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Health Care: Why Corporate America Is Paralyzed


Economic Viewpoint

HEALTH CARE: WHY CORPORATE AMERICA IS PARALYZED

The business community continues to be divided on the issue of health care in instructive and ironic ways. Medical inflation is still roaring along at more than double the general inflation rate, and business shoulders much of the burden, paying approximately 28% of direct health care costs through employee benefits.

Some large corporations, especially those with unions or generous health plans, tend to support fairly radical surgery to fix the system. Others prefer simply to shift costs onto their employees through reduced benefits. Many smaller businesses, which do not provide health benefits, flatly oppose either universal health insurance or government-mandated private insurance. Another influential set of businesses--those that provide health care--tend to support broader insurance coverage but fiercely oppose tighter cost containment.

No one knows if these splits can be overcome in a manner that produces constructive public policy. Big businesses, of course, are seldom hotbeds of socialistic sentiment. But some large corporations are coming around to the view that a comprehensive and substantially regulated national system of health care is the only way to restrain escalating charges, reduce cost shifting, and require free-riding businesses to pay their fair share. Ultimately, the bills of the uninsured are paid either through taxes or through higher premiums charged to paying customers, and the sheer inefficiency of the present patchwork system inflates everyone's costs.

BIG GUNS. The blue-chip National Leadership Coalition for Health Care Reform, for example, is quietly moving toward a comprehensive proposal that would require every employer to either provide a specified level of health insurance or pay a tax ("play-or-pay") and would include comprehensive cost-containment features. The tax would finance part of a residual public health insurance system to cover those not insured by their employers. The coalition includes AT&T and several Baby Bells, Bethlehem Steel, Chrysler, Ford, Eastman Kodak, General Electric, Lockheed, 3M, Westinghouse, and Xerox, as well as several trade unions and charitable and professional associations. Notably absent are the health insurance, hospital, and pharmaceutical industries and the American Medical Assn.

What continues to divide the coalition are such thorny issues as how comprehensive any government-mandated coverage should be, how the tax-supported portion of the system should be financed, and just how cost-containment regulation should operate. There is also the awkward problem of new taxes.

Any universal approach necessarily increases taxes even if it ultimately contains overall costs. The proposal of last year's bipartisan Pepper Commission on comprehensive health care, a play-or-pay approach not unlike what the leadership coalition is contemplating, was criticized as fiscally improbable because it required new tax receipts of over $60 billion a year. A Canadian-style universal system, entirely publicly financed, would increase taxes by hundreds of billions of dollars a year--but it would reduce employer, administrative, and out-of-pocket costs by nearly as much.

ONE STEP AHEAD. Although the Leadership Coalition includes impressive corporate representation, such industry groups often take on a life of their own and get out in front of their CEOs. It is not yet clear that more than a handful of the 200 or so Business Roundtable CEOs, who tend to recoil from regulation in their own industries, are truly prepared to put aside ideological qualms and support a plainly socialistic health system--even one that saves them money.

Moreover, many advocates of a Canadian-style universal system, such as Dr. Sidney M. Wolfe of the Ralph Nader-affiliated Public Citizen Health Research Group, argue convincingly that only a universal system can avoid the pitfalls of cost-shifting, in which providers stay one step ahead of the forces of cost containment by inventing new procedures, gold-plating treatments, complicating bills, inflating diagnoses, and shifting costs to the better-insured parts of the system. A universal system, in contrast, caps overall costs and compels the several provider groups to fight over a relatively fixed pie. Although it is possible in principle for a play-or-pay system to achieve much of the discipline of a universal system, it is not yet clear whether leading businesses would support the degree of regulation that would be required.

Thus, we have another in a never-ending series of instructive contradictions of capitalism. Soaring health costs are cutting into corporate profits, and market-like approaches aren't restraining costs. Yet the villain of the piece is another set of corporations that misuse their entrepreneurial ingenuity to keep ratcheting up health costs.

In the usual account, it is government that is paralyzed. But in this case, the paralysis of public policy reflects an underlying gridlock of diverse, profit-making constituencies. Unfortunately, this costs the nation and its businesses a lot of money, not to mention much human suffering. It remains to be seen whether U. S. business can divine its true collective interest, let alone pursue it.ROBERT KUTTNER


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