GM Healthcare: A Tree falling in the Forest?

Ready for some mixed metaphors? OK here goes. First a question… when will America see the Forest for the trees? Probably only when one of those trees falls. But then.. if a tree falls in the forest and there is no one there to see it, does it make a sound?

Pheww.

What I’m babbling about is yesterdays agreement by GM with the UAW to massively cut healthcare costs… and in the process… possibly save the company from bankruptcy.

GM lost 1.6 BILLION dollars in the 1st half of 2005. Largely because they can’t afford to pay the health care costs that their employees demand and deserve.

So why is GM in this position and others aren’t… well…. because the majority of their car plants, unlike other foreign and domestic Auto Makers… are in the US. And in the US companies must completely provide for health care for their employees. In other car producing countries… like Japan, Asia, Germany, and yes, Canada… there is Universal, government funded, health care. The company is saddled with a fraction of the cost.

In todays world of ageing working population how can companies be expected to provide for their employees? Only governments have the ability to simultaneously raise money and cut costs as health care costs rise.

GM could still easily go under. Will it take a Chapter 11 filing from one of the Great American Companies to make Americans realise that if they want their economy to succeed they need to take responsibility for it, and themselves. They need universal healthcare. And they need to be willing to pay taxes to do it.

The free ride is over. The first tree is falling.

10 thoughts on “GM Healthcare: A Tree falling in the Forest?”

  1. In the US, as you no doubt are aware, the group health insurance provided by the employer is paid almost entirely by the employer. I myself pay $90 per month for excellent health insurance for both my husband and myself with no deductible except prescription and office visits. I also receive dental and vision insurance for both of us at no extra charge.

    In the past few years, as I’ve gotten older, I’ve received a ton of health benefits – two cataract surgeries, an MRI, a colonscopy, expensive medication for a skin condition (related to the immune system), an extensive cardio-evaluation complete with stress test and bi-monthly checkups for a metabolic condition (diabetes) and about 6 or 7 daily medications. My skin medication costs $300 per week ($15,600 annually) and must be taken for life just to keep the condition under control. – just to give you an example of what one person is receiving. It’s extremely expensive, I know but my treatments are with no waiting and always with referrals from my Primary Care physician to specialists if necessary. the majority of my life I’ve seen doctors rarely. Now I’m there often.

    I’m told that it costs my employer way more than I could afford to pay for my portion of the monthly cost of the group insurance our company provides. The question I have asked for over a decade now with no satisfactory explanation is this:

    If my employer is relieved of the monthly cost to insure my family and health insurance becomes a tax payers burden, the costs of my care don’t necessarily go down. The source of the money pooled in the insurance industry and used to pay health care costs has to switch from the business community pool to the taxpayer pool, right? Is the government going to take from me in the form of taxes that monthly $1,000 (estimated) formerly paid by my employer? Are my taxes (or whatever they want to call the money I pay) going to go up by $1,000 per month? I don’t understand how this benefits me or my fellow citizens.

    Health care will never be free even if the source of the funds goes from US employers to a tax paid universal health insurance fund. Right now society pays the employer back for my health insurance in the form of what is charged the public for goods and services sold by the employer. Whose going to pay me back that $1,000 per month that I will pay and can jolly well not afford?

    This health care conundrum is a huge problem and your system does not solve the problems by a long shot. As Canada’s aging population requires more and more health care, how will the far fewer younger tax-payers support your health care system? This is a real problem facing most of the socialist/welfare countries in Europe and Canada and not once have I heard from a citizen who enjoys this system now with an answer to this serious question.

    In the US this question is raised in connection just with social security considerations but the problem applies to countries all over the world. If a solution isn’t found soon, we will all have far fewer options and most likely a lower and lower expected average life span. There just aren’t enough “kids” demographically speaking in Western first world countries to keep the old folks in health care indefinitely. It appears to me that there is a LOT of denial goin’ on.

  2. PS The tree-in- the-forest question is answered easily. Yes, of course, it makes a sound whether any creature is there to hear the sound or not. The laws of physics are not suspended whether or not there is anyone or anything there to witness (or hear) the phenonema. The tree’s fall produces sound waves carried through the atmosphere just as the porpoise jumping through the water makes bubbles or ripples – even when the porpoise is all alone in the big ocean.

