By REGISTER EDITORIAL BOARD
September 27, 2005
Your employer does not buy your groceries for you.
Your employer does not make your house payments for you.
Your employer does not pay your utility bills.
So why in the world is your employer expected to provide your health insurance?
Alone among the industrialized countries, the United States drifted into a cockamamie arrangement in which health insurance is job-based. The glaring flaws with such a system include complexity, confusion and gaps that leave 40 million Americans without insurance.
To those drawbacks add another: The soaring cost of job-based health insurance puts American companies at a disadvantage in global competition.
When U.S. companies move jobs to China or India or Mexico, they don’t get just cheaper labor. They escape the steep and rising cost of employee health care. It’s not the only reason U.S. manufacturing is threatened, but it’s a big factor. If America is going to retain a strong manufacturing base, it must level the playing field.
Manufacturers’ tab especially high
A study done for the National Association of Manufacturers looked at the built-in cost disadvantages U.S. companies face in the global marketplace. Employee benefits came in a close second to high corporate tax rates.
The disadvantage is especially felt by manufacturers, which traditionally have offered generous benefits. Health-care costs are one-third higher in manufacturing than in the service sector.
One reason is that venerable U.S. manufacturers pay health-insurance benefits to large numbers of retirees. As they have downsized their work forces, their retiree numbers have increased. Newer, service-sector companies aren’t burdened as much by these so-called legacy costs of retired workers.
General Motors says health-care costs for active and retired employees add $1,500 to the price of every car the company makes. That’s an expense the foreign competition doesn’t have.
Maytag Corp. in Newton is in a similar situation — a mature company that not only provides health benefits to its active work force but also helps retirees with prescription-drug benefits and Medicare supplements. In a message to employees earlier this year, Maytag noted that its worldwide work force decreased about 25 percent (from 24,000 to 18,000) between 2000 and 2004. During the same time, the number of retirees eligible for health benefits increased by 25 percent, to 7,000. Retiree medical benefits cost Maytag $60 million a year and are expected to reach $80 million by 2010. Nationally, it’s estimated that more than 9 million retirees get health benefits from their former employers.
Health insurance was a major issue in a 2004 strike at the Newton plant, as it has been in almost every labor dispute in America in recent years.
Universal system offers pluses
The needed action is obvious, if not easy. The cost of health care should be lifted from the shoulders of employers. It should be the responsibility of individuals and taxpayers.
Studies show that a universal, government-sponsored system — similar to those in every other industrialized nation — could cover everyone in America for about the same amount Americans now pay for a disjointed, job-based system. The bonus: It would improve the competitive position of American manufacturers.
The U.S. Department of Commerce last year published a white paper on competitiveness in manufacturing. It recommended attempting to lower health-care costs through measures such as joint purchasing and malpractice tort reform.
Unfortunately, manufacturers’ groups and the Commerce Department stop short of advocating comprehensive reform. It is not sufficient to tinker with a dysfunctional health-care system. Joint purchasing isn’t enough to get the job done.
The health-care-cost disadvantage borne by American manufacturers will be removed only by abandoning the whole idea of job-based insurance.
And only business has the lobbying clout to make it happen.
Manufacturers and other employers could break the gridlock over health-care reform by weighing in on the side of universal coverage that is not job-based. They need to do so for their own sake, the sake of competitiveness and the sake of the country.
