Member Resource Archive - Page 1102 of 1212

Global budgets and sustainable growth rate

United States General Accounting Office Testimony Before the Subcommittee on Health, Committee on Energy and Commerce, House of Representatives
May 5, 2004
Medicare Physician Payments
Information on Spending Trends and Targets
Statement of A. Bruce Steinwald, Director, Health Care-Economic and Payment
Issues

Concluding Observations

To a large extent, the physician fee cuts projected by Medicare’s Trustees are required under SGR’s system (Sustainable Growth Rate system) of cumulative spending targets to make up for excess spending in earlier years. MMA (Medicare Prescription Drug, Improvement, and Modernization Act of 2003) added to the excess spending by specifying minimum fee updates for 2004 and 2005 without resetting the spending targets for those years. As a result, physician fee cuts were postponed, not avoided.

In considering the projected fee cuts, however, it is important to recall that Congress originally established Medicare spending targets for physician services in response to runaway spending in the 1980s. The recent increase in volume and intensity growth suggests that Medicare faces a fundamental physician spending growth problem even if the SGR slate of missed spending targets were somehow wiped clean. Currently, projected Medicare spending for physician services exceeds what policymakers have specified-through the parameters of the SGR system-is the appropriate amount to spend. Because of expected increases in the volume and intensity of services provided by physicians, real spending per beneficiary is projected to grow by more than 3 percent per year. SGR, designed to promote fiscal discipline, allows such spending to grow by just over 2 percent per year. If the growth in real spending per beneficiary is not lowered through other means, SGR will mechanically reduce fee updates in an attempt to impose fiscal discipline and moderate total spending increases. Although this mechanical response may be desirable from a budgetary perspective, any consequences for physicians and their patients are uncertain.

http://www.gao.gov/new.items/d04751t.pdf

Comment: A common response to escalating prices is the institution of price (fee) controls. This response is not limited to governments, as in the case of Medicare, but it is also characteristic of the private sector, as in the dictated fees of the managed care plans. In health care, in order to increase income when fees are fixed, physicians respond by increasing the volume of services (number of services provided to each patient) and by increasing the intensity of services (increasing the complexity and costliness of those services). The experience with Medicare confirms that this phenomenon is very real.

Because of escalating spending in the Medicare program, the sustainable growth rate (SGR) system was established. Total program spending for physicians was allowed to increase at a “sustainable” rate of about 2% per year. It is important for single payer supporters to understand this concept because it is somewhat analogous to the “global budgets” which would be used to limit excessive growth in health care expenditures. A more rational rate than an arbitrary 2% would be adopted, but the system would still be funded within the confines of a defined budget.

Because the volume and intensity of Medicare services have been increasing significantly, the fees (prices) per unit of service will decrease over the next several years. This has been compounded by the requirement to recapture, through lower fees, payments made in previous years that were high due to forecast estimates that proved to be erroneous. But even without these errors, physicians will perceive the lower fee schedule to represent pay cuts, even though the global payments will increase by about 2%. It can be anticipated that there will be increased physician opposition to any “government-run” program like Medicare. We should be prepared to explain to them how lower fees will not reduce their gross incomes (although overutilizers could drain funds away from physicians who are trying to provide care at more appropriate levels of utilization).

Fee-for-service incentivizes excessive services. Capitation for individual physicians incentivizes the erection of barriers to care. Salary plus incentives seems to be the least perverse mechanism of compensation, but would we be willing to convert our health care system into a national health service?

Can the Democrats learn from the swallows?

In These Times
July 23, 2004
Cure a Sick Healthcare System
By Steffie Woolhandler and David Himmelstein

Like Capistrano’s swallows, the Democrats always return to health reform. Unfortunately, this year they’re showing little more brain power than the birds.

Don’t get us wrong, we’re no fans of President George Bush’s health agenda:
Ship tens of billions of federal dollars to a panoply of healthcare firms, privatize Medicare, and dangle skimpy tax credits in front of the 44 million uninsured. But Kerry seems intent on refilling a failed prescription for reform: by proposing to give hundreds of billions to private insurers in exchange for measly coverage for some of the uninsured.