    And the prospect of GM going under is no more worrisome than seeing the recent bankruptcies of several airlines. Competition weeds out the inferior businesses. GM has been a disaster waiting to happen for several decades. They simply do not turn out the quality vehicles demanded by the public in this age and they had a huge surge in sails this year due to their heavy discounts. Was that wise considering their financial problems now? What did that gain – selling more cars but at an inadequate price strikes me as rather poor management. Perhaps they deserve to fail. Of course, Chrysler was in the same condition in the early 80s and got bailed out by the taxpayer.

  3. PS GM didn’t cut health insurance benefits. They raised the employee participation percentages so that workers and retirees will have to share more of the cost but still GM is paying at least 70% for salaried workers and more for the hourly workers.

    Just wanted to clarify that error.

  4. Chris … as you could probably figure, I consider jane’s comments spot-on. We end up paying the cost in ANY healthcare system — the question is, which system combines maximizes efficiency and effectiveness for our citizens when it comes to using our resources for healthcare?

    The biggest reason healthcare costs in the USA have soared is because the vast majority of patients are at least partially insulated from the true costs — thanks to insurance. The cost-benefit feedback loop is attenuated, if not opened entirely.

    As a result, people have developed an attitude of “give me the best, or else”, and the doctors have little incentive for considering cost-effectiveness in treatment decisions … and some of that “or else” is behind the costs incurred for malpractice insurance and “defensive medecine” in response to our perpetual lawsuit lottery.

    This situation makes our “selfish obsession” with SUV’s — a favorite gripe of many — look downright trivial.

    Managed care is an attempt to restore the proper feedback, without being so callous as to throw the entire burden back on the individual. There is still competition in that system, that serves to drive costs down … but it makes things quite complicated for the individual, from personal experience.

    OTOH, we have seen costs drop in “elective” areas like LASIK surgery … where the free market, and not insurance or government, is still the primary medium for decision-making. Not only is there price competition, but the lack of insurance involvement in such fields lowers administrative costs … and the desire to maximize profits also fuels innovation here. I’m not necessarily saying that the answer is the free market … but what you are advocating is a course of action that is the dead opposite of what dropped the costs in this case.

    Going to a government-funded system will do nothing to close the cost-benefit feedback loop … in fact, it will break that loop, in both directions, by removing both cost perceptions and a varying degree of patient control in healthcare decisions.

    Also, the government’s ability to deal with the lawsuit lottery by taking over the system comes at a price — putting my health care in the hands of practically-unaccountable bureaucrats, with no recourse to the courts even for legitimate reasons.

    It’s ironic that those who are the most vocal about a woman’s “right to choose” are also some of the biggest proponents of letting the government take control of their health … their bodies.

    Healthcare is an area where there is not one, overarching solution … it is an area where there are MILLIONS of individual needs — and associated solutions. This is an area where the subset of our population we call “government” is simply structurally incapable of efficiently and effectively handling all the variables in the equation.

    You instead get lowest-common-denominator healthcare … and progress in the field gets retarded by removing the incentives to innovate.

    (BTW, my father is a retired GM employee … and with my wife and I having medical problems, we are on a first-name basis with our managed-care insurance administrators.)

  5. “We end up paying the cost in ANY healthcare system”

    Absolutely.

    “As a result, people have developed an attitude of “give me the best, or else”, and the doctors have little incentive for considering cost-effectiveness in treatment decisions”

    I’m less inclined to blame doctors, who, in both our countries are completely overworked and their staff, nurses are also on their last legs… it should not be up to them to consider cost-effectiveness, only the best treatment for the situation… cost is up to the insurer (in the US, an HMO, in Canada, the government) and the burden put on the patient.

    This topic is about that burden. In the US it is up to business to provide funding for their employees health care… if they do so at all. And that is a massive cost and as we can see with GM it can become a huge burden. However, what seems counter intuitive to me is that not only is the burden great on the business, but its’ also heavy on the consumer/worker.

    As an example, I was at a resort once and sat down to breakfast with an American couple.. the older man was a successful business man in Washington State. (he flew his own plane up here to go to the resort). He asked me, very gently I might add “So, in one sentence describe your experience with your healthcare system”

    I said… “It’s been very good to us”. I then explained our experience with my daughter who was 3 months premature and in the hospital for the first 2 months of her life.

