The UAW and GM have been debating health care as Friday’s deadline for their national contract approaches. This round of negotiation is about survival.
Yesterday, I covered the rising costs of employer-sponsored health insurance. Today, let’s visit the intimately-related topic of retiree health benefits. These are eroding even faster than health benefits for employed workers. Many employers have significantly scaled back health benefits for retirees. Currently, one in three large employers offers retire benefits, compared with two in three in the late 1980s.
Consider the predicament of the company ranked #3 on the 2006 Fortune 500 list, General Motors. Retirees outnumber workers by more than 2:1 at GM. Last year, GM spent $5.3 billion on health care. By 2008, GM will likely spend more on health care in the U.S. than on its hourly-worker payroll.
Investor guru Warren Buffett has called GM, “a health and benefits company with an auto company attached.”
Paul Ginsburg, one of my favorite health policy researchers who leads Center for Studying Health System Change, said, “The health benefits for unionized autoworkers are a relic from another era.”
Health care costs are the American auto industry’s key competitive disadvantage in the global car market — Honda, Toyota, Nissan, et. al., do not have to cover their employees’ health care due to their nation’s health coverage. GM is now wrestling with Toyota for world dominance of the auto industry.
The main health care topic is retiree health care. GM spends more on health care than steel. This is a problem for American business. Starbucks spends more on health care than coffee beans.
The auto companies’ conundrum is that if they don’t get health care liabilities off of their books, they can’t compete globally, and the U.S. will lose a huge industry.
Where will the auto workers go? Perhaps not to barrista training camp. Starbucks might have to cut those health benefits, as well.
Ironically, some of these auto workers seem to be moving into…health care! (see the Kaiser Network source, below)
Health Populi’s Hot Points: Watch this space: Kaiser Family Foundation and others predict the continued erosion of retiree health benefits. That means Cash will be King when Baby Boomers Retiree: we will need hundreds of thousands more dollars saved for health care costs in retirement. See the EBRI website for the sobering data.
Sources: Employee Benefits Research Institute (http://www.ebri.org/), Center for Studying Health Systems Changes (http://www.hschange.org/), Kaiser Family Foundation on auto workers shifting to health care work (http://www.kaisernetwork.org/daily_reports/rep_index.cfm?DR_ID=47428)