Unions lay down marker on healthcare costs

Worker walkout this week symbolizes how increasing healthcare costs have risen to the top of labor agenda.

On the frigid dark Tuesday morning, the only warmth provided by barrels of fire, Patrick Ryan picked up a picket sign at the General Electric plant in Lynn, Mass., and fired what he believes is the first salvo in a renewed fight to preserve American workers' healthcare benefits.

"This isn't just about GE, it's about the healthcare system in the country as whole," says the 22-year veteran of the aircraft engine plant. "It's radically broken and people are beginning to recognize that."

Mr. Ryan is one of more than 17,000 workers nationwide taking part in a two-day national strike to protest a hike in out-of-pocket expenses at one of the nation's largest and most profitable corporations.

With healthcare costs spiraling upward into the double digits once again, thousands of companies like GE - recent surveys suggest as many as 75 percent of American businesses - are now asking workers to share a larger burden of the costs. That's pushed healthcare benefits to the top of the list in labor negotiations across the country. And experts say today's strike is a harbinger of many more demonstrations to come.

Indeed, the labor unrest over health costs is expected to prompt calls for a major reform of the healthcare system, just as it did in the late 1980s when the increasing cost of healthcare first jumped from the negotiating table to the picket lines. That spurred the first major effort at reform of the healthcare system in a generation. But, with a potential war on Iraq, terrorism, and daunting budget deficits, this time it could be several years before healthcare again rises to the top of the nation's agenda.

"I see things deteriorating and lots of [GE-style] stories over the next few months," says Robert Blendon of Harvard's School of Public Health in Boston. "But I don't see government stepping in until the 2004 elections and then voters would have to say they want a more activist government on healthcare."

A warning shot over the bows

The ostensible reason for the strike is GE's Jan. 1 decision to increase workers' copayments by between $200 and $400 a year. But union leaders contend there's a larger symbolic goal: to put management on notice that when contract negotiations come around this summer, workers won't tolerate paying more for healthcare.

From their perspective, management and corporate America in general are failing to deal with the real problem, which is the nation's broken healthcare system. Instead, they're simply passing the increased costs along to workers. That's a prescription, union leaders contend, guaranteed to cause the system to unravel even further, leaving more Americans uninsured and insecure.

"This is a downpayment on the future," says John Hovis, president of the United Electrical Radio & Machine Workers of America, one of the two unions leading the strike. "We're trying to get people to understand the real need for healthcare reform."

For companies, worries over costs

General Electric doesn't disagree that the healthcare system is broken. But spokesman Gary Sheffer says there's "no magic pill" to fix it and the company's immediate goal is to cope with rising costs. Since 1999, the amount that GE pays for healthcare has jumped 45 percent, from $965 million to $1.4 billion.

General Electric workers currently pay about 16 percent of their healthcare costs, compared with a national average of 22 percent. While GE profits increased 7 percent last year, its costs for healthcare jumped 14 percent.

"Even after these increases, our employees will still have great benefits and they'll still be paying a reasonable cost for them," says Mr. Sheffer.

Mr. Ryan agrees he's got great benefits. That's not what's prompting him to spend two nights this week with ice-cold feet on the picket line. He wants to ensure that his benefits aren't eroded further and, at the same time, raise public awareness about the problems with the healthcare system.

"It's a disgrace this country doesn't have a national healthcare system," he says. "We need to get the word out."

During the late 1980s, it was such orchestrated union activity, particularly in Pennsylvania, that first thrust the healthcare crisis into the political realm. While costs had been rising for a decade, it wasn't until companies began requiring workers to pay more - which led them to hit the picket line - that politicians picked up the call for comprehensive healthcare reform.

But after the failure in 1994 of the Clinton healthcare package, calls for systematic overhaul all but disappeared. They were considered politically untenable. At the same time, the growth of managed care companies which emphasized preventive care and efficient use of resources helped rein in the costs. That gave the appearance that the marketplace was solving the problem. But it turned out to be only an appearance. Once the managed-care companies squeezed inefficiencies out of the system, prices rose again. And the number of uninsured Americans just kept growing.

"We're at a critical juncture here once again, everything that should be going down is going up," says Ken Thorpe, a professor of health policy at Emory University and one of the architects of the Clinton healthcare reform proposals.

While many similarities exists between now and the late 1980s, from the public's increasing awareness of the problem to the erosion of health coverage, Professor Thorpe says there is one fundamental difference. This time there is no private institutional fix such as managed care waiting in the wings to help bring down health costs.

A search for viable solutions

Some analysts disagree. They argue that if workers pay more for their coverage, they'll use healthcare services more sparingly and that will help keep overall costs in line. But others contend that free-market motives just don't work in healthcare. After an accident, few Americans take the time to shop around for the cheapest hospital. They simply want the best care for their loved one and don't care how much it costs.

"It's very understandable that corporate America is in deep trouble with these rising costs," says Dr. Henry Simmons, president of the National Coalition on Health Care in Washington. "But I don't think passing the costs on to the workers is the answer. Both corporate America and their employees - and the rest of society - has to come together and make the major reforms in the health system. That's the only way that it will become affordable and universal."

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