Kerry promises more of the same. He proposes to spend about $65 billion annually to expand coverage through two mechanisms: One, offer government
subsidies for private insurance; two, expand Medicaid. As a nod to middle-class Americans, he’d try to hold down private premiums by having the feds pick up the tab for any patient whose care costs more than $50,000-a misguided effort that shifts some costs to the taxpayers but leaves control in the hands of private firms. Kerry’s massive new spending would leave at least 17 million uninsured (by his own estimate) and tens of millions more with inadequate coverage, and stimulate the malignant growth of healthcare costs.

Kerry’s plan would actually boost bureaucracy. He’d funnel hundreds of billions of additional public dollars through wasteful private plans. And he’d do nothing to cut the tens of billions that doctors and hospitals waste on insurance paperwork. Kerry claims administrative savings for his plan-through computerized billing and claims processing. But such claims are not credible; more than two-thirds of all healthcare bills already are filed electronically. It’s not sending the bill that’s expensive. It’s the insurance advertising and sales, utilization review, eligibility
determination, obtaining pre-approvals for referrals, cost-tracking, and co-payment collections. All would continue under Kerry.

For the 85 percent of Americans who currently have insurance, Kerry offers virtually nothing. No plausible plan to upgrade their coverage, slow premium
increases, bring down drug costs, improve quality, or expand the number of
nurses. He’d just ask tax-payers facing skyrocketing premiums to chip in for
the coverage of the uninsured.

http://www.inthesetimes.com/site/main/article/cure_a_sick_healthcare_system/

And…

infoplease
Accessed July 28,2004

The famous cliff swallows of San Juan Capistrano… land at the mission in San Juan, California, on or around St. Joseph’s Day, March 19, to the ringing bells of the old church…

Legend has it that the swallows took refuge in the Mission San Juan Capistrano from an irate innkeeper who destroyed their muddy nests. The swallows return to the old ruined church each spring knowing they will be protected within the mission’s walls.

The mission is located near two rivers and was an ideal spot for the swallows to nest for years because of the abundance of the insects on which they feed. The reduction in numbers of the insects, largely as a result of the development of the area, has caused some of the swallows to locate further from the center of town and explains why there are no longer huge clouds of swallows descending on the Mission.

http://www.infoplease.com/spot/swallows1.html

Comment: Thanks in a large part to the inspiration provided by the work of Steffie and David, I know something about health policies that would correct the profound deficiencies in our system. As a life-long liberal, I also know something about the Democrats and their positions on issues of social justice. And as a resident of San Juan Capistrano, as I look out of my home office window towards Dana Point Harbor and observe the darting and diving flight of the swallows catching their food, I do know a little bit about the swallows of Capistrano.

Steffie and David state that the Democrats are showing little more brain power than the swallows. But when the swallows return to Capistrano, they know how to adapt to the havoc that has been wreaked on their habitat. They know where to go to build their nests and collect their food. When the Democrats return to Washington, they too recognize the havoc that has been wreaked on our health care system. But they don’t seem to know where to go to find the policy wonks who would show them how to build a health care system that would care for everyone. They can’t seem to get past their political advisors who are reminding them that the Democrats are the party of inclusiveness, and they can’t afford to offend the libertarians.

No, Steffie and David, I’m afraid that the swallows are the ones with the superior brain power.

Don McCanne
San Juan Capistrano, CA

Our Health Care Mocks Equality

Our Health Care Mocks Equality

I was reading the Berkshire Eagle on July 4th, and was moved by our Declaration of Independence, printed on the editorial page, and its proclamation of equality for all people, and of their rights to life, liberty and the pursuit of happiness. It made me think of all the people who live in poverty in the Berkshires, and of our current health care crisis. Many Americans cannot afford the basics for life ( like food, shelter and health care), let alone pursue happiness. And while the health care crisis affects us all, it is even more of a disaster for those who are thrust into bankruptcy because of catastrophic illnesses for which they have no health insurance, for those who are unable to afford primary health care and suffer from pain and untreated illnesses, and for those who have to choose between food and necessary medications. The World Health Organization ranks the United States 72nd on the performance of our health care system, based on our level of health. This is below all industrialized nations, and below many third world nations.

