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Day 17

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Health Care Costs and the Job Flight to Canada

What’s Good for Canada is Good for GM

by DAVE LINDORFF

Almost half a century ago, Charles Wilson, chairman of General Motors, once famously declared, "What’s good for General Motors is good for the country." These days, his successor might more properly say, "What’s good for Canada is good for General Motors."

Certainly over the last decade or so, GM, along with competitors Ford and Chrysler (now DaimlerChrysler), have been shifting production out of Michigan and across the Detroit River into Ontario as fast as they can, making Windsor, Ont., and not Detroit, the real "Motor City" of North America today.

The reason for this capital flight, which has taken tens of thousands of American jobs with it, is health care costs. General Motors executives, who even now are demanding that the United Autoworkers Union agree in this round of bargaining to a contract that for the first time would require workers to pay for part of their health benefits, complain that health costs currently account for $1500 of the cost of production of every vehicle made in the U.S. In Canada, the figure is only a small fraction of that.

So much does General Motors love Canada’s socialized, taxpayer-funded "single-payer" health care system, that the company’s top executives in Canada, along with the top execs of Ford, Chrysler and a host of other U.S.-owned subsidiaries in Canada, actually have been lobbying the provincial and federal government to expand the system to include other services such as pharmacy and home health care-and to increase funding of what is known in Canada as "Medicare."

Just two years ago, GM Canada’s CEO Michael Grimaldi sent a letter co-signed by Canadian Autoworkers Union president Buzz Hargrave to a Crown Commission considering reforms of Canada’s 35-year-old national health program which said, "The public health care system significantly reduces total labour costs for automobile manufacturing firms, compared to their cost of equivalent private insurance services purchased by U.S.-based automakers." That letter also said it was "vitally important that the publicly funded health care system be preserved and renewed, on the existing principles of universality, accessibility, portability, comprehensiveness and public administration," and went on to call not just for preservation but for an "updated range of services." CEOs of the Canadian units of Ford and DaimlerChrysler wrote similar encomiums endorsing the national health system.

"The Canadian plan has been a significant advantage for investing in Canada," says GM Canada spokesman David Patterson.

If you haven’t heard that kind of talk out of GM, Ford or DaimlerChrysler executive offices here in the U.S, or from their corporate lobbyists in Washington., don’t be surprised. As a GM company spokeswoman puts it, "GM thinks there has to be closer cooperation between the government and the private sector, but we don’t advocate a single-payer system for the U.S."

Health care costs, currently averaging $6800 per worker in America, may be sucking the lifeblood out of corporate bottom lines, but free-market ideology trumps business common sense, apparently. The notion of having the government take over an industry that represents about 15 percent of the U.S. economy simply gives U.S. executives the willies. But in backing insurance company interests, GM runs counter to both its own business interests, the sentiments of many customers, and maybe even the wishes of its shareholders.

"No American business can say they’re in favor of socialized medicine," says Jon Erb, a senior manager for healthcare consulting at Deloitte Consulting LLP. "The whole idea of the government controlling prices on things, and essentially taking over such a huge sector of American business, is not something anyone will publicly endorse."

"It is totally ingrained in the U.S. that the government is the enemy, not a friend," agrees Helen Darling, a veteran corporate benefits expert and president of the National Business Group on Health.

That politically motivated opposition, however, may be beginning to weaken-at least according to some unlikely proponents. While he doesn’t advocate a wholesale appropriation of the Canadian model, Paul O’Neill, President George W. Bush’s first Treasury secretary (he was fired during Bush’s first term) and former CEO of Alcoa Corp., claims that "socializing" the cost of catastrophic insurance-the real bank-breaker in the healthcare cost crisis-is a likely prospect and should be supported by companies. "That employers are the primary providers of health benefits is an unfortunate accident of history," says O’Neill, who until recently served as CEO of the Pittsburgh Regional Healthcare Initiative, a health reform project in western Pennsylvania. "It dates from wage and price controls during World War II, when employers turned to health benefits as a way of getting around limits on what they could pay their workers." O’Neill argues that the primary responsibility for providing health coverage needs to be taken off the back of business.

