NY Times: Whose Problem Is Health Care?

Nice piece in today's business section of the New York Times by Daniel Gross on the problems of employer-based health care. The story is about a December 2003 report from the Manufacturers Alliance and the National Association of Manufacturers that details the factors that make it difficult for American manufacturers to compete with foreign firms -- not just those in developing countries with low labor costs, but in developed countries as well. One of the culprits that cancels out gains in productivity and cost controls is the structural costs of operating in the US: corporate income taxes, employee benefits, and rule compliance. The article looks particularly at health care costs:

After corporate income taxes, employee benefits are the second-largest structural cost for American manufacturers, adding 5.8 percent to costs, according to the study. In all major economies, paying for health care means a combination of public and private money. But in the United States, businesses pay a larger chunk than do their European and Asian counterparts.

"In Canada, for example, a lot of the expenditures for health are funded out of general revenues," said Jeremy Leonard, an economic consultant for the Manufacturers Alliance, and the report's main author.

In Canada, the private sector spends 2.8 percent of gross domestic product on health care; in the United States, the private-sector figure is 7.7 percent. And American private-sector spending falls disproportionately on big employers like manufacturers. Some 97 percent of members of the National Association of Manufacturers provide health care coverage for employees. In 2002 alone, General Motors, which covers 1.2 million Americans, spent $4.5 billion on health care.

Best quote, predictably, comes from the eminently quotable Uwe Reinhardt, "an economist at Princeton, has referred to General Motors, Ford and Daimler-Chrysler as 'a social insurance system that sells cars to finance itself.'''

The debate is between a governmental program for retiree health care (and can employee health care then be far behind?) and the current, privately financed employer-based approach. The article concludes, "Whatever way, we all pay." Increasingly, though, large employers are looking for ways to shift their health-care costs to a larger denominator (say, all taxpayers). The tradeoff in terms of slight increases in corporate taxes will be more that offset by the many-times-larger reduction in health-care costs. It will be interesting to see if and when the captains of industry start throwing themselves behind a national, single-payer system. . . .