In Pittsfield, 5,075 residents (11.4%) live below the poverty line (defined as $18,400 per year for a family of four), as do 18.2% of North Adams residents. Over twelve thousand Berkshire County residents live in poverty, which represents almost 10% of the people in our county. The United States is number one in poverty among industrialized nations, with 35 million people living below the poverty line. Seventeen percent of children in the United States live in poverty. Our poverty levels are 60% higher than in the United Kingdom and Canada, twice those of Sweden , and three times those of the Netherlands. Yet our average income is similar to, or higher than, these nations. Our poverty rate is due to income inequalities. Forty three million Americans were without health insurance in 2002; these uninsured exceeded the total population of 24 states. Medicaid insured 14 million in 2002 (30% of those in poverty), but 10.5 million others in poverty had no health insurance. Of those in poverty, workers are less
likely to be covered than non-workers. For every medical problem that has been studied (cardiovascular disease, diabetes, high blood pressure, etc.), the poor, the uninsured, and minority group members in the United States receive inappropriately low rates of care.

Canada has a single payer national health care system that covers everyone. Even the poorest Canadians now have mortality rates below the U.S. average.
All other industrialized nations have a single payer national health care system, funded and administered by the government, that provides universal access to health care. Yet in the United States, we make a mockery of the document from our founding fathers that supports such a right. There are organizations in Berkshire County which are working hard to address the health care needs of those in poverty, or those who fall dangerously close to that abyss. The Children’s Health Center in Great Barrington and the Neighborhood Health Center in Pittsfield have cared for those in poverty for years. Ecu-Health Care in North Adams helps people find medical care through public health programs, or from doctors who will reduce their fees. Volunteers in Medicine, a clinic in which doctors will donate their time, is slated to open next month in Great Barrington. These are all efforts worthy of our support, to address the immediate needs of
those in poverty. But they can only ameliorate the symptoms of a system that breeds these inequities.

The Declaration of Independence further states, “..To secure these rights, governments are instituted among men.” Bills are in the legislatures in Massachusetts and other states, as well as in the federal legislature, to create single payer health care, that would provide universal coverage, and be funded and administered by the government. It is time for the government to intervene in our health care crisis. It is time to take health care funding and administration out of the hands of profit-making insurance corporations. It is time for the United States to further the vision of our founding fathers, who wrote that stirring
document when our country was created. The Declaration of Independence started a revolution. Two hundred years later it can be the inspiration for another revolution, that will change the face of health care delivery in our country and make it accessible to every American citizen.

Susanne L. King, M.D., Lenox, MA
7/26/04

Low Medicaid fees impair access

Health Affairs
Web Exclusive
June 23, 2004
Changes In Medicaid Physician Fees, 1998-2003: Implications For Physician Participation Despite recent gains, the relative attractiveness of Medicaid patients
has not improved much over the longer term.
by Stephen Zuckerman, Joshua McFeeters, Peter Cunningham, and Len
Nichols

Despite some improvement among primary care physicians in states with the
lowest fee levels, physicians continue to be paid less for Medicaid beneficiaries than for other groups of insured patients, and they are much less likely to accept new Medicaid patients than other insured patients.

States are now dealing with the worst financial crisis since the Great Depression and will not be in position to raise provider fees greatly, so access for Medicaid recipients may be at increasing risk.

http://content.healthaffairs.org/cgi/reprint/hlthaff.w4.374v1

Comment: As long as Medicaid remains chronically underfunded, access to
essential services will remain impaired due to a lack of willing providers. Impaired access results in impaired outcomes. By continuing to support a
separate program for low income individuals, we tacitly accept the principle that they are not entitled to the same level of improved outcomes that the rest of us expect.

Most incremental proposals would leave Medicaid in place. But shifting Medicaid patients into a universal program would improve access and outcomes. Shouldn’t we be supporting health care policies that result in improved outcomes?