    He said, that under the plan he gives his employees, which he says is still quite “old fashioned” and very complete, his employees would likely have to pay 1000s of dollars for that time in the hospital.

    Whereas here… we paid $0, and my employer paid $0… In fact, the Government started paying *us* through the Child Tax Benefit.

    “putting my health care in the hands of practically-unaccountable bureaucrats, with no recourse to the courts even for legitimate reasons.”

    So what’s the difference between an HMO and a government? Does the president of your HMO know any more than the President of the United States about what that bump is on grandmas foot? I seriously doubt it… and worse, that HMO president is far MORE concerned about the state of his business and his investors and making a profit.

    It’s good that you’re on a first-name basis with your administrator, but it makes me wonder why you would need one. “Managed-care” just sounds to me like another word for “long-term debt”. I would rather go straight to a doctor that I could trust and develop a relationship with so that I was sure I was getting the care that I needed…

    bureaucrats have nothing to do with healthcare. They just give the money to make it run. If I want to sue my doctor, I can do that. If I want 5 other opinions before I get a procedure, I can do that. I simply don’t understand where people get the myth that Universal healthcare==Government deciding on health matters. That’s absollutely false, at least in Canada. It’s up to the patient or the doctor to decide what needs to be done. And it’s up to Universities, Centres of Research, and other places of learning and research to come up with new “solutions” as you would describe them.

    The difference is that in Canada, if a procedure is deemed medically necessary, then for the most part, the government picks up the tab… for everyone and every business… no matter what their job description.

    And if there is a procedure that I want done (like Lasic eye surgery) that isn’t medically necessary, then I can get that done too by paying for it mysef… yes, there are less places to do it, and I might have to wait a little longer (though, for stuff like that, usually no more than a few weeks) but I can do it and the government *again* picks up part of that tab as well.

    Canadians pay for that through taxes. Ironically, American citizens pay both through taxes and through the increased medical benefits plans doled out by HMOs and business…

    The conclusion that we came to when I was discussing it with the American couple was that both systems had serious problems.. the US, with access and cost to consumers, and Canada with timeliness and major infrastructure.

    We left it at that.

  6. So what’s the difference between an HMO and a government? Does the president of your HMO know any more than the President of the United States about what that bump is on grandmas foot? I seriously doubt it….

    My company can at least walk away from the HMO, with my resources, and apply them to fund a more effective and efficient provider. Been there — done that.

    The Hillarycare plan back in 1993 actually had penalties for going out of the system, OTOH.

    and worse, that HMO president is far MORE concerned about the state of his business and his investors and making a profit

    The state of that business includes keeping groups as customers for his services … one of those feedback mechanisms I talk about. The gov, OTOH, has a guarantee of “customers” … and the only incentive to make things better is via the political process. In terms of control, that’s like me using a 20-foot screwdriver to steer my car.

    You say that bureaucrats have nothing to do with healthcare … since when does such a level of government funding not come with serious strings attached? Control follows funding … or the funders risk charges of waste.

    There are many reasons for the overwork of doctors … and not all of them are altruistic. They seek profit, just like the rest of us, by doing what they love to do.

    Many of them compromise on patient contact, in order to get more throughput and maximize revenue … for example, you might be surprised to know that pyschatrists do relatively little counseling/direct analysis these days. They leave that to the psychology-trained counselors … and primarily act as prescription dispensers. Another example … GP’s who specialize ONLY in hospital practice, grouping with other GP’s who only work outside the hospital.

    The vast majority, IMO, dislike this … but today, thanks to the high level of regulation — and the lawsuit lottery — this kind of assembly-line medicine is the only way they can get a decent return on thier (considerable) investment in their education.

    Is part of this also due to price pressure from managed care? YES! However, the need for these shifts in the practice of medicine stem from the years where we didn’t even have THAT feedback mechanism for cost containment. Managed care is our attemtpt to hot-wire that broken feedback loop … and doctors are caught in the middle.

    Healthcare is like the environment … it is very hard to preserve and enhance either when you are wondering where your next meal comes from. Cost-effectiveness must ALWAYS be considered, or we will deplete the overall pool of resources we have, to apply to all our needs.

    The more direct the feedback, the faster errors are corrected. Placing healthcare under government control works directly against this principle, by insulating the recipient from the costs and placing other decision-makers … who have little direct knowledge of how their decisions affect THAT RECIPIE?NT — in the loop.

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