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Health-Care Cost Issue Unites Unions, Firms

February 19, 1986|Harry Bernstein

Management and union negotiators used to spend many a sleepless night, sometimes endangering their own health, as they fought furiously over the cost of health care for workers.

Those battles came between the late 1970s and early 1980s, after medical costs began to skyrocket and before a revolution in the health industry began to have its dramatic effect with the advent of large-scale group care and a massive influx of new doctors.

Until about three years ago, the medical profession managed to stand aloof from the fray, watching the angry disputes over who would pay their bills with seeming unconcern.

Representatives of management and labor still often have marathon discussions about health-care costs. But, increasingly, the issue has become a powerful force unifying instead of dividing them.

They are demonstrating a long overdue spirit of cooperation and an acceptance of the fact that management, workers and their unions all have major roles to play in getting adequate health care for workers and their families at costs they can afford.

Most company and union representatives have decided--as they should have done years ago--that they can and should work together to protect their pocketbooks from the providers of health care, whom some of them privately call their common enemy.

Physicians, hospitals and others in the industry had once been widely regarded as epitomizing the concept of rugged individualism. They usually set fees that they themselves decided were appropriate to their own economic desires, which were not negligible.

They left the unpleasant details, such as how to pay increasingly hefty medical and hospital bills, to corporations, to unions and to individuals.

At first, companies, for the most part, obliged by just paying the increased bills. When workers were unionized, unions almost automatically included increased health-care costs as part of their contract proposals. But the medical bills themselves were rarely questioned. After all, doctors were, and are, a much needed and admired group of workers.

As medical costs soared about 20% a year, well above the average inflation rate, insurance premiums kept pace. That was when management began first to quietly balk at the higher costs and then gradually to begin shouting "no!" to union proposals that companies maintain benefits for workers as they had done for years.

In contract talks with management, labor fought company efforts to get workers to shoulder part of the increasing costs--or to accept less medical care. The trigger phrase for many a battle was "maintenance of benefits" (commonly called "MOB") clauses in union contracts. Before medical costs began rising with such startling speed, companies usually agreed to MOB clauses, paying whatever was needed to maintain health-care benefits for their employees.

But, soon, arguments over the MOBs dominated many labor negotiations as management struggled to modify or even eliminate them from union contracts. Often, strikes resulted from the conflicts.

But even as the union-management fights continued, and as non-union companies tried desperately to meet spiraling medical costs, revolutionary forces were at work within the health-care industry.

Young men and women, often attracted, in part, by the handsome incomes of doctors, entered the medical profession in increasing numbers. Now there is a doctor for every 470 Americans, compared to one for every 700 in 1965. Thus, the competition for customers, or patients, has stiffened.

Entrepreneurs, also attracted by the glowing reports of high profits, entered the heath-care industry, slowly at first and then on a massive scale. Before 1980, there were few alternatives to the traditional "fee for service" system that means companies or individuals pay--directly through self-insured programs or through insurance firms--whatever fees the doctors and hospitals decided they wanted to levy.

But more and more alternative systems were created, such as health maintenance organizations (HMOs), preferred provider organizations (PPOs) or variations of those plans. Such systems provide health care for a fixed fee, or cut-rate fees, and they began competing not only with the ruggedly individualistic doctors in private practice but with each other.

By 1980, there were still only an estimated 5 million Americans using some alternative to the old fee-for-service system. At that point, though, the alternative systems began to proliferate at an astonishing rate. Between July, 1984, and June, 1985, for example, the number of HMOs alone increased by 24.9%, according to Washington-based health-care consultant Ruth Hanft. The HMOs now amount to an $18-billion-a-year business--the kind of money that is bound to attract more and more competitors in the field.

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