Saturday, November 04, 2006

In U.S., it's pay more, get less

Tuesday, September 26, 2006
The General and the Beast
In U.S., it's pay more, get less
GM's health care costs are far lower in Canada, other countries
Ron French / The Detroit News

OSHAWA, Ontario -- George Mercieca builds engines for General Motors Corp. He's 47 years old, bald and beefy, and a real health care bargain.

GM spends an average of $1,385 a year on medical bills for Mercieca and his fellow assembly line workers in GM's assembly plant in Oshawa, Ontario.

Put that assembly plant on a barge and float it across Lake Ontario to Rochester, N.Y., and Mercieca's health care would cost the automaker about $5,000.

The company pays more for health care in the United States and, as measured by international health organizations, its workers get worse care. Those cost differences put GM and other American companies at a competitive disadvantage, while doing little to improve the health of their American workers.

An auto supplier offering worse products for higher prices would have been dropped decades ago. But there is no alternative health care system for GM -- or Americans -- to turn to.

Medical bills soar

Divide the nation's medical bill evenly across the population, and each of us paid $6,102 in 2004, according to the Organization for Economic Cooperation and Development. That's 50 percent more than the residents of the country with the next-highest health care bill, Switzerland ($4,077), and more than double the average for industrialized nations ($2,546).

Those countries provide health care for all their residents for less money than the United State spends while it leaves an estimated 46 million without insurance.

As late as 1970, Americans paid about the same amount for health care as most Europeans. Since then, medical costs have risen faster in the United States than the rest of the world.

The American Medical Association argues that Americans are getting their money's worth. There is more high-tech medical equipment in the United States than in other countries, said Dr. Edward Langston, the incoming chairman of the board of the American Medical Association and a family physician in Lafayette, Ind. "There are probably more MRIs in Detroit than in all of Ontario," Langston said.

That's contradicted by studies conducted by Gerard Anderson, director of the Center for Hospital Finance and Management at Johns Hopkins School of Public Health. "We have about the same number of MRIs and CT scanners as Canada, the U.K. and France, and far fewer than Japan," Anderson said. "We have the same number of doctors, doctor visits, hospitals and inpatient days at hospitals.

"The difference is we pay two to 2 1/2 times more for virtually identical services."

The average U.S. physician earned $180,000 in 2004, Anderson said; in Canada, it was $100,000 (in U.S. dollars).

Even after adjusting for the higher income of U.S. residents, Americans pay on average $2,000 more per year for health care than the residents of the next-highest paying country, Anderson said.

One out of every seven dollars spent today in the United States goes for health care -- a record 15.3 percent of the gross domestic product in 2004, the latest year for which statistics are available. By comparison, Canada spends 9.9 percent of its GDP; Japan spends 8.0 percent.

By 2015, one out of every five dollars spent in the United States will go for health care, according to projections by the Centers for Medicare and Medicaid Services. If those projections hold, the average American's share for medical needs alone will be a staggering $12,320.

For all that money, you would expect Americans to be healthier than their foreign friends. The opposite is true.


If you're born in the United States, chances are that you'll die younger than people born in other industrialized nations. The United States has the lowest life expectancy of 14 nations measured by the World Health Organization. U.S. life expectancy in 2001 was 77.1; Canada, 79.7; Italy, 79.8; Japan, 81.5

The infant mortality rate is higher in the United States than in other industrialized nations. In 2003, seven infants died for every 1,000 live births in the United States -- the worst rate of 19 countries measured by the Organization for Economic Cooperation and Development.

Forty percent of Americans reported having gone without needed medical care because they couldn't afford it, the highest percentage of the nations surveyed in 2004 by the Commonwealth Fund International Health Policy Survey. In Canada, 17 percent said they had gone without medical care; only 9 percent said they had skipped care in the United Kingdom.

Americans spend an average of 9.4 years in poor health, tied with Canada as the worst among industrialized nations measured by the WHO in 2000. Australians can expect to live 8.4 years in poor health; the French, 8 years; the Swiss, 7.3 years.

Many factors could influence those statistics. Americans have a higher rate of obesity than people in many other countries, and the 46 million who have no health insurance often delay health care until they have life-threatening conditions. Still, Dr. Joel Bender, global medical director for GM, summarizes the U.S. health care crisis this way:

Americans are sicker. When they get sick, they demand more medical care. And when they receive more medical care, they pay more for those services.

"There is a sense of frustration on my part," Bender said.

Cost differential is huge

That frustration is understandable when GM looks at its sprawling Oshawa facility, which builds Impalas, Grand Prix, Monte Carlos and Buick LaCrosses in one building and Silverado and Sierra pickups in another. More than 800,000 vehicles were built in Oshawa last year, with most shipped to the United States for sale.

Those vehicles, often parked on the same dealer lot as identical vehicles produced in U.S. plants, have one notable difference: Each vehicle assembled in the United States cost GM $1,525 for health care; those made in Canada cost GM $197.

The higher salaries of Canadian autoworkers offset much of the health care savings for the company, said Jim Cameron, labor relations director for GM Canada. But at the cash-strapped automaker, such a huge health care cost differential is hard to ignore. The difference is primarily a result of Canada's national health care system, in which most medical bills are paid by the government. Most countries have similar systems.

GM pays only for supplemental insurance covering dentistry and prescription medicine for those under 65.

Individuals and companies in Canada indirectly pay for care through taxes. GM pays 1.95 percent of its payroll in Ontario for the government health care system.

What's often overlooked is that GM also pays a health care tax in the United States -- 1.45 percent of payroll for Medicare. When taxes in both countries are added to GM's health care tab, Canada is still significantly cheaper.

Critics of the Canadian system point to waiting lists for elective surgeries. In 2000, the average waiting time for a hip replacement was 112 days; knee replacement, 136 days; and cataract surgery, 80 days.

"If I told someone it will take two months to see a surgeon about your hernia and after that it may take eight months to have the surgery because it's not life-threatening, they'd be upset," said Langston of the AMA. "The distribution of new technology and drugs takes longer in Canada."

In August, GM chose Oshawa and its workers with lower health care costs to build its new Camaro over endangered assembly plants in the United States.

The automaker said only that Oshawa was the best fit to produce the Camaro.

On the Oshawa assembly line, Mercieca thinks he knows why the decision was made. "Health care is cheaper here," he said. "It works for me."

You can reach Ron French at (313) 222-2175 or

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