Viewpoints [1]
A New Look at Health Care Costs and Who Should Pay

A New Look at Health Care Costs and Who Should Pay

By David Merrefield [3]
VP, Editorial Director

The issue of health care costs and how they are paid is a perennial one, but one that should be considered anew every now and then.

As it happens, this is a good time to take another look, not just on general principle but because of a few recent events. The food distribution industry itself is taking a new look at how business should contribute to employee health care. More immediately, health care costs figure prominently in the labor negotiations going on in Southern California. Those negotiations often set the tone for much of the country. (See the news feature referenced on the front page.)

Health care costs are perhaps the most-evolved benefit many businesses confer on their workers. The tradition of company-paid insurance coverage of various sorts started and grew during an earlier era when such costs were nearly negligible and could easily be absorbed by business. Although business was often pushed by organized labor into providing such benefits, doing so long had an upside for business since they could be used as a way to attract workers.

In more recent times, of course, health care costs became an onerous burden on business as those costs increased at an exponential rate, and well above the rate of inflation. Now, the cost of health care threatens to absorb large proportions of many companies’ earnings in the not-too-distant future.

There are three chief ways that this problem could be ameliorated: One is to somehow cap and reduce the cost of health care, another is to pass costs to workers themselves and the last is to pass costs to the public. The first alternative is the preferable one, but one that’s difficult for insurance-paying businesses to accomplish. Businesses and their insurers can and should examine procedures and refuse to pay for those that have no real benefit. This is being done with some limited success.

The alternative of passing costs to workers is one that has been in the making for a long time. It isn’t difficult to recall the time when employers routinely paid the entire cost of health care insurance for their workers. Those days are almost entirely gone and won’t be coming back. This isn’t all bad, even from the prospective of employees and the health care industry. If workers have some stake in paying for health care, they will soon become much wiser shoppers. They will at least pose questions to their doctors about the necessity of costly procedures. This will help rationalize the system.

Finally, there’s the alternative of public financing of health care costs. This too is creeping into reality since the government is the insurer of last resort in certain situations. Yet, in this country it will be some time before the full cost of all health care is borne by public coffers, even though such is the case in many other developed countries. That fact poses a competitive dynamic of its own. It was at about this time last year that H. Lee Scott, Wal-Mart’s top executive, called for public financing of health care. His reason was that American business is put at a competitive disadvantage globally because it is saddled with health care costs that businesses in other nations don’t bear.