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LESSON FROM AUTO CRISIS: PRIVATIZED HEALTH INSURANCE HURTS AMERICAN ECONOMY
Progress Report The growing burden of providing health care benefits has contributed significantly to U.S. automakers' dwindling profits. Health care costs add $1,525 to the price tag of every General Motors vehicle; the company spent $4.6 billion on health care in 2007, more than it paid for steel. According to data compiled by GM's director of health care policy, "every second of every day, GM pays for a medical procedure; every two seconds, it pays for a prescription." In fact, despite "fierce competition among states hoping to attract a new Toyota assembly plant," in June 2005, Toyota chose to locate the new plant in Ontario, Canada. As Nobel-Prize winning economist Paul Krugman observed, Canada's national health insurance system was a "big selling point," saving "auto manufacturers large sums in benefit payments compared with their costs in the United States." In America, the economics have become so upside-down that Warren Buffett calls GM "a health and benefits company with an auto company attached." But as American automakers are grappling with soaring health care costs, their foreign competitors aren't burdened with the responsibility of providing health care. For instance, Toyota, which benefits from Japan's universal health system and cost-sharing and containment mechanisms, "paid $1,400 less per vehicle on health care" and makes $2,400 more per car than American manufacturers. In Japan, the government, employers, and individuals all share in the responsibility of providing health care, while American companies are left at a competitive disadvantage.
Wonk Room - The argument that automakers will benefit from a system of universal coverage in which the government, the employer, and the individual share the costs of health insurance is fairly obvious.
Japanese companies aren't burdened by aging retirees straining company profits. In Japan, everyone is required to enroll in a public or private employer-sponsored plan, and the government spends half as much on health care as the United States to provide care for everyone.
While the Japanese government negotiates a fixed price for every procedure and every drug with the health industry to keep costs low and requires private insurance companies to offer everyone coverage, the American system lacks electronic medical records, effective comparative effectiveness research of new technologies, and broad-based access to preventive care.
In Japan, every citizen is covered while in America, care for the uninsured adds an average $922 to family health insurance premiums.
In short, our fractured health care system inflates health care costs and expects businesses to pick-up the tab.