Right Reality:
Health Care: Neither You Nor Your Company Can Afford It

David Batstone

by David Batstone

I just received notice from my primary employer, the university, that my personal contribution to cover health care premiums will rise 20 percent per year for the next 3 years. My per medical visit deductible fee also went up 50 percent. I promised that my family would not fall ill anymore, but my plea fell on deaf ears.

If you work for a U.S. company, I am sure you could share your own story of rising medical insurance costs; that is, if your employer still covers you. Employer-sponsored health insurance is becoming scarcer and more costly according to the annual health coverage survey conducted by the Kaiser Family Foundation and Health Research & Educational Trust. Their report shows that premiums for job-based health insurance is rising 9.2 percent on average nationwide in 2005, about three times the general rate of inflation. More worrying, the slice of companies even providing health benefits to employees dropped to 60 percent in 2005, down from 69 percent in 2000.

I don't blame my employer for the bigger bite out of my paycheck, nor should you. The problem resides way beyond your bosses' control. Health care costs have become a major burden on businesses that provide insurance coverage: General Motors now spends about $1,525 on health care for every car it produces - or roughly $6 billion in 2005.

Howard Schultz, the chairman of Starbucks, made the jolting revelation last week that Starbucks will spend more on health insurance for its employees this year than on raw materials needed to brew its coffee. Schultz, whose Seattle-based company offers health care coverage to employees who work at least 20 hours per week, said Starbucks has paid double-digit increases in health insurance costs over the past four years. "It's completely non-sustainable," even for companies like his "that want to do the right thing," Schultz told a gathering of U.S. senators.

Indeed, these costs are so burdensome to US corporations that more and more companies either don't offer health coverage, or coverage is so expensive that few employees can afford to participate in the plan. Clearly the system is broken.

The U.S. Congress rejected attempts to more tightly managed care in the late 1990s. Although a single-payer, universal health care plan works fine and dandy in most European countries, Australia, and Canada, a high-powered medical care lobby in Washington DC fights any attempt to reform the medical care system. So we are stuck with half-baked measures to contain runaway medical costs, and they consistently fail.

As a nation, the U.S. cannot rely solely on private-sector insurance. According to the 30-member-country Organization for Economic Cooperation and Development, "the United States spent $5,635 per person on health [in 2003], more than twice the OECD average and around ten times more than the lowest-spending countries, Mexico and Turkey." The United States devotes 15 percent of its gross domestic product to health spending.
Fortunately, American business leaders are engaging lawmakers in a new conversation around health insurance that transcends traditional conservative-liberal labels. For instance, last week, Schultz was joined by Dawn Lepore, president and CEO of Drugstore.com, Costco CEO Jim Sinegal, and Ivan Seidenberg, chariman and CEO of Verizon Communications in sharing concerns about what they identify as a growing health care crisis.

Shultz traces his passion about health care back to his youth in New York City when he saw his dad struggle to hold down a series of low-wage jobs, none of which included health insurance. "I wanted to try and build a company that my father never got a chance to work for," Schultz said.

The fact that skyrocketing health care costs make U.S. employers less competitive in the global marketplace will be the factor that will tip the scale in favor of a dramatic revision of the health care system. One clear sign: more U.S. companies are looking at Canada as a possible site to relocate their operations due to more affordable health care costs up North. Furthermore, as U.S. health costs continue to soar - and believe me, they will - more would-be entrepreneurs are reluctant to quit Corporate America and its blue-chip benefits to start companies. That trend impacts on innovation and job growth, when both are vital to the U.S. economy.

"As a company, we spend more on health care than we do on steel," Bill Ford, chairman and CEO of the Ford Motor Company told the U.S. Chamber of Commerce late last year. Ford followed this shocking admission to business leaders with a call to arms that makes more than sense: "What we seek is a partnership with the government to find solutions to America's health care needs. Our goal should be to make affordable, quality care more accessible to everyone."

Are you fed up with the U.S. health care system? Speak your mind at the Right Reality blog.