High Costs Signal Emerging Crisis


THE strikes against four regional telephone companies are the first skirmishes of a much larger battle in the United States. The issue is the alarming rise in health-care costs. The tug of war is over who will pick up the tab.

Will it be employers? Workers? Or will federal or state government step in with some other solution? No consensus has yet emerged on the issue, only an abiding sense that a crisis is developing.

``It's beginning to get the attention of top management,'' says Wendy Gray, employee benefits specialist for the Conference Board, a business-backed research group in New York.

The trends are clear:

Employers shoulder most health-care costs. In 1986, for example, employment-based health-insurance plans covered nearly two-thirds of the nonelderly population, according to the Congressional Research Service.

Health-care costs are rising dramatically. Ten years ago, a company paid an average 3 percent of a worker's wages to provide health-care services. Today, the average is more than 12 percent, according to the Wyatt Company, a New York-based benefits and compensation consulting firm. Last year alone, the cost of employers' health-care plans rose an average 18.6 percent, according to A. Foster Higgins & Co., another New York consulting firm.

These increases are out of line with the rest of the industrialized world. In 1960, the US devoted 5.2 percent of its gross domestic product to health spending - 27 percent higher than the average of 23 countries in the Organization for Economic Cooperation and Development. By 1986, that gap had widened to 52 percent. Also in 1986, every US citizen spent an average $1,926 on health care, compared with only $1,195 for a Swede, $1,031 for a West German, and $831 for a Japanese.

``There's going to have to be a change in perception,'' says Lance Tane, a Wyatt Company consultant. ``We as a society are facing probably one of the biggest social issues of the 1990s.... We are not willing to admit that there are limits to the amount of medical care that we can afford.''

The most recent evidence of the growing problem came on Aug. 6, when some contract talks at three regional telephone companies broke down and 156,000 union workers went on strike. On Aug. 13, failed contract talks at a fourth regional concern led to a strike. All four companies - Bell Atlantic, NYNEX, Pacific Telesis, and Ameritech - have demanded that workers begin paying part of the cost of their health-care benefits.

Union negotiators for the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers have rejected the idea.

``There is a crisis, no doubt about it,'' says Steve Rosenthal, a CWA spokesman. But ``cost-sharing is a totally bogus solution to the health-care cost crisis.'' The real answer lies at the national level, he contends, where federal legislation can begin to address the high cost and inequities of health care.

Two other regional telephone companies - US West and Southwestern Bell - have averted a strike by offering lower wage increases in exchange for continuing to fund 100 percent of their workers' health benefits.

But by continuing full funding of health-care benefits, the telephone industry is going against the grain. Recent surveys show that major corporations are moving toward cost-sharing. For example, the percentage of companies offering full reimbursement of hospital room and board charges fell from 53 percent in 1984 to 29 percent last year, according to Hewitt Associates, a benefits consulting firm in Illinois.

Experts are split on whether this trend will continue. Ms. Gray of the Conference Board says large companies will avoid disgruntling workers by cutting benefits and will, instead, continue seeking other creative ways to contain costs. But Mr. Tane of the Wyatt Company expects the trend toward cost-sharing to continue. The main thrust, he adds, is not to shift costs to workers simply to make them more conscious and judicious in how they use those benefits.

These increased costs are certain to lead to more pressure on Washington to do something about health care.

Even businesses are lining up to support federal legislation that would mandate certain health-care benefits, says Lawrence Mishel, research director of the labor-backed Economic Policy Institute in Washington, D.C. He says one steel executive told him he supported socialized medicine.

On the other hand, Tane says, the American penchant for choice probably means an overhaul of the current private system, where ultimately, economics will answer the twin questions of how much health care and who pays.

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