Cure a Sick Healthcare System

July 23, 2004
In These Times
Cure a Sick Healthcare System
Universal coverage under National Health Insurance would not increase health costs
By Steffie Woolhandler and David Himmelstein

Like Capistrano’s swallows, the Democrats always return to health reform. Unfortunately, this year they’re showing little more brain power than the birds.

Don’t get us wrong, we’re no fans of President George Bush’s health agenda: Ship tens of billions of federal dollars to a panoply- of healthcare firms privatize Medicare and dangle skimpy tax credits in front of the 44 million uninsured. But Kerry seems intent on refilling a failed prescription for reform: by proposing to give hundreds of billions to private insurers in exchange for measly coverage for some of the uninsured.

Our healthcare system is so sick that even people with good insurance are feeling the fever. Premiums for employers and their workers are rising 12 percent, even 18 percent per year. Employers have downsized coverage by super-sizing copayments and deductibles. Insurance often proves illusory when it’s most needed—payment denials, visit limits, loopholes and policy cancellations leave millions stuck with huge medical bills despite what they thought was good coverage. Most people’s choice of doctors and hospitals is restricted. Seniors can’t afford drugs, Medicaid recipients face draconian cuts and everyone’s rushed out of the hospital.

Investor-owned healthcare has flourished, despite definitive evidence that it raises both costs and death rates. And bandit CEOs regularly raid our health system, making off with seven- and even eight-figure incomes as their reward for cooking the books, defrauding Medicare and abusing patients to inflate profits.

Bush’s signal healthcare achievement, passage of the $534 billion Medicare drug bill, already is unravelling. Double-digit yearly price increases—even for older drugs—already have eaten up the paltry savings (about 15 percent) available from the recently introduced Medicare drug discount cards. Even the massive flow of federal funds that will commence in 2006, when the full drug benefit kicks in, will only get seniors back where they started last year in terms of drug spending.

Why will $534 billion in new federal spending (over 10 years) buy so little? First, the new drug coverage will be purchased through private insurance plans with overhead costs that average four times Medicare’s. Second, the bill prohibits Medicare from negotiating with drug companies to lower their prices (and effectively bans imports of Canadian drugs on the preposterous pretext that they’re unsafe). Both the Canadian government and our own Defense Department have used their purchasing clout to garner volume discounts. Prohibiting such bargaining assures drug firms of hundreds of billions in excess profits.

Finally, the bill hands Medicare HMOs—which have been ripping off Medicare for years—an extra $46 billion. Since 1985, Medicare has paid HMOs for seniors who choose to enroll. The payment formula has allowed HMOs to collect far more than it would have cost the taxpayers to care for these seniors in the traditional Medicare program. The Congressional Budget Office and the General Accounting Office have estimated these extra costs at about $2 billion per year. Yet HMOs—burdened by administrative overhead far higher than Medicare’s—complained they couldn’t make a profit from Medicare patients.

Bush’s solution? Send them more money. So in 2004, Medicare will pay HMOs an extra $552 above the cost of traditional Medicare for each senior they enroll, according to an estimate by the Commonwealth Fund.

Incredibly, the Republicans (and many Democrats) describe this corporate welfare program as a “pro-competition” health policy. Drug firms are granted patents that shield them from generic competitors, foreign drug imports are banned, government is precluded from negotiating over prices and HMOs are given huge subsidies to compete unfairly against Medicare—all in the name of competition.

Sadly, many Bush initiatives merely continued Clinton’s policies. Kerry promises more of the same. He proposes to spend about $65 billion annually to expand coverage through two mechanisms: One, offer government subsidies for private insurance; two, expand Medicaid. As a nod to middle-class Americans, he’d try to hold down private premiums by having the feds pick up the tab for any patient whose care costs more than $50,000—a misguided effort that shifts some costs to the taxpayers but leaves control in the hands of private firms. Kerry’s massive new spending would leave at least 17 million uninsured (by his own estimate) and tens of millions more with inadequate coverage, and stimulate the malignant growth of healthcare costs.

