A column about history, culture, policy, and things in between.
Last week the UAW began negotiations on a new contract with the “shrinking three” - Ford, GM and the Chrysler Group.
The question is not “WILL these companies go bankrupt” it is “WHEN”. They cannot survive the insupportable “cradle to grave” package of benefits for their employees and retirees. We all have skin in this game, because our public sector unions continue to insist on maintaining similar packages, with similar financial ramifications for their employers.
At the core of these negotiations lie health care and pension costs, and the Detroit-based bargaining will be a precursor for much of the coming Presidential campaign and attendant policy discussions.
One major problem is that employees covered by such insulated and monolithic plans (be they public or private sector) are not CONSUMERS of health care. The term “consumer” implies that “shopping” occurs, shopping in which options are presented, different features evaluated, and choices made. The term “consumer” implies that there are differences between users that are reflected in the pricing structure. The term “consumer” implies that, when facing the need for expensive surgical procedures, the person undergoing the surgery is motivated to make COST one of the factors in their decision.
At the company I work for, employees who face such expensive operations are presented with a menu of providers. One recent example is that of a knee or hip replacement. In the greater Milwaukee area there are dozens of hospitals that perform these same procedures – all with great success. They all execute the same operation, use the same materials, and generate the same high levels of patient satisfaction. But the costs on this menu vary by as much as $40,000. What other industry do you know of, where the provider of a given service that is not measurably different from those of its competitors, could survive such price variances?
Since our company is self-insured, it is enormously motivated to see employees choose the less expensive options. So employees who do some shopping and choose one of the lower cost providers, personally receive a portion of the company’s savings. Imagine that – people SHOPPING for health care.
My employer offers a variety of coverage to meet a variety of needs - and guess what? The prices of those plans vary, as does the employee’s share of the costs. Thus, the employees at our company are CONSUMERS of health care, and their choices are made accordingly. What’s the result? Our total health care costs have been flat for nearly five years.
Our choices in health care and public governance are to continue the use of such insulated, inflexible plans that will lead to the disaster of universal, government sponsored health care, or to implement market driven reforms that will finally position users of health care to become informed and motivated consumers.
Only then will we slay the dragon of health care costs, and prevent financial upheaval in the public sector.
