Bail Them Out? Why Not Take Over Their Healthcare Instead?

December 12, 2008

The auto industry bailout is stalled. Opponents can’t seem decide what’s most objectionable: the lack of punishment for bad planning, or the idea that taxpayer money is being used to pay decent wages. There’s a proposal to force UAW workers to accept the wage levels paid in the US by foreign auto companies, but that only amounts to about $3 per hour or so. The average cost for employee health care in the US is more than that.

So here’s another idea: Let’s have the government assume the cost of providing health care to auto workers, and have it take the lead in deciding how those health dollars are spent. If the government pays these costs for five years, the financial picture for these companies would improve significantly. And imagine what would happen if Tom Daschle directed the autoworkers health plan in his dual role as HHS Secretary and health reform chief. He could ensure that taxpayer dollars are being spent wisely, and he could build a working model for the reformed healthcare system of the future.

Come to think of it, those 2.5 million workers that will be working for the President’s infrastructure program could be part of this new health plan too.

Here’s one reason why this idea makes sense: Unlike other types of bailout, especially in the banking sector, a large portion of the health insurance dollar is spent in the first year of coverage. That means that most of this money will recirculate into the economy immediately, creating a short-term stimulus effect.

The automakers have some immediate cash needs, especially for $10 billion in outstanding bills. It would be reckless to allow these suppliers to go under. But overall, the numbers suggest that a plan like this could actually work. Here are some back-of-the-envelope calculations:

  • Let’s use one of the lower numbers being thrown around and say that 241,000 people work for the Big Three.
  • Employer health plan premiums were $12,000 per year in 2007. It’s gone up since then, but part of the cost is paid by the employee, and some employees will have health coverage through other sources (though not many in this case). So let’s conservatively assume a per-employee cost to the Big Three of $8,000.
  • That gives us an annual cost of just under $2 billion ($1,928,000) to cover these 241,000 employees. We would hope to reduce cost inflation, but we can’t promise that. But even if this plan suffers a raging 10% inflation rate, the total cost of a five-year “health bailout” would be less than $12 billion — which is less than the $14 billion previously proposed.

And look at what else we would get. Secretary Daschle and his team could use this process to build a model Data Exchange and health purchasing process. Even more innovative programs could be carried out, too, especially in Michigan (where 149,000 of the Big Three’s workers live). Electronic data records, online and in-person wellness programs, “medical homes,” new incentives for providers and enrollees — Michigan can become the breeding ground for new ideas, and the autoworker health plan can become the incubator for health reform.

What happens if you add 2.5 million infrastructure workers to the mix? You have a nationwide canvas for sketching out new reform ideas before rolling them out to the nation as a whole. Then there is the problem of retired autoworkers. The unfunded liability for their health care has been estimated at nearly $100 billion. These retirees could be folded into the plan, too.

What are the objections? Some will say that this is government-run health care. But the government will be paying for it anyway, no matter what happens. So why not manage our money wisely? And the President-elect’s reform proposals don’t call for single-payer, but for a blend of insurance programs. Even with government oversight, it will be a private-sector initiative. (I’d vote for a Medicare coverage option, though.)

There are also those who will object because it doesn’t punish the car companies enough for their bad decisions. That’s a discussion for another day, but here’s a thought: The car companies may deserve punishment for not building cars people want. But the credit crisis is not of their doing, and the lack of car loans is what’s hurting them most right now. The “serenity prayer” fits here: The car makers should change what they can change as a condition for aid. But there are some things that are beyond their control. We taxpayers, the ones who are bailing them out, should have the wisdom to know the difference.

Paul Krugman says that the current geographic concentration of the auto industry can’t continue, and he’s undoubtedly right. But that doesn’t mean the transition can’t be managed wisely and imaginatively, especially where employee health is concerned. And if we’re paying the bill, why not use our money to leverage some real change?

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One Response to “Bail Them Out? Why Not Take Over Their Healthcare Instead?”

  1. Chuck Levenstein Says:

    I think this is an excellent idea. At one point the auto manufacturers were complaining that the cost of health care was more important than the cost of steel in an auto. Other countries with national health programs have a great advantage over American companies — and nobody, for instance, would call Japan a “socialist” country.


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