In contrast, a single payer national health insurance (NHI) program could simultaneously cover all of the uninsured, upgrade coverage for most other Americans and save money. Under NHI, everyone would be covered for care at any hospital, doctor’s office or clinic without copayments or deductibles. Patients would enjoy a free choice of provider, and doctors and nurses would be freed from the massive bureaucracy that encumbers care and wastes money. For-profit ownership of hospitals and other clinical facilities would be proscribed, and private health insurers and most HMOs would be eliminated—saving billions now squandered on profits and executives’ incomes, while upgrading quality.

Surprisingly, universal coverage under NHI would not increase health costs. At $6,200 per capita, Americans already spend nearly twice as much for care as do Canadians, Australians, Germans, Swedes and the Swiss—all of whom enjoy universal coverage and lower death rates than ours. Much of the cost difference is due to our mammoth health bureaucracy, which wastes upward of $300 billion annually. NHI could slash bureaucracy by replacing the current welter of private plans with a single public payer and simplifying payments. Even the Congressional Budget Office and the General Accounting Office concede that NHI could save enough on bureaucracy to cover all Americans for what we’re now spending.

On the contrary, Kerry’s plan would actually boost bureaucracy. He’d funnel hundreds of billions of additional public dollars through wasteful private plans. And he’d do nothing to cut the tens of billions that doctors and hospitals waste on insurance paperwork. Kerry claims administrative savings for his plan—through computerized billing and claims processing. But such claims are not credible; more than two-thirds of all healthcare bills already are filed electronically. It’s not sending the bill that’s expensive. It’s the insurance advertising and sales, utilization review, eligibility determination, obtaining pre-approvals for referrals, cost-tracking, and co-payment collections. All would continue under Kerry.

For the 85 percent of Americans who currently have insurance, Kerry offers virtually nothing. No plausible plan to upgrade their coverage, slow premium increases, bring down drug costs, improve quality, or ex-pand the number of nurses. He’d just ask tax-payers facing skyrocketing premiums to chip in for the coverage of the uninsured.

Much of what Kerry is pro-pos-ing already was tried, and failed miserably. Medicaid expansion has been pushed by Democrats for decades. Since 1987, 11.4 million people have been added to the Medicaid rolls, and Medicaid spending has risen from $50 billion to $228 billion, eating a hole in state budgets. Yet the number of uninsured has grown by 10.2 million people during this period, and Medicaid has remained second-class coverage, segregating the poor. On many measures, Medicaid patients fare no better than the uninsured. Medicaid should be replaced by mainstream coverage, not expanded.

Subsidies for private coverage also have a dismal track record. A 2002 federal program offers to pay 65 percent of premium costs for workers who’ve lost jobs due to foreign imports. As of December 31, 2003, 8,874 of the 500,000 eligible workers were taking advantage of the subsidy. With private coverage costing about $10,000 per family, few low-income workers can afford insurance, even with a big boost from government.

NHI isn’t just good policy, its good politics. According to a recent Washington Post/ABC News poll, 62 percent of Americans favor “a universal health insurance program, in which everyone is covered under a program like Medicare that’s run by the government and financed by taxpayers.”

Of course, NHI would be a death blow to the health insurance industry and it would threaten the super-profits of powerful drug and hospital firms. Presumably, that is why only Ralph Nader and Dennis Kucinich have been willing to buck the special interests, and say what Americans long to hear about health care: NHI can succeed. Healthcare is a right, not a commodity.

Medicare empowers patients to enjoy financial hardship

Department of Health and Human Services
Centers for Medicare and Medicaid Services (CMS)
Office of the Actuary
July 2, 2004
Letter (excerpts)
From: Sol Mussey, Director of the Medicare and Medicaid Cost Estimate Group of the Office of the Actuary

To: The Honorable Pete Stark of the Subcommittee on Health, Committee on Ways and Means

Table II.C14 was not included in the 2004 report… The attached table provides the information you requested in the same form as Table II.C14 from the 2003 report. The out-of-pocket payments for parts A, B and D of the Medicare program are shown as a percentage of an illustrative 65-year-old’s Social Security benefit. Also shown are the Medicare out-of-pocket payments for the same illustrative beneficiary 20 years later at age 85.

