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Would National Health Insurance Help GM?

Conventional wisdom in this country has it that American businesses are uncompetitive partly because they have to spend so much on health insurance for their workers. Here's a common variation, from Dean Bakopoulos:

[W]e must implement a system that guarantees universal healthcare. American industry — from National Steel to Starbucks — would benefit from having the burden of health insurance lifted off its back. Why else would GM be aggressively investing in nationalized-healthcare Canada while U.S. plants shut down?

Why indeed? I certainly don't know. But I'm not convinced that the conventional wisdom is entirely right. At least let's hash it out. There's reason to think that national healthcare wouldn't necessarily make American businesses more competitive.

Say each year GM paid each worker $40,000 and spent $5,000 per worker on health insurance. That's a major drag, right? Well, look. Say national health insurance is then created, some system that doesn't rely on employers. Depending on how it's financed, GM could still be on the hook for that $5,000, so long as total worker compensation doesn't change—which it shouldn't, so long as it's set by the market. Maybe companies will now pay that $5,000 in wage form, to attract the same caliber workers (or because unions demand it). Or maybe the new system will be financed by payroll taxes or individual mandates, in which case the company might have to pay each worker $45,000 to cover the cost. But total compensation wouldn't change.

Alternatively, those companies that are currently paying nothing for health insurance can help share the load with companies like GM. But then you're just taking from one company to help out another—American businesses overall don't necessarily become more competitive. There are probably ways to redistribute the load that make sense, and that's why we have policy wonks, but the point is there's nothing prima facie business-friendly about this.

In reality, of course, things would look far more complicated. The current tax system makes things complex. And some health insurance systems are more efficient than others. National health insurance might be cheaper, on aggregate, than our current system, in which case everyone would be paying less, and businesses obviously become more competitive. But what if the new system was more expensive—given that 45 million new people would need to be covered? GM's fortunes would depend largely on how the system was financed and how good it was at controlling costs. European companies are more competitive on this front presumably because Europe rations its health care and so spends less (with similar, if not better health outcomes). If we could do that, it wouldn't matter quite as much how health care was delivered—cutting costs is where the benefits to business would lie, primarily.

There's another aspect here. Right now, when insurance premiums go up each year, GM usually has to cover the increase, which goes up faster than wages do, unless it wants to shift some of the cost onto workers—a move that usually causes a big stir and is somewhat hard to do. But if GM was paying its workers entirely in wages, and the government handling health insurance, then GM might be able to get away with avoiding the "necessary" wage increases whenever there was a premium hike. In that case, GM would save money and become more profitable by giving its employees a pay cut—who get, say, a payroll tax increase or premium hike from the government, but not enough of a corresponding wage increase from GM to cover it. But who knows.

I certainly think a national health insurance system is necessary in this country, one not tied to employment. It would help workers move from job to job more easily while remaining insured, and would guarantee that everyone had insurance. It's fair, moral, decent, etc. And it would likely be progressive, which the current tax deductions for employer-backed insurance certainly aren't. And so on. In theory reform could even help control costs, although I'm not as orthodox about that particular faith as some. But would it be a boon for American businesses? It really depends.

Posted by Bradford Plumer on 11/22/05 at 9:56 AM | E-mail | Print

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This week G Richard Wagoner Jr., Chairman and CEO of General Motors, wrote an op-ed called â€˜A Portrait of My Industryâ€™ attempting to address the root-causes of GMâ€™s abysmal performance in the past few years. In essence, he is writing a defense f... [Read More]

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Comments

This whole question is sort of missing the point isn't it? National healthcare is the right thing to do because millions of people don't have healthcare, not because it might help out some corporations. This is like people arguing about whether or not torture "works." It doesn't matter whether or not it works, it's still wrong.

National healthcare helping or hurting corporations is a side effect. If it's a good side effect, that's great. If it's not, it's still beside the main point. When working people have to wait until they're emergency room level ill before they get medical care, that's a moral problem even more than an economic problem. National healthcare is the moral answer to a moral crisis.

