Neuron Culture

In his recent New Yorker article, “The Risk Pool,” as well as a blog post, Malcolm Gladwell has drawn attention to yet another reason to move to a single-payer health insurance system: the punishing competitive disadvantage that American companies and industries suffer when they provide health insurance, especially health insurance for their retirees and pensioners. Gladwell’s piece is mainly about retirement benefits, both pensions and health-care; he focuses on the “dependency ratio,” which is the ratio, within a company, an industry, or a country, of working wage-earners to nonworking dependents, primarily the young and the retired. The higher the ratio of workers to dependents, the better the economic prospects for a company, an industry, or a company. Indeed, he presents fascinating arguments that changes in dependency ratios are responsible for much of the economic growth in Asia over the last quarter century as well as for the economic troubles of Africa.

sawmill.jpg

The Sherman Lumber Company Sawmill, Stacyville, Maine, closed in 2002 and sold at auction. New England sawmills, like U.S. automakers and steelmakers, are getting their clocks cleaned partly because they carry health-insurance costs their foreign competitors (in this case, Canadian sawmills) do not. Photo from Keene Auction Company.


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Within particular countries, however, the dependency ratio is almost meaningless to individual companies or industries in most industrialized Western nations, since retirement and health-care benefits are absorbed by society at large. In the U.S., however, companies that provide these benefits suffer a tremendous competitive advantage. And though Gladwell focuses mainly on retirement benefits (both pensions and health-care) in the article, his blog post notes that even our employer-based health-care-insurance system here in the U.S. puts many industries at a horrible disadvantge.

I first saw this directly when talking with New England sawmill and paper-mill owners when working on The Northern Forest, the book Richard Ober and I wrote about the northern New England woods industry and culture. These mill owners — a group decidedly toward the libertarian end of the political spectrum — were getting killed by Canadian mills an hour or two north, and a prime reason, as most of them recognized, was that the Canadian mills didn’t have the expense of paying for worker health insurance.

“I don’t have to give my guys health insurance coverage,” one mill owner told me. “But considering how dangerous this work is, I couldn’t feel good about it if I didn’t.” As a result, he operated on dangerously thin margins. This hurt him yet further, for it meant he couldn’t afford investments in more efficient mill equipment to improve productivity — improvements the Canadian companies were making as we spoke.

The New England mill industry is getting crushed right now by Canadian competition, and the cost of health-care insurance (and worker compensation insurance, another cost Canadian mills don’t directly bear) is a big reason why.

As Gladwell points out on his blog, some of our bigger, older industries, such as cars and steel, suffer this fate more painfully, since they are insuring not only present workers but many retired workers. The cost of doing so is one reason (along with some brain-dead management) that the Big Three are taking such a beating. Gladwell says the managers of these companies recognize quite clearly that the lack of national health insurance is crippling these industries — yet they stay mum. As Gladwell puts it,

Why aren’t the heads of the Big Three all campaigning for universal healthcare? One reader points out that Detroit did support the Clinton healthcare initiative, so perhaps their failure to speak up right now around is strategic: that is, they would rather expend political capital on ideas that have an immediate political future. But even if that is true, I don’t follow the logic. If the heads of all the old-line manufacturers were to stand up tomorrow and make a combined call for universal healthcare, wouldn’t that act alone be sufficient to put the issue at the top of the political agenda?

All I know is that if I were foolish enough to own GM stock right now, I would find Wagoner’s silence on this issue to be something very close to a violation of his fiduciary responsibility.

Ideology has led our political and business leaders to overlook a lot of bright-white evidence the past few years. But the continued insistence on sticking with our present employer-based medical insurance system ranks near the top. Our system costs us twice as much per person as systems in other countries that produce better outcomes, leaves tens of millions of people uninsured, harms both economy and society by forcing many people to stay in jobs they hate just so they can keep their insurance, and is crushing some of the industries that made us the superpower we are. Yet we seem scared to even raise the subject.

Comments

  1. #1 bigTom
    August 28, 2006

    All so sadly true.
    My personal opinion, it would be disastrous to nationalize health insurance, before tackling the cost issue. Health providers will spend any amount of money available to them, and the government is seen as a bottomless source. Looking at it from a different angle, retirement planning for upper middle class people, I’ve read we need to have $300K set aside to pay for a couples retirement health care. Obviously this is beyond the capability of 90% of the working population, so to pretend it is just a problem for the lower classes is just plain untrue. Unfortunately the political power of the words “socialized medicine” is so great that no politician will risk being tarred with it.