For the purposes of this table, an illustrative beneficiary is defined as (1) paying the standard Part B premium, (2) paying the average Part D premium, (3) incurring the average level of copayments for all aged beneficiaries each year, and (4) receiving a monthly Social Security benefit at age 65 equal to approximately the average benefit for all OASDI beneficiaries in the year shown, with the standard OASDI benefit increases applying in subsequent years.

http://www.familiesusa.org/site/DocServer/CMS_data_on_Medicare_oop_costs.pdf?docID=3963&JServSessionIdr012=lkg0yrebn2.app27a

Comment: The tables attached to the letter demonstrate that the average 65 year old Medicare and Social Security beneficiary this year, 2004, pays 18.6% of his or her Social Security benefits as out-of-pocket expenses under the Medicare program. The percentages continue to increase each year.

By 2065, the average 85 year old will pay 100.2% of his of her Social Security benefits as out-of-pocket expenses under the Medicare program. In fact, by 2078, even the average 65 year old will be paying 97.0% of Social Security benefits as out-of-pocket expenses under Medicare. At the start of retirement, the Social Security check is already wiped out.

Note that these are average values. For individuals with greater health care needs, the Part B and D out-of-pocket expenses and copayments will dramatically increase. In spite of Medicare, medical bills will wipe out Social Security income for these individuals at a much earlier date.

We are rapidly entering a phase in health care financing in which costs are being shifted to those with greater health care needs. This is being accomplished through polices such as defined contribution funding, higher deductibles, greater coinsurance and copayments, and manipulation of benefits covered. The conservative agenda is to shift medical costs from pooled resources with risk sharing to “empowered” individual health care consumers who can then take control of their own health care. The obvious flaw is that individuals with greater health care needs have no empowerment if they do not have adequate access to pooled insurance funds.

In the private sector, individual plans and many group programs are rapidly shifting to these policies that are designed to keep premiums affordable by shifting costs to patients. But the tragedy demonstrated by the tables, attached to the Office of the Actuary letter, is that the conservatives in Congress, with the support of the current administration, have been successful in converting our one program of social insurance, Medicare, into a “consumer-driven” product that will not provide financial security for those with significant health care needs.

But there is also an ethical issue here. The administration was blatantly dishonest in deleting these important tables from the 2004 Medicare Trustees’ Report. And yet the polls indicate that half of our nation wants more of this. My national pride has suffered a staggering blow. How could we… ?

Health costs talk is crucial

Sun, Jul. 25, 2004
Health costs talk is crucial

States need incentives to try policy changes
Mercury News Editorial

Crisis doesn’t begin to describe the extent of America’s health care problem.
The nation’s economic future is being threatened by a system that is drowning America’s employers and its workers in a sea of rising insurance premium costs.

California’s business and labor unions should join forces to find common ground and demand a national conversation about health care reforms. Now.

Health care alternatives exist, ranging from the relatively simple — revamping our employer-based system — to the more radical, such as instituting a single-payer or voucher system.

Congress should be pushed to provide incentives for states to experiment with policy changes to see whether they would be effective at a national level.

The problem isn’t a lack of funding — America spends $1.6 trillion a year on health care. That’s 50 percent more per capita than the second-highest spending country, Switzerland.

Yet the health of the average American is worse than that of citizens in any of the major industrialized nations. Americans’ life expectancy has slipped to 24th in the world after topping the rankings three decades ago. The World Health organization now ranks the United States 37th in the world in overall health system performance, sandwiched between Costa Rica and Slovenia. Those low rankings are in large part due to the fact that 44 million Americans — many of them workers — have no health care insurance. As a result, inability to pay medical expenses is expected to soon become the leading cause of bankruptcy in America.

President Bush’s solution is underwhelming, at best. He proposes to cut the number of uninsured by roughly 10 percent by providing tax credits and personal savings accounts to the uninsured.