Posted by: Les on 11/22/05 at 11:19 AM

Les -- Totally agree, see my last paragraph there.

Posted by: Brad Plumer on 11/22/05 at 11:57 AM

The next Toyota auto plant for North America will be built in Ontario Canada. Toyota's top 2 reasons for selecting Ontario were the well educated, easy to train workforce and Canada's nationalized healthcare. That's a fact, not theory.

Posted by: Marvin Toler on 11/22/05 at 1:57 PM

If we financed a national health care system with a value added tax on all goods and services sold in this country (with exemptions for such necessaries as rent and basic food stocks), then the burden of health care would fall on all who sell in this country regardless of whether they manufacture in Detroit or a Chinese forced labor camp. That would help eliminate the competitive edge of outsourcing overseas, and thereby help GM, Delphi, and other domestic firms.

Posted by: Michael Miller on 11/22/05 at 3:46 PM

I think you miss the fiscal catastrophe our medical "system" is. The 50 plus million uninsured are currently paid for by GM et. al. in the treatment charges for people with insurance. A typical medical procedure in the US costs two to three times as much as anywhere else in the world and the effectiveness of treatment is mediocre (life expectancy, infant mortality, number and length of hospital stays, percentage of children immunized, etc.). The 50 plus uninsured do not include those on medicaid, another 40 million, plus or minus, whose expenses are shouldered by everyone, employer and employee, through local and federal taxes of some sort. Our system is ineffective, unfair, and outrageously expensive, but highly profitable for some, thus a complete collapse will be needed to fix.

Posted by: art h. on 11/23/05 at 5:19 AM

Please, please, please do NOT discuss national health systems of Canada or Europe unless and until you know more about it. The worst features of American reports about national health is the sheer ignorance of how they are funded, how they manage health care, and how successful they are. Please stifle.

Posted by: RED on 11/23/05 at 10:20 AM

RED -- No one's said anything incorrect about Canadian or European health care systems.

Posted by: Brad Plumer on 11/23/05 at 10:52 AM

Continued: "European companies are more competitive on this front presumably because Europe rations its health care and so spends less (with similar, if not better health outcomes)." Most national health systems (Europe included) are employer-employee shared systems -- just like their pension systems -- and in the system of care: (a) do not practice defensive medicine (superfluous tests to avert malpractice charges); (b) do not allow surgeons to do major surgeries on octogenarians (and older); (c) do emphasize good health in addition to treating disease; (c) do control costs of medical professionals (no multi-millionaire physicians). That for starters.

Posted by: RED on 11/23/05 at 2:09 PM

There are a few things you might also consider re: the advantage that corporations gain by controlling the healthcare coverage of their employees:
1. Corporations pay less (through leverging power) for an insurance policy that would cost employees, independent of an employer, far more. Hence, an employer can offer an employee package worth more to the employee than it's cost to the employer.
2. Corporations experience greater job loyalty due to impediments to job mobility.
3. Unions have difficulty oragnizing if they fear losing their (family) health benefits-- a price many cannot afford.
4.Interlocking boards: the health industry is 1/5 of the U.S. economy. How many CEO/CFOs are not exposed to financial losses in the advent of a nat'l system? Not many!

Posted by: Zoe on 11/29/05 at 6:41 PM

I'm a former teacher paying $367 a month for COBRA. This does not include the $100 monthly co-pays for my meds or my $500 deductible for physical therapy. Incidentally, the main reason I became a teacher was so that my anti-depressants (which keep me from being near-suicidal) would be covered. Many insurers refuse to cover pre-existing conditions or have a waiting period of 3-6 months.

What do I do in the meantime? Can you imagine telling someone with a heart condition that they can't get medicine for 6 months? WTF?

Mental health is still seen as something you can pull yourself out of by the bootstraps and is not considered necessary. In essence, I'm being punished financially for something that I can't help.

Posted by: Yvonne on 08/23/06 at 11:58 AM