At first blush, there wouldn't seem to be much in common between the unionized workers at GM who just walked out on strike and the gig workers at companies like Uber and Lyft that would have to be classified as employees, not contractors, and provided benefits under legislation that California approved last week. Yes, GM workers make cars, and Uber/Lyft drivers use cars, but how else are those stamping out auto bodies on an assembly line eight hours a day related to those who opt in and out of providing rides in their cars?
The answer is health insurance. The workers' issues take different routes to get to health insurance, but they both land there, with a thud.
Among Uber/Lyft drivers and other gig workers, many are just looking for any kind of health coverage—which accounts for the vast majority of the benefits that employers very much don't want to provide these workers. GM workers want wage gains that GM could easily afford if so much of compensation didn't get sucked up by health insurance. GM spends $9 an hour per worker on health insurance, a cost that logic suggests could be cut in half, given that the U.S. spends twice as much as other developed countries on healthcare while getting slightly below-average care. Turn those cost savings into wages, and workers could receive an extra $9,360 a year. That would be a raise of 14% to 26% for line workers, right off the top. Think the UAW would be happy with that?
The new California law, the GM strike and scads of other evidence suggest that our current healthcare system, including today's approach to health insurance, can't continue indefinitely, and, as Stein's Law says, "If something cannot go on forever, it will stop."
I have a broad prescription, if you will. (It has nothing to do with a political stance.) I even have a suggestion on how to get there from here. But, first, it's worth understanding how we stumbled into today's predicament, through more than a century of haphazard actions that are now defended zealously by lobbyists but that don't come close to resembling a plan.
Health insurance began as a charitable endeavor in the early 1900s, mostly so that workers who got injured or fell ill would have their wages covered while they sought care. Treatment didn’t cost much because there wasn’t much care to be offered. Treatment didn’t last long, either – generally, within a couple of weeks, the patient either recovered and returned to work or died. (Harsh, but true.) When Blue Cross was founded at Baylor University in 1929, it charged enrollees just $6 a year.
Then World War II came along. The federal government instituted a wage freeze—after all, companies were pitching in to win the war. Unions, much stronger in those days, pushed companies to improve benefits in lieu of wage increases, and businesses went along. Remember, at the time healthcare was cheap. The federal government endorsed the arrangement by giving businesses a tax break on the cost of health insurance they provided.
And that was that. The unique structure of today's health insurance market in the U.S. was put in place.
In the decades since, having employers as suppliers of health insurance has divided the country into haves and have-nots in a way that no one anticipated. You typically got robust insurance through your employer; you received a lesser form through the government; or you likely did without. Only 7% of Americans had individual policies in 2017, while 49% were insured through employers; 9% were not insured, and Medicare or Medicaid covered the remaining 35%.
The divide got worse in the 1980s and 1990s when insurers switched from non-profit to for-profit status. The five-headed behemoth known as BUCAH (for the Blues, United Healthcare, Cigna, Aetna and Humana) marketed based on the discounts they offered employers. That, perversely, encouraged providers to raise prices—that way, the insurers' discounts looked all the better.
By now, as a doctor said recently, "It'd be like…your car mechanic…saying, 'Well, I think it’s going to be $17,000 to get this fixed,' and you say, 'Well, how about $149?'"
That's mostly fine if you get your health insurance from an employer, which gets the discount, but those who don't get insurance at work are left out. They're expected to pay that $17,000 list price. In fact, providers go to great lengths to make sure they do.
Today, healthcare and health insurance prices are finally rising so much that even the haves are struggling. Employers have been pushing more of the insurance cost onto employees, many of whom can't afford it and opt for deductibles so high that they're afraid to use their insurance.
What do we do now?
My answer: Insurance needs to switch from being associated with the employer to being associated with the individual. That change has already happened with retirement funds, as corporate America has gone from providing pensions a generation ago to perhaps contributing to IRA and 401(k) savings today. So, we know such a change is possible.
It could get started rather easily, simply by acknowledging that the tax break given to employees three-quarters of a century ago was a well-meaning stopgap in extraordinary circumstances that shouldn't define our healthcare system for eternity. Then we eliminate the tax break.
Now, that change would be fought as hard as can be because undoing that credit would be the start of a series of upheavals to a nearly $4 trillion-a-year healthcare system—and people will do a lot to protect $4 trillion. Wars have been fought for less.
But it's possible to outmaneuver the naysayers and define a rational solution through an exercise called a future history, which I've also seen referred to as a clean sheet of paper. Basically, you pick a time in the future and imagine in detail the best possible version of something, such as the healthcare system. Then you write an article dated in the future that explains how you, hypothetically, got there.
If you pick the right time frame—usually three to five years for a company but probably 20 or 30 years in the case of something as complex as healthcare in the U.S.—you can eliminate a lot of the angst. You aren't talking about reducing anybody's bonus this year. If you think about healthcare in 2050, you aren't even talking to those who will be the big players then; they'll be long retired. And everybody will have plenty of time to prepare.
Nobody can defend something like today's system, based on a historical anomaly that has led to wildly, erratically high prices and such a divide between haves and have-nots, so let's design something better. Let's design something. Let's design something.
I prefer ideas like those proposed by economist Uwe Reinhardt, but almost anything would be better than what we have, because we won't fall into it. The change won't happen in time to help GM and its unions or Uber and Lyft and their gig economy workers, but at least we'll be heading in a rational direction.
Cheers,
Paul Carroll
Editor-in-Chief
