayer dollars are being spent wisely, and he could build a working model for the reformed healthcare system of the future.
Come to think of it, those 2.5 million workers that will be working for the President's infrastructure program could be part of this new health plan too.
Here's one reason why this idea makes sense: Unlike other types of bailout, especially in the banking sector, a large portion of the health insurance dollar is spent in the first year of coverage. That means that most of this money will recirculate into the economy immediately, creating a short-term stimulus effect.
The automakers have some immediate cash needs, especially for $10 billion in outstanding bills. It would be reckless to allow these suppliers to go under. But overall, the numbers suggest that a plan like this could actually work. Here are some back-of-the-envelope calculations:
- Let's use one of the lower numbers being thrown around and say that 241,000 people work for the Big Three.
- Employer health plan premiums were $12,000 per year in 2007. It's gone up since then, but part of the cost is paid by the employee, and some employees will have health coverage through other sources (though not many in this case). So let's conservatively assume a per-employee cost to the Big Three of $8,000.
- That gives us an annual cost of just under $2 billion ($1,928,000) to cover these 241,000 employees. We would hope to reduce cost inflation, but we can't promise that. But even if this plan suffers a raging 10% inflation rate, the total cost of a five-year "health bailout" would be less than $12 billion -- which is below the $14 billion previously proposed.
And look at what else we would get. Secretary Daschle and his team could use this process to build a model Data Exchange and health purchasing process. Even more innovative programs could be carried out, too, especially in Michigan (where 149,000 of the Big Three's workers live). Electronic data records, online and in-person wellness programs, "medical homes," new incentives for providers and enrollees -- Michigan can become the breeding ground for new ideas, and the autoworker health plan can become the incubator for health reform.
What happens if you add 2.5 million infrastructure workers to the mix? You have a nationwide canvas for sketching out new reform ideas before rolling them out to the nation as a whole. Then there is the problem of retired autoworkers. The unfunded liability for their health care has been estimated at nearly $100 billion. These retirees could be folded into the plan, too.
What are the objections? Some will say that this is government-run health care. But the government will be paying for it anyway, no matter what happens. So why not manage our money wisely? And the President-elect's reform proposals don't call for single-payer, but for a blend of insurance programs. Even with government oversight, it will be a private-sector initiative. (I'd vote for a Medicare coverage option, though.)
There are also those who will object because it doesn't punish the car companies enough for their bad decisions. That's a discussion for another day, but here's a thought: The car companies may deserve punishment for poor management, or for not building cars people want. But the credit crisis is not of their doing, and the lack of car loans is what's hurting them most right now. The "serenity prayer" fits here: The car makers should change what they can change as a condition for aid. But there are some things that are beyond their control. We taxpayers, the ones who are bailing them out, should have the wisdom to know the difference.
Paul Krugman says that the current geographic concentration of the auto industry can't continue, and he's undoubtedly right. But that doesn't mean the transition can't be managed wisely and imaginatively, especially where employee health is concerned. And if we're paying the bill, why not use our money to leverage some real change?
______________________
RJ Eskow blogs when he can at:
A Night Light
The Sentinel Effect: Healthcare Blog
Follow RJ Eskow on Twitter: www.twitter.com/rjeskow
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
About your numbers -
That $12,000 represents an entire benefit package which includes pensions/401k, education training, paid vacation, holidays and sick time.
I recently wanted to negotiate salary for a new job. I have health insurance and so I wanted to be compensated with money. I was shocked to find out that the average rate paid for health insurance by midsize companies is only $2400 a year. I went online and did more research and I found that an individual policy with Oxford with drug coverage cost close to $13,000 a year but if I purchased a similar Oxford plan through HealthyNY (a buying group) I could pay a little less than $3600 per year.
http://www
Provides additional facts on health care and the auto industry. Please note that new employees can only get HMO or PPO insurance and there are some retirees that receive less than $8000 a year as their pension. Also, a separate fund has been set up to offset the cost of retiree benefits.
I think it is safer to say that the corporations are paying probably closer to $3000 for actual health insurance for a total of about $75 million dollars per year.
Bottom line - paying for their workers health insurance won't be enough. They will try to end paid holidays, paid vacation, paid sick time, education, training, etc.
BTW - I wonder what kind of health insurance the CEOs have. I doubt they are in HMOs
The 2007 energy bill HR6 promised the auto companies loans and subsidies. This was passed into law last year.
http://tho
Subtitle B: Improved Vehicle Technology
"Directs such Secretary to establish a program to provide up to $25 billion in loans for the costs of such activities. Requires loan applicants to provide written assurances that laborers and mechanics employed by contractors or subcontractors during construction, alteration, or repair financed by such loan shall be paid wages at rates not less than those prevailing on similar construction in the locality."
This has nothing to do with health care other than Detroit playing a game to get what they have been after for many years - stop paying health care costs. it is because they are greedy not needy.