Democratic challenger John Kerry’s proposal is more ambitious. He advocates eliminating Bush’s tax cuts for households with an income of $200,000 or more and use those savings to fund coverage for an additional 27 million people. But his plan will have a difficult time passing Congress, if Republicans retain control.

Neither candidate puts enough emphasis on bringing down costs.

One way to accomplish that goal is to adopt a universal health care system. Many Californians are unaware that Sen. Sheila Kuehl’s single-payer bill — SB 921 — has passed the state Assembly and is pending in the state Senate. The thrust of her argument is that the United States wastes nearly 20 percent of its health care dollars — $300 billion annually — on health care administrative costs. In contrast, administrative costs account for only 2.1 percent of Medicare’s budget.

But universal health care contains its own set of unknowns. Oregon voters in 2002 voted down a single-payer initiative over fears that taxes would go through the roof and that rationing of certain medical procedures (a recurring criticism of Canada’s single-payer system) would ultimately become a fact of life. California would need further assurances on both fronts before making that leap of faith.

Kuehl gets high marks for having the courage to move the health care conversation forward.

Those who remain on the sidelines have themselves to blame if health care premiums jump another 14 percent next year and if costs continue to rise four times faster than wages.

Ford: Health costs could drive investment overseas Firm's vice chairman says rising fees hurt competitiveness

Tuesday, July 20, 2004
Ford: Health costs could drive investment overseas Firm’s vice chairman says rising fees hurt competitiveness
By Eric Mayne / The Detroit News

If U.S. health care costs continue to soar, Detroit automakers may be forced to invest overseas rather than the United States to remain competitive, Ford Motor Co. Vice Chairman Allan Gilmour said in a speech Monday.

Ford spent $3.2 billion on health care in 2003 for 560,000 employees, retirees and their dependents. The costs added $1,000 to the price of every Ford car and truck built in the United States — up from $700 three years ago.

The rising health care tab means Ford has less money to invest in new products.

“Our foreign competitors don’t share these problems,” Gilmour said Monday in a speech before the National Governors Association in Seattle. “These health care challenges have created a competitive gap, that if unchecked, will drive investment decisions away from the United States.”

Automakers and other manufacturers increasingly arelooking overseas to take advantage of lower wages and cheaper benefits, raising fears that U.S. auto jobs could be outsourced. But the vast majority of vehicles sold in the United States are still assembled in North America. Toyota Motor Co.p., Honda Motor Co. and other foreign automakers with U.S. operations enjoy lower health care costs because they employ younger workers and support fewer retirees. Nationwide, health care expenditures have grown 7 percent annually for five years — more than double the inflation rate — to $1.67 trillion in 2003.

Gilmour told The Detroit News in an interview Monday that he addressed the group because state governments must be involved in the process to fix the system. But meaningful progress can’t be made until after November’s presidential election, and Ford isn’t taking sides. Until then, Ford plans to adopt better management and consumer education to affect change. “We have to help Americans become better health care consumers,” said Gilmour, who has spent the last six months studying health care costs and their impact on Ford, the auto industry and the country.

He questioned why insurance companies cover the cost of visits to a doctor’s office. But insurance companies won’t pay for phone advice from that same doctor.

It is possible to cover the cost of such service, without compromising a patient’s needs, said Jim Morell, immediate past chairman of the American Association of Healthcare Consultants.

“If you look at somebody who sees a doctor on a regular basis, there probably aren’t many surprises,” Morell said. “But right now, everything is geared to a face-to-face encounter. We don’t have a handle on the record-keeping for (phone service).”

Ford is encouraging increased Internet use to streamline and lower the cost of delivering health care services — such as the transfer of medical records.

“We’re auditing everything we can find to audit,” Gilmour said.

Gilmour urged the governors to take decisive action.

“We, as employers, need your leadership — perhaps including the establishment of a broad-based coalition — to find a solution for the long term. Not a quick fix for the present.”

You can reach Eric Mayne at 313-222-2443 or emayne@detnews.com.

Ford: Health costs could drive investment overseas Firm’s vice chairman says rising fees hurt competitiveness