Health Care Mediators Beset with Difficult Choices

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Spending on health care has skyrocketed for employers and the average American family. Len Nichols, an economist at the New America Foundation, says reducing reliance on employers for health care requires a commitment from government.

LINDA WERTHEIMER, host:

The topic of healthcare, as you've just heard, will dominate the talks between car companies and auto workers at the bargaining table. Spending on health care has skyrocketed both for employers and for the average American family over the past two decades.

Len Nichols is an economist at the New America Foundation, a Washington, D.C. think tank. And he tells us the negotiators are facing difficult choices.

Mr. LEN NICHOLS (New America Foundation): The auto situation is in some ways unique. You think about its emphasis on retiree health, pensions, and very generous benefits relative to the rest of us; it's much more like a social insurance system for the auto industry. So as their market share fell, the ability to keep those promises they made 30 years ago dissipated, even if health care cost had not grow. Health case cost growing just kind of puts the problem on steroids.

WERTHEIMER: Well now, automakers have been trying to lower their health care cost for years and workers have taken on additional burdens as well. But is there a way to do this? How can employers do this?

Mr. NICHOLS: Well, first, I would certainly agree that General Motors, in particular, but also Ford, have been among the more aggressive corporate buyers in our country in trying to buy health care smarter. But the fact that they too have had such limited success says something about the inability of any individual company or industry to do something about it. It's going to take a systemic effort. It is possible, and that's why you see so many candidates for president this year on both sides of the aisle, as well as leaders around the country in state houses, trying to grapple with this question.

WERTHEIMER: When you say systemic, what do you mean?

Mr. NICHOLS: I mean comprehensive health reform. Right now we don't know what we pay for and we basically don't buy very smartly. And we could do far, far better.

WERTHEIMER: You know, I'm hearing just those things talked about in the campaigns as I've traveled with candidates this year. Do you think there is political will to go for that kind of reform?

Mr. NICHOLS: Well, I think, in fact, the will is growing and it's manifested both by the negotiations your story is reporting on today in the auto industry and the coalitions that have been formed across quite unusual lines. Look at Andy Stern, the head of SEIU, the Service Employees International Union, shaking hands with Lee Scott of Wal-Mart - two arch-enemies. They shake hands and say we have to work together to make our system more efficient. So yes, I think the effort is growing because people realize we cannot afford this as a nation.

WERTHEIMER: Do you think that it is still possible for businesses in the United States to offer generous health benefits to their employees and remain competitive, remain in business?

Mr. NICHOLS: I really don't see how we can sustain so much reliance on our employers to fund our health care benefits for everyone. Our workers and firms are at competitive disadvantages internationally. So I think it's much smarter to think about transitions, reducing reliance on employer. But that's going to require a social commitment to make sure everyone has health care. That means we're going to have to have a larger government role, a larger subsidy role.

It doesn't mean we have to go all the way to single payer, although that is an option. Employers would still contribute voluntarily for those high-wage workers that could - whose productivity can support it. But the idea that we can depend upon employers going forward seems to be a rather 20th-century idea in a 21st-century economy.

WERTHEIMER: Len Nichols, thanks very much.

Mr. NICHOLS: Thank you, Linda.

WERTHEIMER: Len Nichols is an economist. He is the director of the Health Policy Program at the New America Foundation here in Washington.

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