Now here's the solution to the problem of competition with the world that big business has resisted for so long. We absolutely need to go to a single payer system that has the buying power and the bargaining power to stop the rapid inflation in cost of health care. Had the Big Three and all of the rest of Industrial America come to their senses years ago, we would be much more competitive with the rest of the industrial nations of the world. This one thing has made the US lag far behind the other nations of the world. The big business lobbyists, confident in their ability to keep health care cost lower by their management, have been found to be lacking in the basic forecasting ability in the field of their business, not to mention the utter failure of being able to forecast another industry entirely.
The power to regulate society must be taken away from the captains of industry, those who have shown themselves to be the captains of our Titanic, steaming full speed ahead into the icefield of this financial disaster.
Your numbers (12 $bl over 5 years) appear to leave out the additional cost of care and feeding. You do plan to give them housing and food too, right?
I was disappointed; I thought we were going to hear how universal health care's time had come.
.
"Working model for the reformed healthcare
The only reason to do some half-assed, introductory program is fear of Rush Limbaugh. Give us a break.
It's propaganda, my man! It's funded by the vicious circle of Big Pharma and Big Insurance and the Imperial AMA.
Unlike insurance companies big pharma does not care about how you pay for your drugs and how much the government participation is. Development costs are fixed and there is little one can do about that (except for doing away with the clinical trials, maybe, but I don't think you would want that). That money has to come back or nobody will develop drugs any longer. You may not like that but reality is a bitch and on this one she slaps rather hard.
KTM, what you've said simply doesn't make sense. Pharma cares a huge amount about how people pay for their drugs, and they care even more about government participation. Who do you think wrote the legislation that enabled Medicare part D (prescription drug coverage) so that it precludes government using its power to negotiate for lower drug costs? Who do you think was behind the lobbying efforts that made it illegal for US citizens to buy drugs from other countries where the prices have been driven down by actual competition or government intervention?
As to there being "little" that pharmaceutical companies can do about development costs, you'd be surprised. A ridiculous number of drugs are re-released for new indications, sometimes even creating entirely new diagnoses, so that patents can be extended and/or renewed. (Case in point: Zoloft, originally for depression, is now recommended for "social phobia".)
As for doing away with clinical trials, Pharma has been successfully suppressing negative studies for years. Many have been pushing to create a clinical trials registry, so that the results of ALL trials must be published. This will prevent another vioxx controversy, where the company successfully marketed a medication for years despite having internal evidence from its own clinical trials of an association with heart attacks.
I think you're a little confused as to who is the b**ch and who is getting slapped.
You nailed the problem, Big Pharma, Big Insurance and the AMA. They have their hands so deep in our pockets, I am afraid to look at it. Get rid of these three and the US would have a decent, working health care system.
Super! All the conservative bragging on the lower worker costs of foreign manuf's I've been yelling back at for so long: yeah, their governments subsidize the health care!! Duh duh duh!! Solution when they come here? Rhapsodize out of one side of the mouth about how the American Worker is better than anything anywhere, then sell the American Worker out cheap with no benefits.
The "blend of insurance programs" you describe as Obama's reform plan is a loser. The "conservative" propaganda machine loves to screech about "Government bureaucracy," but the current system is a massive bureaucracy of moral bankrupts who are able to internalize a primary objective of DENYING care to maximize profits. How could a substituted government bureaucracy be worse? Just add a re-employment plan for the grunt insurance adjusters who so need to be re-finding their souls somewhere!
You've made an eloquent case. It leads, logically, to the broader question: What conceivable argument can be mustered against a government
The mathematical model is yet to be invented which makes a coherent economic argument in favor of private, for-profit health care insurance. No one can figure out how to justify bureaucratic duplication, payroll overhead, office space, clerical overhead imposed on providers, dividends for stockholders and those obscenely generous administrative packages.
Meanwhile, Medicare quietly goes about its business, making an absolute mockery of private health insurance.
Yes yes yes!!! I had my appendix out in Great Britain many years ago, and my insured American parents wanted to pay. There was no office, no forms, no bureuacrat to generate a billing.
The moment is crying out for this sort of imagination. I always thought it would require a catastrophe to jar us into a rational health care policy. This appears to be a dynamic opportunity.
I am absolutely in agreement with your comments, both about the mathematical absurdity of for-profit health insurance, and also about the necessity of a single-payer system.
Anybody interested in joining advocacy efforts for single-payer health care should check out the web site of Physicians for a National Health Program, at http://www
The difference between success and failure of the Big 3 could very well involve the presence or absence of employee health care costs in the cost sheets of the Big 3. Removing health care costs from them would put them on a level playing field with their foreign competitors that currently assemble cars here in the USA. This may be an obvious solution but for some reason the subject will be avoided by those that have the power to dictate policy. It could also be argued that removing health care responsibilty from all American manufacturers would create a level field for American industry in a global economy.
