Medical Device Daily Washington Editor

WASHINGTON — The arguments for healthcare reform are numerous, as are the proposals for reform, and another batch of data often is enough to spur yet another public meeting on the urgent need to expeditiously make those reforms.

Whether the case for reform offered on Capitol Hill last Friday by the New America Foundation (Washington) qualifies as a compelling argument is an eye-of-the-beholder question, but some business leaders apparently think so, given that a member of the Senate cited the automobile industry as one that is in dire need of relief from healthcare costs if the U.S. economy is to stay afloat.

Leading off the discussion was Sen. Debbie Stabenow (D-Michigan), who claimed a piece of the rhetorical turf by saying that "it's nice to be joined by the data in something I've been talking about for a long time."

Stabenow said the auto industry "created the middle class in this country," but added that "[b]ecause of the disparities in what our businesses pay and what foreign businesses pay, we're losing jobs."

The problem with reforms that do not include universal coverage, she said, is that "you can't get to cost" without dealing with access that will keep emergency rooms out of the business of treating non-emergency conditions. "We have universal health insurance [but] it is the most expensive, crazy system in the world," she said.

Stabenow expressed optimism that the U.S. "can and will compete," but asked "will we continue to have a middle class?" She said allowing healthcare costs to rise would eventually pull down household incomes. She described a trade of wage increases for better coverage as "a race to the bottom because there will always someone in another country who will work for less."

Len Nichols, PhD, director of health policy programs at the New America Foundation (Washington), gave attendees a quick look at the document that stimulated the gathering. The former senior health policy adviser to the Office of Management and Budget in 1993 and 1994 indicated that he has some experience in the field, but admitted that he is "reluctant to look in the faces of CEOs who make between 20 and 1,000 times what I make and tell them they're stupid" for being worried about the impact of healthcare costs on U.S. economic competitiveness.

Nichols said that as a share of gross domestic product (GDP), wages and salaries fell by about eight percentage points between 1960 and 2006, but acknowledged that the value of expanded benefits, including more comprehensive health insurance, has filled in the gap so that "the reduction in the share going to wages is exactly the [increased] amount going to health benefits." In response to those who would argue that this as a reason not to worry, he said, "46 years is a long time to work for equilibrium.

"Reducing the reliance on the employer's role is good health policy and good economic policy," Nichols said, but he noted that reformists cannot simply pull out the rug from the current system in the drive toward reform. Still, "in order to make the market work well," enrollment has to be mandatory for all, he said.

Nichols also presented data that indicated that while hourly wages for manufacturing jobs in the U.S. average a bit more than $18 — 90 cents lower than in Canada and more than $1 higher than in France — the hourly cost of health benefits in this sector in the U.S. is almost $2.40. By comparison, Canada's figure was 86 cents, but the hourly cost of healthcare benefits in France was close to that of the U.S. at $2.17.

Nichols said "reducing the employer role is good health policy and good economic policy," but echoed Stabenow's position that "we must extend the advantages of the employer system for all Americans."

Joseph Antos, a healthcare scholar at the American Enterprise Institute (AEI; Washington), said the discussion really encompassed "two separate issues," namely wages and competitiveness. He said that Nichols' position that healthcare costs are cramping national economic competitiveness "is a straw man" argument.

"The full story is in equilibrium" of total compensation, Antos said, adding that "the composition of compensation adjusts so that workers receive" that for which they aggregately express a preference. In any market in which total compensation is flat, "total compensation does not increase because some of the compensation" falls, he said, commenting that if benefits go up, wages have to go down unless total compensation rises.

Antos said a number of factors make themselves felt in the compensation received by workers, including higher wages stimulated by changes to production for increased efficiency, and lower wages brought on by lower investor returns. "The point is that you can't draw simple lines" between wages and benefits, he said.

"The bottom line is that in the real world ... you expect workers to absorb some of the costs," as well as employers, Antos said, adding that the reason employers are concerned is that they "feel they have less control over health costs than they have over other costs."

He reminded the audience that Detroit's problems were largely at least in part to a lack of quality compared to rivals from overseas. "If you don't have the product, you can't be competitive," he said, stating further "[w]hat's really going on here" is that employers "want someone else to pick up the cost."

Medical Device Daily pointed out that the recent fluctuation in exchange rates had sufficiently tilted the tables to cause Toyota (Aichi, Japan) to forecast a 27% drop in profits in the year ahead, whereas Ford Motors (Dearborn, Michigan) recently reported a first-quarter profit of $100 million. MDD asked Nichols whether exchange rates were not the primary culprit in Detroit's lagging fortunes of late.

He said that healthcare costs are "not the only issue, but my fundamental point is why we want to let this be a continued burden?"