  2. #2 jn
    August 29, 2006

    bigTom:

    A single-payer National Health Insurance system would go a long way toward tackling the cost issue. Some of the biggest cost drivers today include the “cut” taken by insurance companies, very expensive emergency care for folks who delay treatment because they lack coverage, and pharmaceutical company price gouging. The first would be neutralized when they insurance companies taken out of the picture, the second would be remedied by enabling people to seek preventive care, and the third would be mitigated by enabling the public insurance system to negotiate discounts for bulk purchases.

    We took a step closer in California today as SB 840 passed the Assembly.

    For fun, you might want to check out the Nurse Avenger game at http://www.calhealthplan.org.

  3. #3 David Dobbs
    August 29, 2006

    We will need to address cost as part of a single-payer system, but it seems unfair to ask that we do so ONLY if (and before) we move to such a system; the insistence implies that costs are only a problem in a universal plan and not today’s “system.” Yet rising costs are just as ruinous in the present system as in a single-payer system. They drive up premiums every year, making it ever more painful for companies and individuals to buy adequate coverage and preventing others from getting any.

    And as a rhetorical point, insisting that single-payer advocates solve the cost problem ignores puts them uniquely on the spot for answering tough questions about what gets covered — and ignores that our present system is already answering these problems, but silently, and badly, in the way we actually spend our health-care money. It ignores, of course, that we spend some 25% — that would be about $500,000,000, folks — on insurance operating costs; Medicare spends less than 5%.

    It also ignores that our have v. have-not approach, in which the insured get almost anything and the uninsured almost nothing, makes gruesomely unjust decisions about which costs are most important. Should we spend huge percentages of our total health-care spending on the last few days of people who stand little chance of surviving — while many sick people can’t even see a doctor? Should cleaning up my knee cartilage so I can play baseball on weekends be a more important cost to cover than examining an uninsured person’s mole or a funny lump early enough to detect and treat their cancer?

    Most of us would say No to either question; yet our present system says Yea to both. We spend vast sums on the last 2 days of death while ignoring millions of illnesses and injuries that simple care could make better. And we apparently think it makes sense to fix my knee (if I happen to be insured, which I am, on my own dime — many, many dimes) than it does to examine the lump of someone who’s uninsured and foregoes examination till the lump grows large. Somewhere, while I play baseball this weekend, grows a detectable but unexamined melanoma that will kill its uninsured host.

    We can make a healthy start — and save hundreds of billions — by nationalizing not health care but health insurance. (Opponents of single-payer love to call it “nationalized health care” or “socialized medicine.” But single-payer doesn’t nationalize or socialize the care, which would be provided by the same mix of providers we have now. It simly rationalizes the insurance coverage.) People love to come up with nightmare implications for single-payer, but in essence it’s MediCare extended to everyone. Medicare’s poorer cousin, Medicaid, of course, is a troubled program, as Congress seldom hesitates to short the poor and because Medicaid relies heavily on funding by cash-strapped states. But Medicare is (the new prescription drug plan aside) a success, ensuring that our elderly get most of the medical care they need from the providers and hospitals they want. Want a model of how a single-payer system could work in the U.S.? We already have one. It’s called Medicare.

    The California plan that just passed the legislature proposes something along these lines. Another, national proposal, HR 676, takes the admirably simple route of simply expanding Medicare to cover everyone. And the Physicians for a National Health Care Plan have proposed another single-payer system model

    The solutions are out there. What lacks is the leadership.

  4. #4 Free Operant
    August 29, 2006

    After having labored in the health care system for many years and after having watched Clinton’s health care plan go belly up, I have only one problem with a single-payer system:

    It can’t happen.

    With all the money the insurance companies hold, how could we expect that they would stand by idly and let themselves be put out of business?

    I don’t see it happening. Somehow, the insurance companies are going to have to be part of the solution.

  5. #5 bigTom
    August 29, 2006

    I didn’t mean to imply that we shouldn’t consider not considering single-payer solutions, until cost issues have been solved, merely to point our the financially grave path we are currently on.
    In terms of government financial viability, medi-care is a looming disaster. We clearly have to find a way to get costs more in line with the rest of the OECD countries, or face some serious problems. Unfortuantly any serious change is scary to a lot of people, and so our political system puts it off until tomorrow.