Workers Feel Like Suckers
Los Angeles Times
March 20, 2002
By Ralph Frammolino
The memories will endure, but the factory that turns out 46 billion Life Savers each year won't. Kraft Foods Inc. is closing the plant and moving its operations to Canada.
Life Savers will pay nonunion workers in Mount Royal about $12.50 an hour--$3 less than their counterparts in Holland (Michigan). With the Canadian government picking up the tab for health coverage, the savings come to about $6.5 million a year.
John Boyd, president of a Princeton, N.J., consulting firm that helps companies select plant locations:
"Labor costs dominate the equation. They account for at least 70% of all operating costs. . . . That's the real driver in the site selection process."
<http://www.latimes.com/news/printedition/la-000020325mar20.story>http://www.latimes.com/news/printedition/la-000020325mar20.story
Comment: When will businesses in the United States be ready for the government to assist in making American products more competitive by picking up the tab for health coverage? And when will the politicians tire of watching jobs and businesses with their tax revenues move to Canada? The lack of publicly funded health insurance in the United States may not be the only factor in this shift, but it's a big one.
Jon Oberlander, Ph.D., Assistant Professor of Social Medicine, University of North Carolina-Chapel Hill, responds to Uwe Reinhardt's comments on Medicare:
I agree with Uwe that single payer is thrown around far too often as a catch phrase. And I strongly believe that too many health reformers are "fundamentalists," fixated on Canadian style single payer when other international models perform just as well--and may be a better political fit for the U.S. That is a large topic that I leave for another day.
But I do want to take up what Uwe has said about Medicare. He tells us of Medicare (along with Medicaid): "neither program is known for its ability to assure the quality of health care, and both can control costs in only the crudest ways--with a sledgehammer." He then goes on to criticize Medicare's regional discrepancies in payment and notes that low cost physicians in Minnesota could be punished under Medicare's Volume Performance Standard system if physicians in Miami push up their own utilization. Is that a way to run a health system, Uwe wonders?
Judging by international experience, the answer is yes. Medicare's tools of cost control are indeed crude but so are those in Canada, Germany, and just about any other country you look. Medicare uses the sledgehammer of setting fee schedules (or price controls, depending on your taste) but that, along with global budgets and controlling technological diffusion (which Medicare is not positioned to do) is precisely how other countries have controlled costs. Crude? Yes. Effective? Yes. So exactly what, Uwe, is the point in labeling Medicare as having crude cost control? Is there another system that works in practice rather than theory (judging by the flops at CalPERS and FEHBP, it is surely not managed competition, as much as Alain Enthoven would have us believe otherwise).
As for regional inequities in Medicare payment, I agree these are truly irrational. But it is worth pointing out that other nations such as Canada, also have collective punishment in budgets that "claw back" excess payments across all doctors. Medicare perhaps is worse--at least the Canadians are smart enough to do it on the provincial level--but collective payment reductions is not exactly an original sin. And Medicare doesn't guarantee quality outcomes, as Uwe says. But who does? Not managed care. For all the talk of disease management and coordinated care, there is no evidence on average that HMOs improve care for Medicare beneficiaries. Too often, this is the stuff of advertising slogans, not real change in health care delivery. And the one group that fares badly under managed care over the years in Hal Luft's review is chronically ill seniors.
At the end of the day, I'm sure we're not far apart in agreeing that Medicare has lots of limitations and could stand for major improvement in benefit coverage etc. But I'm not sure what the point of Medicare bashing is, Uwe, if you leave out its similarities in cost control (with its limited capabilities) to other nations and in quality to the private experience here.
Best, Jon