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The crumbling obstacle to universal health care Saul Friedman Family & Relationships
November 26, 2005
The unique but irrational foundation of America's employer-based health insurance system is collapsing. And nothing illustrates this more than the increasing number of companies cutting or ending health benefits they promised employees and retirees.
Yet this may ultimately be good news, for if employer-based health insurance does come to an end (perhaps during another administration), we can get on to the inevitable, joining the rest of the world in publicly financed universal health care. A recent Harris Poll for the Wall Street Journal found that 96 percent of those polled favored Medicare, and 75 percent supported "universal health insurance."
But the fundamental obstacle is employer-based health insurance, for the millions of workers who have it are reluctant to give it up for universal health care. In an interview with the Boston Globe, Bob Moffit of the conservative Heritage Foundation wondered, "Why is America the only industrialized country that ties health insurance to employment?" "It's nuts," he said, that nine of 10 Americans with private health insurance get their coverage through their employers. "Imagine if auto insurance worked the same way. So if you lost your job, you could no longer drive. That would be absurd."
How did this come about? During World War II, when ceilings were imposed on wages and prices, employers lured workers by offering fringe benefits such as health insurance, the costs of which were (and are) tax deductible for the companies.
All of battered western Europe as well as former enemies Germany and Japan established national health systems. And over here, Harry Truman, too, proposed national health care, but big business cut off that idea by providing private insurance for employees, and labor unions grabbed for it in contracts.
It was generally successful as long as health care costs remained stable and uncomplicated by new technologies and drugs; the workforce remained relatively young and healthy with few retirees; U.S. manufacturers had no competition.
But as that landscape changed, Dr. Marcia Angell, a Harvard lecturer, pointed out the essential flaws in employer-based health insurance: It is cumbersome and costs taxpayers billions in tax breaks. If the business declines in a recession and workers become unemployed, they and their families lose insurance. Even more fundamental, employer- based coverage creates a potential conflict of interest: If the employer's bottom line is hurt by the rising costs of covering health care, the company will inevitably choose to protect profits over protecting the health of workers and retirees.
General Motors, beset by huge losses due mostly to runaway worker- retiree health care costs and competition from Germany, Japan and Canada (where governments provide health coverage), sharply cut its health benefits with the reluctant permission of the union. (On Monday, GM also announced that it plans to cut up to 30,000 jobs.)
The Medicare legislation set aside $89 billion to pay employers to maintain retiree health coverage. But two companies that lobbied for the subsidy, Lucent Technologies and SBC Communications, announced they're cutting retiree benefits. Retailer J.C. Penney notified 9,500 retirees it will end some or all benefits when the law takes effect Jan. 1. Wal-Mart is screening out prospective employees who may have health problems. Sears is eliminating retiree benefits for new employees.
Weirton Steel killed health benefits for 10,000 retirees, their dependents and survivors when it was purchased by International Steel Group. United Airlines slashed benefits for 35,000 former workers. Avionics maker Rockwell Collins says it will no longer offer drug benefits for Medicare-eligible retirees after 2007. And Pfizer Corp., which will make billions selling drugs to Part D beneficiaries, is cutting benefits for retirees who had worked at Pharmacia, a drug firm taken over by Pfizer.
Don M., a Colorado reader, writes of a cruel twist for escaping the cost of retiree benefits. His former employer, Texas-based Electronic Data Systems, founded on Medicare business, is raising the cost of its insurance so high that retirees have no choice but to sign up for Part D and leave the company plan.
The trends are obvious. The rate of coverage for employees and retirees has dropped from 64 percent to 59.8 percent in four years. Small companies can no longer afford employee health insurance. Consequently, Washington's Economic Policy Institute says the number of uninsured Americans rose in four years by 6 million, to 45.8 million men, women and children.
One group has some protection from the trend: older and disabled Americans who are in original Medicare. Despite efforts by Republicans to pick away at its benefits, Medicare remains the most efficient and popular health insurance program in the nation, even among younger people who'd like to have its protection.
As employer health coverage has declined, especially among low-income families and the 550,000 who lost their jobs and insurance in the Gulf Coast hurricanes, enrollment has increased sharply for Medicaid and the State Children's Health Insurance Program.
So here is another trend, said the Economic Policy Institute: "This is a significant shift from private sector coverage to public sector coverage." If that continues, perhaps we'll learn that what's good enough for former enemies is good enough for us. Article 30, Paragraph 1 of the new Iraqi constitution, which the United States helped write, says, "The state guarantees social and health insurance, the basics for a free and honorable life for the individual and the family. . . ."