The United States is the only industrialized nation that does not have universal or government health care. It way past the time that the United States nutted up and covered every one. The two times I have been in the ER heart attacks, I out of the 30 people present had health care. I am here today because I had health insurance and the hospital er unit took excellent care of me. I have lived in two countries that had government health coverage Australia and France. Their worst coverage was better than the coverage the average citizen has here. It is criminal that one of former wealthiest nations on the planet, could not would not cover their citizens. It is way past time to rid our selves of reagan, bushy, and republican blah blah blah about health care.
It's about time we had national health like a wealthy, industrial, cvivilized nation.
I don't get the common viewpoint among Americans that national health is too expensive, & providing health care to all would somehow deflate the productivity of workers - while the wage & benefits packages of union workers are decried as some sort of drain on capitalism because they take up a larger proportion of American automakers' budgets compared to foreign automakers' budgets (glossing over the fact that automakers in nations with national health don't have to purchase expensive health insurance from for-profit corporations). If we don't provide national health care to all (including auto workers), and cut the benefits and wages to auto workers, what happens to auto workers and their family members who get sick?
Fantastic! That is just what I said last week. It would be good for the government to take over a business expense that corporations always whine about anyway. This would take a burden off the auto industry (permanently, forget just five years) and move us in the right direction for national health care.
Great idea; I agree that the government should guarantee healthcare like they do in developed countries. The government couldn't possibly screwup healthcare worse than it already is.
The sad part is that labor is not the automakers problem. Toyota has been making the Prius for a decade and we are making Hummers.
Along with some loan guarantees in exchange for equity and immediate changes in their tactical and strategic plans to green their auto lines and their manufacturing processes, and serious consideration for Michael Moore's other suggestions, relieving the Big Three of their health care costs is an excellent idea. And yes, I'd favor the Medicare option as well, or possibly a blended Medicare/VA option in which the government buys/builds/manages medical infrastructure in the Detroit region for those autoworkers, and does the Medicare thing elsewhere.
See Maggie Mahar's Profile
Unfortunately, if we try to bail out the autoworkers' healthcare,
without making the structural reforms our health care system
needs, we will be pouring money into a broken system--
throwing good money after bad.
Over two decades of research done at Dartmouth shows that
$1 out of $3 healthcare dollars are wasted on unnecessary
treatments and hospitalizations, redundant tests, and ineffective,
unproven new drug and procedures that often are no better than the
products and services that they are trying to replace.
This isn'; just costly--it's hazardous waste--hazardous to our health.
By throwing money into this system, we'll be "stimulating" the economy in
the sense that we will be growing the most bloated, most lucrative parts of
for-profit healthcare--rather than giving people the prevenitive care and
chornic disease management they need. (Because preventive care and
disease management are not lucrative, our money-driven system
skimps in these areas.)
.
Scroll down to read my post here on Huffington about all of this-
"On Health Care Reform Stimulating the Economy: The
Example of Massachusetts"
Hey, 2$ worth of care for 3$ is a lot better than
700B$ for nothing.
Only for the first five months of the year, after that it's a loser.
:-)
This is the way to start changing that, Maggie - by using our bailout dollars to design, implement, and manage a system that really works.
See Maggie Mahar's Profile
RJ--
Healthcare dollars are fnite--and before "bailing out" people who are earning more than median income, we should focus on the poor.
SCHIP needs to be expanded, and we need to give the states more money for Medicaid. Our youngest and poorest should be our first priority.
Secondly, Medicare is going broke. IT's hospital fund has been paying out more than it takes in in taxes for several years. The average Medicare recipient earngs $20,000 a year (that includes Social Security, dividends, capital gains, every penny that comes in.)
That's significantly less than autoworkers. Meanwhile co-pays and deductibles for Medicare have been soaring.
Medicare is in the best position to experiment with new ways reforming the system by paying for quality, comparing the effectiveness of treatments when deciding on co-pays and fees for doctors. And Medicare has the clout to stand up to the lobbyists.
Auto-workers should get unemployment insurance, job training, and if they are truly broke, Medicaid. But by and large, they are not the neediest people in America.
Get a grip, sister! What you describe is the result of insane inflation of costs CAUSED BY A PRIVATE INSURANCE SYSTEM!!!!! If (some) people aren't paying actual market values, and Big Pharma wants to show monster numbers, then whoopie, who cares what the number is? If the hospital can't bill a zillion dollars for a test, there's no incentive to order high-profit-margin "redundant" tests.
And government negotiation works. I am a beneficiary of a government plan, and accidentally got billed "full" (read "made up from thin air") price for a blood test. Oops. No, the provider contracted for a price with the government that probably had some remote connection to real value. Who knows how many scales there are?
One way or another, the private insurance system has to go. Either insure nobody, and subsidize no R&D so Big Pharma can't steal the profits from the taxpayers, or let "Big Government" try to figure out what services are really worth. With no insurance, there would be a crash in incomes of doctors and drug companies. I guarantee you they would suddenly be singing the praises of Big Government
You must be logged in to comment. Log in or connect with
