Foreign Competition May Push U.S. Health Reform

August 29, 2005
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As school employees move back into position this week, every district has funding worries and is crunching the numbers. One of the top cost issues is a school district's (read: taxpayer's) health-care benefit cost. In Grand Rapids Public Schools, for instance, pension and benefit costs are $1,915 per pupil ($6,782 foundation per pupil).

School employees lamenting changed benefits and employee contributions are finding little sympathy from parents, who have likely become accustomed to such annual adjustments as employers continue to be assailed with double-digit increases for more than five consecutive years. It is the single biggest threat to economic stability, with evidence in the fact that health-care costs represent more than 17 percent of the Gross Domestic Product, and is widely expected by analysts to move past 20 percent.

The U.S. Small Business Administration Office of Advocacy last week released its study, "Cost of Employee Benefits in Small and Large Companies." It is hardly a surprise to see the numbers bear out what employers and business owners already know: Small businesses especially are increasingly unable to provide employer-sponsored health benefit plans, and even large employers are feeling the pinch.

The SBA study showed that employer-sponsored health insurance has been rising five times faster than workers' earnings since the beginning of the new millennium. It is hard to imagine anything more explosive and debilitating in the "normal" course of business.

The report shows health insurance is not as widely available now, compared to the pre-recession year of 2001. The U.S. Department of Labor shows U.S. businesses paid an average of $7.40 per hour per employee. The annual premium charged last year by health insurers to business owners was $9,950 for a plan covering a family of four.

The Automotive Industry Action Group meeting at Cobo Hall in Detroit last week heard General Motors' health-care plan benefit director, Robert Moroni, cite the wide discrepancies in such costs between the U.S. and every other country in which the automaker does business. Moroni said the price of each GM vehicle made in America carries $1,525 in health care costs (compared to $120 per car in Canada).

And Moroni also opened his fact book on the quality of health care in the U.S. compared to all others (Germany, Canada, Japan etc.), showing this country ranks second to last in 16 commonly ranked health-care quality indicators, including mortality rates.

Cost and quality issues will now more quickly defeat U.S. health care, especially as better quality care and outcomes — at significantly reduced prices — are becoming more common choices for U.S. citizens (see Grand Rapids Business Journal, June 6, 2005, issue.)

The speed of reform is likely tied more directly to such competition than to proposals of government regulation.    

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