In recent weeks on the assembly lines at General Motors Corp., members of the United Auto Workers union have stopped work to view company-sponsored videotapes portraying UAW families coping with rising health care costs and deciding what type of health coverage to choose.
Satellite-fed "teleconferences" featuring company and union officers have been beamed from Detroit to 90 GM facilities nationwide. They are intended to explain to plant managers and UAW officials the importance of the cooperative fight to reduce health care costs, which had been increasing 14 percent per year to reach roughly $400 per GM car.
The joint company-union effort to promote cost control has contributed to a significant improvement, according to company officials. For the first time in its history, GM will reduce its health care spending this year, projecting a $200 million reduction in its annual $2.3 billion outlay to cover 2.1 million employes, retirees and dependents, according to company officials.
GM's apparent success -- which is based primarily on aggressive promotion of health maintenance organizations (HMOs) and similar services aimed at reducing hospitalization and unnecessary surgery -- is a model for a growing effort by corporations and labor unions to join forces against the common enemy of rapidly inflating health costs, according to health experts and industry officials.
Corporations pay more than $100 billion a year for health care, nearly one-third of the national total, and are usually most successful in reducing those costs when they involve employes in decision-making, according to a new two-year study released this week by the Work in America Institute, a nonprofit research group supported by business, unions, universities and foundations.
The traditional approach to cost-containment for many companies has been cutting benefits while raising deductibles and worker contributions to health insurance. But such "cost-shifting" strategies only transfer the burden to employes and may ultimately be less cost-effective than cooperative approaches, said Jerome M. Rosow, a former Exxon Corp. and Labor Department official who heads the institute.
"Cost effectiveness and quality can coexist and be best achieved by the joint efforts of those who pay for and those who use the service," Rosow said in releasing the 150-page report, "Improving Health-Care Management in the Workplace," which the institute called the first study of its kind. The report makes 28 recommendations for further study, including the idea that where HMOs and other alternative plans are unavailable, companies and unions can create their own, as some have done.
Although companies pay the majority of health care costs, unions are realizing the importance of helping to reduce spending because health care remains the most rapidly increasing cost of doing business. This frequently causes firms to be unable or unwilling to raise pay and pension benefits, Rosow said.
Companies and unions are experimenting with lobbying government to reduce excess local hospital capacity, requiring "precertification" to determine in advance how long a non-emergency hospitalization will last, cooperating in "worksite wellness" programs that promote good health habits and preventive care, and computer-monitoring insurance claims to detect fraud and abuse.
The effectiveness of particular approaches cannot yet be measured with precision, because many have been in existence only a short time and the methods vary widely among companies, Rosow said. A more detailed report on specific cases will be released next year, but the growth of such programs has already had impact on workers as health care consumers, he said.
"Users of health care are really rather timid, lacking in power. The doctor is still held in a certain degree of awe," he said, but added that this view is changing partly because corporations with economic clout are challenging practices of the medical establishment.
At GM, which the study described as having the most comprehensive joint program, a key to success has been labor-management cooperation in educating workers, according to company and union officials. "The communication and the jointness with UAW has made a huge difference," said Richard O'Brien, GM's director of employe benefits. "You can negotiate the best health plan in the world, but unless you get the local UAW people and the local management behind it, whatever plan you developed won't sell."
On the union side, "we believed we were paying a lot of big bucks, and not getting quality care," said David Beier, UAW's administrator of benefit plans at GM. "We are now getting into things like case-management. For our people facing long-term hospitalization, we look hard for alternate methods, whether it's home health care, or nursing homes . . . or buying a hospital bed so the person can go home."
In the past year, GM's new "informed choice plan" has sold more than 130,000 employes on the idea of switching from conventional insurance to HMOs and PPOs, "preferred provider organizations." Some 600,000 GM employes, retirees and dependents now belong to 68 HMOs and dozens of PPOs nationwide.
HMOs charge fixed fees in advance and provide members with an approved group of doctors, labs and hospitals. PPOs arrange for the services of particular doctors and hospitals that agree in advance on predetermined costs and quality standards. Both types usually pay most office-visit fees and require lower contributions from participants for other services.
GM, which pays the full cost of employes' basic health insurance, hired outside consultants to study its health plan and was surprised by the findings, O'Brien said.
Among the results, he said: in New Jersey, 30 percent of the hospital days were considered "questionable" by health experts; in Michigan and neighboring states, up to 70 percent of foot surgery performed was believed unnecessary; nationwide, among 18,000 women who gave birth yearly, mothers spent an estimated 20,000 "excess" days hospitalized and too many underwent caesarean section operations.
On average, workers in traditional insurance plans spend 700 days in the hospital a year per 1,000 employes, compared to 400 days in HMOs because of more careful control over whether to hospitalize and how long to stay, O'Brien said.
The difference, in GM's view, is based on financial incentives, he said. HMOs, because they are paid fixed fees in advance, have an incentive to minimize hospital expenses, he said. For a physician practicing at a hospital, however, "the incentive of fee-for-service is, in some cases, to leave someone in the hospital because it helps my hospital" to fill beds, he said.
The Work in America report, prepared with the assistance and funding of labor and management groups, was prepared by Rosow, Ruth S. Hanft, a former deputy assistant secretary of the Department of Health and Human Services, and Robert Zager, the institute's vice president.