Hershey Workers Approve Contract
The Washington Post
June 9, 2002
Associated Press
HERSHEY, Pa., June 8 -- Members of Chocolate Workers Local 464 voted overwhelmingly today to approve a new contract with Hershey Foods Corp., ending the longest strike in the company's history.
The main issue had been health care costs. Under the previous four-year contract, workers paid 6 percent of their health care costs, and the company wanted to increase the workers' share to 12 percent over four years.
The agreement kept the workers' share of health care costs at 6 percent in exchange for a smaller wage increase.
Bob Oakley, head negotiator of Chocolate Workers Local 464:
"The people were adamant about it."
<http://www.washingtonpost.com/wp-dyn/articles/A18413-2002Jun8.html>http://www.washingtonpost.com/wp-dyn/articles/A18413-2002Jun8.html
Comment: Hershey workers made a decision to pay more for continued health care security by using their own wages. This is an explicit example of the contention of most economists that health benefits provided by the employer are actually a part of the employee's total compensation package. Employer-provided health benefit programs are funded by reductions in employee wages.
Health care costs continue to escalate because of the failure of our market approaches in containing costs. The Hershey experience makes it very clear who is paying these increased costs, and that is the individual employee.
Another lesson is that Americans do want to preserve comprehensive programs of health insurance in order to provide them with financial security in the event of significant medical expenses. That has always been the most important function of health insurance.
A common claim is that insurance is only for the purpose of insuring catastrophic loss, and that individuals should be responsible for "routine" expenses. Major acute or chronic disorders create "routine" expenses that are unaffordable for many moderate and low income individuals. Even very modest cost-sharing has been demonstrated to impair outcomes because of the financial barriers to care.
Chocolate Workers Local 464 has drawn the line on shifting risk to those who have the greatest health care needs. Let's hope that the rest of the nation is inspired by their wise decision. Once this threat is quashed we should move forward with establishing a single national risk pool for everyone. A monopsonistic program of national health insurance would reduce health care inflation while assuring that our abundant health care resources would be effectively targeted to patient care. Then, finally, we would all have health care security that is affordable.
The New England Journal of Medicine
June 6, 2002
What's Ahead for Health Insurance in the United States?
By Victor R. Fuchs, Ph.D., Stanford University
The announcement that most of the nation's biggest insurers - Aetna, CIGNA, Humana, the United Health Group, and Wellpoint Health Network - will be introducing a new kind of health plan during the next year or two signals the beginning of a new era in health insurance in the United States. These plans feature a complicated menu of premiums, copayments, and deductibles that will add impetus to the trend of employers' offering a defined contribution for health benefits. Each employee will get a fixed amount of money to spend as he or she sees fit and will use the Internet to "shop" for medical care. The plans will encourage the use of medical savings accounts in combination with catastrophic-illness insurance to cover expenditures that exceed a large deductible. One of their major effects will be to shift the burden of health care costs from employees who use little care to those who use more. Thus, the new plans will be another nail in the coffin of health insurance as a form of social insurance.
(Dr. Fuchs then discusses the erosion of social insurance, the advantages and disadvantages of the new plans, and the problems with reliance on catastrophic-illness insurance. He then closes with the following comments on the reemergence of social insurance.)
The case for the fairness of the social-insurance model will be strengthened as people realize that most health problems have, at least in part, a genetic basis. The case for the model's efficiency will benefit from recognition that employment-based insurance has high administrative costs but provides no advantages to society as a whole. The desire to exert more direct control over increasing expenditures will provide an additional reason to introduce some form of national health insurance.
The timing of such a change, however, will depend largely on factors external to health care. Major changes in health policy are political acts undertaken for political purposes. The political nature of such changes was apparent when Bismarck introduced national health insurance to the new German state in the 19th century. It was apparent when England adopted national health insurance after World War II; and it will be apparent in the United States as well. National health insurance will probably come to the United States after a major change in the political climate - the kind of change that often accompanies a war, a depression, or large-scale civil unrest. Until then, the chief effect of the new plans will be to make young and healthy workers better off at the expense of their older, sicker colleagues.
(Note: The Quote of the Day messages will be suspended for two weeks while we travel. On returning, we'll be back attempting to change the political climate without the necessity of experiencing war or a depression, although maybe it's time for some good, old-fashioned civil unrest.)