from business, urgent cries for reform
PITTSBURGH — If the average American is worried about skyrocketing health-care costs, business is steaming.It's getting harder and harder for employers to pick up their employees' health-care tab. For example: * General Motors Corporation spent $3.2 billion on health care last year. That amounts to $772 for every car and truck it made in the United States. * American Telephone & Telegraph Company shells out $3 million every day to pay for its employees' health-care benefits. Most small businesses have been hit even harder. "You have an enormous amount of frustration in the small-business community," says Carolynn Miller, a lobbyist for the National Federation of Independent Business. "It's like being dragged by a horse," says Lawrence Atkins, a health policy analyst at the law firm of Winthrop, Stimson, Putnam & Roberts. Employers "can't control the speed of the horse or its direction. All they can do is lift their head a little bit" to lessen the bumps. The businesses with the bumpiest ride have older workers and a greater proportion of retirees. Many companies are pushing for a national solution to the health-care crisis. "Obviously we're concerned," says John Maciarz, a spokesman for GM. "We're supportive of national health-care reforms." Rival Chrysler Corporation sees a direct international threat. While Chrysler spends some $700 per car for health care, the automaker estimates its Japanese competitors pay only $200 to $400. The problem is less acute for other companies - those with younger employees, fewer retirees, or those fortunate enough to be in industries where they can pass on the costs to consumers without losing sales to competitors. "It's like a TV dinner in a microwave oven," says Bill Custer, characterizing businesses' reaction to the spiraling costs. "Certain sections are getting hot. But it's uneven." Mr. Custer, director of research at the Employee Benefit Research Institute in Washington, D.C., says that as the heat intensifies, more businesses will jump onto the bandwagon of national health-care reform. Last year, the average US employer spent $3,161 on health care per employee, according to a survey by A. Foster Higgins & Co., an international benefits consulting firm based in New York. That represented a 21.6 percent annual jump in costs - twice the overall medical inflation rate. Should that pace continue through the rest of the decade, the average employer in the year 2000 would pay $20,000 or more per employee just for health insurance. Analysts don't believe that American business will put up with that cost-spiral much longer. "By 1994 or 1995, the problem will be severe enough that some companies will have to make decisions whether to carry health insurance at all for their employees," says Michael Cadger, a principal with Foster Higgins. "The majority of employers in the United States feel that something should be done about health-care costs," Custer adds. "It's the 'what' that nobody can agree on." At the moment, business is hesitant and divided over the issue. Part of the problem is that health-care itself is big business. Doctors, hospitals, drug manufacturers, insurance companies, and others profit from the current system. Even companies not usually associated with medicine have an important stake, Custer says. Kodak and General Electric make medical equipment. IBM sells computers to hospitals and doctors. Oil companies make plastics for the medical industry. Companies are also deeply distrustful that government can solve the problem without adding a whole new layer of costs. When the federal government enacted Medicare in the mid-1960s, health care represented 6 percent of the nation's gross national product. Today, the medical industry claims more than 12 percent of GNP. "Massive help from the government can sometimes translate into mountains of paperwork," says Burke Stinson, a spokesman for AT&T. "That the country doesn't need. At the same time, incremental baby steps and Band-Aids are not what the country deserves either." What kind of system would the business community like to see? It has not yet reached a consensus. But health-care analysts expect the new system will involve incremental reform rather than a wholesale adoption of another country's system. Reform might include: Reduced cost-shifting. Doctors and hospitals often treat Medicare and uninsured patients at a loss. They make it up by charging other customers a premium. As large businesses negotiate their own deductions, those higher costs are shifted to a shrinking pool of small businesses and insured individuals. Carol Cronin, vice president of the Washington Business Group on Health, expects national reform will coordinate public and private responsibilities, so that cost-shifting will be minimized. Federal and state governments will take up part of the problem with probably some role for the employer community. Individuals will have to pay part of their employer's health-care costs and, probably, higher taxes as well. Cost containment. Business is likely to go along with national reform that extends benefits to the 33 million uninsured Americans, but only with a key tradeoff, Mr. Atkins says. Congress will have to put a meaningful cap on the rise in health-care costs. "My goal would be to reduce the rate of growth in the system," Atkins says. "Six to 7 percent [a year] would be acceptable." The National Leadership Coalition for Health Care Reform, which includes business, labor, and other interest groups, this month proposed a plan that would give businesses a choice. Either they provide their own health-care plan or pay a 7 percent tax to participate in a government-sponsored program similar to Medicaid. A national review board would set rates for health services, create standards for quality care, and issue annual spending targets that would gradually bring the cost spiral under control.