Some experts point out that healthcare would hardly be the first "business" that government would be in charge of running. "After all, the government runs defense and law enforcement, so why not healthcare?" asks Dr. Steffie Woolhandler, an associate professor of medicine at Harvard and co-founder of the 30,000-member Physicians for a National Health Program. "Businesspeople don’t like to think of the government taking over any industry and doing a better job of it."

They may have no choice, though.

"Is there a private sector solution to the rapidly increasing cost of healthcare? Probably not," says Deloitte Consulting’s Erb. "As a health consultant, I confess I’ve always underestimated the ability of U.S. companies to absorb health costs, but we’re reaching a tipping point. There would be huge resistance to a wholesale national solution because the tentacles of the healthcare industry reach into all sectors of the economy, but I suspect you’ll see business’s strategy will be to sneak a single-payer system in a little bit at a time."

National Business Group on Health’s Darling agrees. Private sector schemes will not solve the problem of rising costs, she claims, and while most business leaders may oppose a federal solution on ideological grounds, "I think you’ll see them start to support it in small increments, for example with a federal takeover of catastrophic coverage." She points to the recently passed Medicare drug plan, under which the government pays up to 28% of a company’s costs for providing drug coverage to retirees, as an early example. "That’s the wedge," she says. "It’s the first time we’ve had the government do that here."

Polls have long shown a majority of Americans have consistently favored some kind of national health system. Now, with the cost of health benefits continuing to soaqr at double digit rates despite every "reform" effort tried, from HMOs to "consumer-driven" plans, corporate executives may join the broader public in finally taking a look the Canadian model.

Back in 1970, a year before Canada switched from an employer-based, insurance company-administered health system like that in the United States to a national single-payer model, both countries were devoting about 7 percent of GDP to health care. Today, Canada devotes 9.1 percent of GDP to health care, while the United States devotes a whopping 15.1. Meanwhile, Canada boasts better health statistics and all of its citizens are fully covered, even for catastrophic illnesses like cancer or AIDS. In the United States, some 15 percent of people have no insurance coverage at all and medical costs are the leading cause of bankruptcy (though that may change now that Congress and the president have made declaring bankruptcy far more difficult).

U.S. conservatives routinely attack the Canadian system for its allegedly long waits and for allegedly driving many Canadians across the border for treatment. In fact, however, Canadians love their health system, and keep electing candidates who back it. Moreover, Canadians say U.S. criticisms are gross exaggerations. A study by Steven Katz et al in the magazine Health Affairs found that in fact the only real Canadians using U.S. health care were "snowbirds" and resident aliens, while a number of U.S. patients were going to Canada to get cheaper care for such uncovered treatments as LASIK eye surgery.

Meanwhile, even Canadian executives are not so harsh on their own system. Stew Low, a spokesman for GM Canada, says stateside criticisms of the Canadian system are overblown and tend to come from people "with an axe to grind." He says, "Both the U.S. and Canadian systems have their challenges, and Canada’s system clearly needs some improvement, especially in the form of higher investment, but in general, people here have ready access to healthcare. I can walk into any ER and get treated quickly. My kids are active in sports and get hurt, and they always get treated right away."

And of course, unremarked by U.S. critics of Canada’s system, here in the United States, health insurance coverage-and access to necessary treatment and care, is worsening. The New York Times reported recently that the percentage of companies paying 100 percent of employee insurance premiums had "plummeted" over the last four years, from 29 percent to only 17 percent. Worse yet, many employers are simply dropping health benefits altogether. All during the 1990s companies were dropping health insurance coverage at the rate of about 2 percent of companies per year. Over the last four years, that pace doubled to four percent of companies per year dumping their employee health plans. Many more are reducing coverage, eliminating coverage for dependents, or forcing employees to pay for half or all of their benefits.

Before long, employee health care benefits in the United States will be the exception, not the rule.

Maybe Congress should invite GM Canada’s Grimaldi down to talk about how Canada deals with the problem.