A May 26 Business article misstated the amount of money Ford Motor Co. spent on health insurance in 2002 and 2003. The company spent $2.8 billion in 2002 and $3.2 billion in 2003. Its total estimated health insurance obligation to current employees and retirees rose from $30 billion to $32 billion. (Published 5/27/04)
Alarmed by his company's escalating health insurance costs and a frightening scarcity of remedies, Ford Motor Co. chief executive William C. Ford Jr. declared in December that the nation needs an entirely new health care system. Then he tapped Ford's vice chairman to craft a proposal to develop one.
"I just think that as a country, if we have a model that isn't working and a model that's driving jobs overseas, then we'd better take another look at it," Ford said.
Yet in a presidential election year, when rising health care costs are climbing up the agenda, Ford -- like the rest of the business community -- remains spooked by the prospect of a "Washington solution" to its spiraling costs and has studiously shied away from the political arena.
From the largest corporations to the smallest mom-and-pop shops, business executives identify double-digit increases in health insurance costs as perhaps the biggest threat to their bottom lines and their future. Yet beyond their vocal complaints, businesses have been strikingly absent from the burgeoning political debate and largely unwilling to take sides.
Business groups large and small say neither political party has embraced proposals that will truly bring down spiraling costs.
"Employers always stand to lose, everyone stands to lose, when health care becomes politicized," said James Klein, president of the business-backed American Benefits Council. "Employers have seen health care politics over the years, and good health care policy does not tend to emerge from health care politics."
After a decade of cost controls in the 1990s, health insurance premiums have resumed their rapid growth -- 11 percent in 2001, 13 percent in 2002, and 14 percent in 2003, according to the Henry J. Kaiser Family Foundation. Ford spent $30 billion in 2002 to cover insurance costs for 560,000 workers, retirees, dependents and surviving spouses, said Ford spokeswoman Brenda Hines. In 2003, the figure jumped $2 billion, adding nearly $1,000 to the cost of every Ford vehicle produced in the United States.
Brand-name prescription drug costs alone rose at nearly three times the rate of inflation last year, the AARP reported this week.
Those rising costs have taken a toll. From 2001 to 2002, the ranks of the uninsured jumped 2.4 million, to 43.3 million, the largest increase since 1987. The Kaiser foundation attributes that almost exclusively to employers, especially small businesses, dumping their health coverage.
In 2001, 68 percent of businesses with fewer than 200 workers offered health care benefits. By last year, 65 percent did. Coverage from businesses with 25 to 49 workers has fallen from 91 percent in 2000 to 84 percent last year.
With the population aging, insurance companies consolidating and managed-care cost containment out of favor, these trends seem likely to continue, said Paul Fronstin, director of health research at the Employee Benefit Research Institute.
"It's sort of the makings of a perfect storm," he said.
In such numbers, Sen. John F. Kerry (Mass.), the presumptive Democratic nominee for president, sees an opportunity to peel business support away from President Bush. He devoted an entire week this month to discussing his $650 billion health care plan. And last week, campaign aides, led by investment banker Roger C. Altman, began formulating a program to woo chief executives to talk up aspects of the plan, if not endorse the Democrat.
Both Kerry and Bush have health care proposals. Bush would offer lower- and middle-income families a tax credit worth roughly $1,000 to purchase health insurance on their own. Costs would be held down by controlling medical malpractice lawsuits. Small businesses would be allowed to pool together to bargain for better private insurance deals, and tax-favored medical savings accounts would be expanded to defray out-of-pocket expenses, all at a 10-year cost of about $120 billion.
Kerry would offer a considerably larger -- and, at $177 billion, more costly -- tax credit. Unlike Bush, he would give individuals the option of purchasing insurance from the same federal employees' health care plan that members of Congress use, an option that he says would bring down premiums significantly. He would also expand children's eligibility for Medicaid and allow more parents to obtain coverage through the federal children's health insurance plan.
Under the plan, small businesses could buy into the federal employees health care plan with a tax credit to cover up to half the cost of employee premiums. Because one serious illness can send a small business's insurance costs skyrocketing, the government would cover up to three-quarters of "catastrophic" medical costs over roughly $50,000 for any business, large or small, that covers its employees and adopts "disease management" to hold down costs for the chronically ill. The disease management provision and a tax incentive for medical technology adoption should hold down health care costs by $250 billion to $300 billion over 10 years, Kerry advisers say.
Kerry's idea of a national insurance pool to cover catastrophic costs may be a seed for bipartisan reform, said Bruce Josten, chief lobbyist for the generally Republican U.S. Chamber of Commerce. Earlier this month, three conservative economists -- including the first chairman of Bush's Council of Economic Advisers -- published a lengthy opinion piece embracing a similar proposal.
But have business groups embraced Kerry's efforts?
"The Kerry plan doesn't solve the cost problem," answered Helen Darling, president of the National Business Group on Health, which includes 46 of the 100 largest U.S. companies. "It shifts private sector costs to the government, but in so doing, it creates a blank check. . . . Bush is at least less likely to drive up costs because he's doing so much less."
Klein said businesses are increasingly frustrated and looking for a dramatic shift in health care policy. But they have an engrained fear of government solutions, which they believe will exchange their insurance costs with an ever-escalating tax bill.
Others say businesses are just too cautious to make the jump into politics.
"There is a lot of interest among large employers to better understand the implications of these political solutions to the health care morass," said Peter Lee, chief executive, Pacific Business Group on Health, which represents West Coast companies. "But there's also concern that we don't have a clear policy answer out there."
Darling said part of the problem is that neither Bush nor Kerry is emphasizing policy options that business groups believe will hold down costs -- for them and the taxpayer. For instance, the federal government, as the largest consumer of health care, could mandate that it will no longer purchase services from hospitals, doctors and other providers that do not immediately adopt uniform, efficient technologies, such as online medical records and billing.
"And don't take the argument that they don't have the money to comply," she added. "They're building new hospitals, buying expensive new equipment. That's just an excuse."
Similarly, the government should purchase health care only from providers that track and publish information on health care quality, such as the rate of infections acquired in the hospital or the number of unanticipated complications a doctor confronts.
The National Institutes of Health could develop a set of reasonably priced medical insurance packages, complete with a list of tests proven to be cost-effective and reasons for hospitalization, that businesses and insurers could adopt nationally.
"It's hard to get on board with something that you don't think is a solution," Darling said. "That goes for everybody's plan so far."
Labor unions have a different explanation for business's political skittishness: Employers already have a solution, foisting rising costs on employees. Just this week, SBC Corp. employees went on strike over efforts by management to increase employees' medical co-payments, while Microsoft Corp. cut back its prescription drug benefit. A nearly-five-month supermarket strike in California last fall and winter centered on health insurance costs.
"The reason they are not seeking a legislative solution is that most workers don't have the protection of a union, so most employers have been successful at shifting the cost," said Richard Bank, director of the Center for Collective Bargaining at the AFL-CIO. "They don't see a need for a long-range remedy at this point."
Indeed, a new trend has developed called "consumer-directed health care," in which employees are given large deductibles, or even a limited pot of money each year, and encouraged to shop for the best health care deal they can find. A recent survey by the consulting firm Watson Wyatt Worldwide found that enrollment in such plans will grow from 169,000 in 2003 to 478,000 this year.
Companies "are getting employees prepared should they cut the cord" in the future and drop health coverage, said Ted Chien, global director of group and health care consulting at the firm. "If costs don't abate, the likely possibility is that employers will just want to get out of the business."