By Ron Cohen, special to Workday Minnesota – September 1, 2004
ST. PAUL – Employers will reduce or eliminate drug coverage for 3.8 million retirees when the new Medicare prescription drug benefit starts in 2006, according to one U.S. government estimate. This will happen despite the fact companies – and supposedly even unions which offer prescription drug coverage – are eligible for $71 billion in federal subsidies between 2006 to 2012. But payment requires they offer substantially the same inadequate drug benefits specified in the new Medicare law.
However, it is a mistake to blame the new law for the continuing sharp decline in retiree health coverage. Employers already are slashing retiree health benefits. Goaded by rapid increases in medical costs, employers also shift premium hikes to their current workforce, increase their co-payments and drop some benefits.
Between 1993 and 2001, firms with 500 or more workers reduced health coverage for early retirees from 46% to 29% and for Medicare eligible retirees from 40% to 23%, the Washington Post reported. The AFL-CIO stresses that employers with 200 or more workers who offer retiree health care fell from 66% in 1988 to 38% in 2003.
The extra pressure on private business came in 1990 when a law was changed to include immediate accounting of future health care costs in publicly held corporate balance sheets.
This year that accounting standard was extended to state and local governments who now will be required to estimate the full cost of health benefits promised to future retirees. This will generate intense pressure to reduce liabilities by scaling back or eliminating future retiree benefits or shifting costs to public employees, including teachers.
Handwriting On The Wall
Look at the cold hard facts. Larger established firms, both union and non-union, have so-called “legacy costs”, long established pensions and retiree health benefits. Estimates are that the price of every truck and car built by General Motors last year included $1,900 in pension and retiree health benefits, up from $1,300 the previous year. The newer auto transplant companies in the U.S. have no such comparable costs.
Major airlines, like Northwest, with long-standing pensions and health benefits are reeling under price wars with low-fare start up airlines without these costs. Steelworkers found how hollow claims are for pensions and retiree health benefits promised by firms that no longer exist or file for bankruptcy to shed a union contract.
The Foreign Competitive Advantage
Worse yet is the situation regarding competition from foreign firms! Canadian, Japanese and European companies have the competitive advantage of government-paid health and/or pension systems. Even China provides manufacturing workers with health care and lodging, a holdover from pure communism.
When the nation’s governors met this spring, they heard testimony that U.S. workers had average benefit costs amounting to $5.50 an hour—before wage rates are even considered. How can American companies compete? Governors asked. Apparently, the corporate answer is to outsource white-collar jobs along with blue-collar work.
A recent article in the New York Times warns the Chinese have excess capacity in nine key manufacturing categories. Since President Bush took office in 2001, America has lost 2.6 million manufacturing jobs. The U.S. trade deficit runs a staggering $600 billion a year, Bush’s new record.
Against this background, it makes no economic sense for the United States to fragment health care among a hodgepodge of systems with separate administrative structures and regulations: Medicare, Medicaid, the Veterans Administration, the Defense Department, the Federal Employees Plan, Federal-State programs to cover children, a flock of state and local government employee plans and finally private insurance plans often top-heavy with administrative costs. Add to this 44 million persons without health insurance who seek treatment at expensive hospital emergency rooms often with costs left for hospitals and local governments to pay. What a tangled mess! Clearly we lack a rational, cost effective health care system.
The One-Payer Necessity
Health care in the richest nation on earth is broken. It is obvious the United States needs one-payer, national health insurance to level the playing field for all employers and employees!
Bush now offers $9 billion a year in new tax incentives for individuals who set up Health Savings Accounts. This is on top of his enacted tax cuts: 36 percent gone into the pockets of the richest one percent of Americans with average incomes of $1.2 million, according to the nonpartisan Congressional Budget Office.
Brace yourselves for what was by far the worst feature of the new Medicare law — a section that doesn’t apply to retirees 65 and older — the creation of tax-free Health Savings Accounts. You qualify for up to a $5,150 a year tax deduction if you’re covered by a catastrophic health plan with at least a $1,000 deductible for an individual, $2,000 for a family. The larger the deductible, the lower the employer’s cost.
Brothers and sisters, this is not the proverbial camel’s nose under the tent. This is the whole animal in your tent chewing its cud. It’s the ultimate conservative fantasy, the richer you are, the bigger the tax break. And naturally employers would love to shuck ever-costlier comprehensive health benefits in favor of cheap catastrophic plans that appeal to the wealthy and the healthy. Non-union employers will flock to this option leaving unionized employers exposed to devastating cost competition!
According to Business Week, May 24, 2004, “Conservatives would require workers to pay taxes on some of the value of employer-provided insurance but give them tax breaks for buying insurance on their own. That’s a far more controversial step than Bush is likely to propose in a tight re-election campaign.” Be warned this is what the President means when he talks about giving workers and their families “ownership” of health care in America: you’re on your own. Also never forget, if re-elected, Bush is on record to compel future retirees to “own” their Social Security Accounts and play the yo-yo stock market.
As President Bush proclaimed on a recent campaign stop, “I need four more years to complete the work.”
This is the reason to vote Nov. 2 for John Kerry, the AFL-CIO’s endorsed candidate for president. It’s up to each of us to mobilize current and retired union members, family and friends to block a second term for Bush and his risky privatization schemes.
This commentary is reprinted from “Gopher Retiree”, the newsletter of the Minnesota State Retiree Council, AFL-CIO. Last month, the Minnesota AFL-CIO convention adopted a resolution sponsored by the Retirees Council, “supporting a not-for-profit, single-payer, national health care plan for all Americans.”
