From the Los Angeles Times
“To put it mildly, exploding healthcare costs present a more tangible problem for many more Americans than right-to-die cases. Since 2000, according to the Kaiser Family Foundation’s authoritative survey, healthcare premiums for family coverage have increased by 59%, six times faster than inflation.”
Recently, General Motors has hit a very difficult financial patch. Major ratings agencies downgraded their debt to junk status. Their US market share is also declining, adding further pressure to their already tight financial margins.
“In 1996, GM spent $3 billion to provide healthcare to 1.2 million workers, retirees and family members. This year, it expects to spend $5.6 billion to cover 1.1 million people. That means GM’s per-person expenditures for healthcare have doubled (from $2,500 to nearly $5,100) in less than a decade. GM now spends more than $1,500 on healthcare for each car it produces. That’s more than it spends on steel.
More importantly, that’s also significantly more than its key foreign competitors spend on healthcare. GM officials estimate that healthcare costs for Toyota are only about one-fourth as much per car, largely because the government pays more of the tab in Japan than in the U.S.”
The health care issue is slowly morphing to a question of national competitiveness. Companies are required to provide health insurance for their employees. Because of the escalating costs, employers hesitate to hire new employees. This partially explains why this recoveries employment numbers are historically low.
Regardless of how GM and its unions resolve the situation, the company is still at a competitive disadvantage. Its Japanese rivals don’t have to factor in health insurance when developing cost projections. If this number was small, it wouldn’t create a problem. But for US companies, factoring in medical expenses for its employees is a major headache that negatively impacts their ability to compete in the world markets.