Thursday, July 20, 2006

GM: Health overhaul elusive

Friday, July 14, 2006
GM: Health overhaul elusive
In D.C., Wagoner says it's up to politicians to fix
David Shepardson / Detroit News Washington Bureau

WASHINGTON -- Despite prodding from lawmakers Thursday, General Motors Corp. chairman and CEO Rick Wagoner refused to endorse specific proposals to overhaul the U.S. health care system.

Testifying before the U.S. Senate Select Committee on Aging, Wagoner said there were many ideas on how to reform the system and although GM has made strides in reducing its costs, its health care costs remain burdensome. The company spends $1,500 per vehicle sold on health care, more than steel.

"We haven't found that it is particularly productive to wade into Option A versus Option B," Wagoner said. "The politicians will have to work out the rest."

GM is the largest provider of private health care in the United States, covering 1.1 million people -- 530,000 people older than 60, more than 1 percent of that population.

The company spent $5.3 billion in 2005 on health care. Its prescription drug costs alone were $1.9 billion in 2005 -- a cost that has more than tripled in 12 years, despite the savings of nearly $400 million by convincing 90 percent of employees and retirees to use generics when available.

While answering questions from Sen. Hillary Rodham Clinton, D-N.Y., a long advocate of health care reform, Wagoner agreed to share an internal analysis of the automaker's employee health care costs in the 20 countries where it has the most employees.

That analysis will show, Wagoner said, that GM is spending more per U.S. employee than its foreign workers. In some cases, a lot more.

Clinton said GM and other large companies are being put in an "impossible situation," and asked why GM isn't using its economic and political clout to demand reform to the "dysfunctional, overly expensive, unproductive health system that we all are paying for."

The automaker has said it expects total health care spending to rise by $2 billion by 2009, despite aggressive efforts to reduce costs and get better care for its employees.

"We're getting a bad deal in America and that GM is getting a bad deal," Clinton said, noting the United States spent $1.7 trillion on health care -- 50 percent more than any other country -- adding the country doesn't even offer the best care.

Noting that medical costs can be cut by sending employees outside the U.S. for treatments, Sen. Gordon Smith, R-Ore., asked if GM would consider those cost-saving measures.

Wagoner declined to endorse outsourcing its health care procedures through what is commonly called "medical tourism."

Smith, chairman of the Senate Select Committee, said some smaller employers have reached agreements with unions to send employees to India to get medical procedures. He noted that a heart surgery that might cost $96,000 in North Carolina costs just $6,000 in India.

Wagoner said GM -- given its large number of employees -- had no plans to consider that.

Clinton, meanwhile, praised GM for carrying such a heavy burden.

"Companies like yours which essentially bear the social contract of the last 50 years are getting an especially bad deal because you're paying for (retirees)," Clinton said.

"Why does American business take such a bad deal?" Clinton asked. "Why is it that American business doesn't just rise up and say there's got to be a better way here?"

Wagoner said he "shared" many of Clinton's views, but never directly answered her question.

After the hourlong hearing, Wagoner elaborated.

He said GM had been "in the vanguard" of talking with Washington, Congress and the Bush administration about efforts "leading to a more effective health care system," but declined to back any specific proposals -- other than a bill to improve information technology for health care and to get Medicare to release more information on the quality of doctors and hospitals.

He didn't think companies should be required to provide health care to their retirees, he said.

"The direction that's been going on is businesses are reducing or even eliminating benefits, particularly to retirees," Wagoner said. "The fundamental issue is we need to get around the cost."

GM has reduced the benefits hourly employees receive through an agreement with the UAW. That move will save the company $1 billion a year and has reduced its long-term retiree health care liability by $15 billion.

GM also is reducing health care benefits for salaried retirees and restructuring its U.S. pension plan for salaried employees. The automaker plans to cap contributions for salaried retiree health care at 2006 levels beginning Jan. 1. GM said earlier this year it expects those retirees to conservatively face increases in health care costs of 5 percent per year.

You can reach David Shepardson at (202) 66 8735 or

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