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DAVID LAZARUS CONSUMER CONFIDENTIAL

GM steers away from health fix

September 25, 2007|DAVID LAZARUS

Chickens, meet roost.

The decision Monday by the United Auto Workers to walk off the job at General Motors highlights yet again the divisive element of healthcare in labor relations, and how what began as a historic accident is now the biggest liability for both businesses and workers.

It also clouds prospects for healthcare reform nationwide as GM, the largest private-sector purchaser of health insurance, signals that it's more concerned about a short-term covering of its you-know-what than a leadership role in seeking long-term solutions.

"The present employer-based system is in terrible trouble," said Henry Simmons, president of the National Coalition on Healthcare, a group of business, labor and other organizations that collectively represents about 150 million Americans. "Business has a critical role to play in fixing that."

Some 73,000 UAW members hit the picket lines Monday as the union responded to what it called an impasse over job security for its members. Analysts say a prolonged strike could do extensive harm to GM's bottom line.

A key issue on the table between GM and the UAW is the creation of a union-controlled trust fund that would cover the automaker's roughly $50-billion liability for providing healthcare to retirees and their families.

The deal would place the union on the hook for offering coverage amid escalating costs for insurance premiums and medical treatment. GM, in turn, after an initial multibillion-dollar outlay, would be relieved of a considerable portion of its annual healthcare spending and perhaps much of the urgency to spearhead reform efforts.

"Nobody is going to fix this problem by passing it off to someone else," Simmons said.

The roots of the healthcare system's current troubles lie in World War II, when Congress sought to keep inflation in check by freezing workers' wages. At the same time, however, lawmakers allowed companies to be as generous as they pleased with benefits.

As a result, employers competed for relatively scarce labor by offering plenty of perks, including medical coverage for workers and their families. By the time Congress lifted the wage cap after the war, employer-based health insurance was a routine part of workers' compensation.

A pivotal moment came in 1950, when GM and the UAW were negotiating autoworkers' contracts. The head of the union, Walter Reuther, believed universal coverage should be the law of the land and that GM should lead the way in ensuring that all employers in all industries provided equitable health benefits to workers.

GM's president, Charlie Wilson, balked at the notion. Instead, he argued that each company should look after its own workforce to the best of its ability. In the end, Wilson won out, and the foundation of the U.S. healthcare system was in place.

Today, GM finds itself with crippling healthcare costs and 47 million Americans are uninsured.

"No one is in love with the current system," acknowledged Helen Darling, president of the National Business Group on Health, an alliance of large employers.

Yet she said that although businesses might agree on the need for expanded or even universal coverage, there's no consensus on how this could be achieved.

"I think we'll probably end up with a lot more coverage for the uninsured," Darling said, "but not for all the uninsured."

The business world has been increasingly vocal in calling for change on the healthcare front, but sadly lacking in specifics for how to accomplish it.

Retail powerhouse Wal-Mart made headlines this year when it joined with the Service Employees International Union to call for universal health coverage within five years. Neither the company nor the union offered a plan to get us there.

"It's just dandy that they're interested, but they're flying at 40,000 feet," said Henry Aaron, a senior fellow at the Brookings Institution. "Any change will have to get done at ground level."

GM seeking a healthcare deal with the UAW represents a short-term reprieve for both the automaker and its workers. Longer term, it could be a setback for reform efforts.

"Everyone knows that GM and other automakers are looking for universal coverage," said Paul Ginsburg, president of the Center for Studying Health System Change, a nonpartisan Washington think tank. "But they may just be sitting back to see what others come up with."

If so, that's a shame. The Big Three may not be what they once were as an industrial juggernaut, but they still wield significant clout on the policymaking front.

In November, the heads of GM, Ford and Chrysler sat down with President Bush and Vice President Dick Cheney at the White House to express their concerns about runaway healthcare costs.

Each company, Bush and Cheney were told, spends more on healthcare per vehicle than it does on steel. The administration was unmoved.

"These leaders are making difficult decisions, tough choices to make sure that their companies are competitive in a global economy," Bush told reporters after the talks. "And I'm confident that they're making the right decisions."

Those decisions look somewhat different with thousands of autoworkers walking the picket line.

This issue wouldn't even be a factor if GM had taken a different approach to health coverage half a century ago. As it stands, the company, and the country, will find its healthcare headache worsening, with no aspirin in sight.

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Consumer Confidential runs Wednesdays and Sundays and frequently in between. Send your tips or feedback to david.lazarus@latimes.com.

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