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U.S. Firms Losing Health Care Battle, GM Chairman Says

"The cost of health care in the U.S. is making American businesses extremely uncompetitive versus our global counterparts," he said. "In the U.S., health care costs have been rising at double-digit rates for many years. In 2003, they were about 15 percent of GDP, at least 30 percent higher than the next-most-expensive country."

Paul Hughes-Cromwick, senior analyst at the nonprofit Altarum Institute in Ann Arbor, Mich., said executives are alarmed that benefit costs are rising far more rapidly than wages.

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Full Text: The remarks by GM CEO G. Richard Wagoner Jr. to the Economic Club of Chicago, as prepared (PDF)
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Total compensation costs for U.S. firms rose about 3.7 percent in 2004, mirroring previous years, he said, citing Bureau of Labor Statistics data. But salaries increased just 2.4 percent, while benefit costs rose 6.9 percent. The gap is the largest he has seen in two decades.

"That huge benefit hit is chewing up the salaries and wages we would be receiving," he said. "That's the key."

Yesterday, Wagoner broke his silence on an idea proposed by Sen. John F. Kerry (D-Mass.) in the 2004 presidential campaign, saying he supports some type of national catastrophic reinsurance program. Senate Majority Leader Bill Frist (R-Tenn.) has also endorsed the concept of a separate government-backed insurance pool to cover the most expensive medical cases.

"If we can create a comprehensive insurance model to better share these catastrophic costs among all consumers, then we can take a big step toward providing affordable health care coverage for all our citizens," Wagoner said.

Wagoner and fellow executives find much to be frustrated with in the health care system.

"It's simply not acceptable for over 45 million Americans to be without health care coverage," he said, echoing a point made recently by Jack O. Bovender Jr., chief executive of health care giant HCA Inc. "And it's unfair for those of us who do provide health care benefits to have to pay higher bills to cover the costs of the uninsured. Talk about 'no good deed goes unpunished.' "

The business leaders cannot understand why the health care industry has been slow to institute the sort of technological changes that helped them improve quality and reduce costs.

"Only in health care does bad service and bad quality get paid for in the same manner as good service and good quality," said Humana Inc. chief executive Michael B. McCallister, chairman of the Business Roundtable's health care task force.

The CEOs agree that the double-digit premium increases will continue as long as individuals are sheltered from the true cost of health care.

"Companies, to manage health care costs, are going to have to have employees who understand that this is something you are consuming and you have a responsibility for," Wal-Mart Stores Inc. chief executive H. Lee Scott Jr. said in an interview.

Staff writer Michael Barbaro contributed to this report.


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