Kaiser Daily Health Policy Report

Monday, October 30, 2006

Capitol Hill Watch

      The big three U.S. automakers, which reported steep losses in the third quarter, will not seek a bailout from the federal government and instead will ask Congress to focus on legislation that would relieve their health care costs, among other legislative priorities, CQ Today reports. Ford Motor, Chrysler Group and General Motors maintain that reduced health care obligations would help them compete with Asian manufacturers that are aided by their home governments. The Big Three said that in 2005 they provided $13 billion in health care benefits to about two million U.S. residents. According to CQ Today, "industry officials and observers say a change in control of Congress as a result of the Nov. 7 elections might create a more receptive environment" for the automakers' requests. Such priorities include ensuring the rapid introduction of generic drugs to the market and creating a federal reinsurance pool from which employer-sponsored health plans would be reimbursed for catastrophic health care costs. Alan Reuther, legislative director of the United Auto Workers, said the question of whether these problems will be addressed is "really all about what the next Congress looks like." According to CQ Today, "industry observers stress ... that the legislative priorities can help the domestic automakers only so much in their struggle to regain their competitive edge." Sean McAlinden, vice president and chief economist of the Center for Automotive Research, said, "Clearly, a lot of Detroit's problems are of their own making." He added, "Their product has been inadequate. They've guessed wrong on product planning" (McGrane, CQ Today, 10/27).

GM Caps
In related news, the Detroit Free Press on Saturday looked at GM salaried retirees' concerns about the increased contributions they will be paying for their health care benefits (Collier, Detroit Free Press, 10/28). GM made the change as part of an overall cost-cutting effort that includes reducing its stock dividend by half and cutting executive compensation. GM said that starting in 2007, it will cap how much it contributes to health care coverage for salaried retirees at 2006 levels. After the limit is reached, retirees will face higher monthly premiums, larger deductibles and higher prescription drug bills as costs increase, according to GM (Kaiser Daily Health Policy Report, 2/8). GM said it will hold a series of meetings this week to explain the changes. GM Chair and CEO Rick Wagoner said the changes are a "difficult but necessary decision." Company spokesperson Michelle Bunker said, "It's just one of the many steps we're taking" to cut costs (Detroit Free Press, 10/28).

Opinion Piece
When the leaders of the Big Three automakers meet next month with President Bush, "[h]opefully" they will stress to Bush and presidential adviser Karl Rove "that a more focused effort is required to alleviate the problems" of high employee health care costs, which are "faced not just by the auto industry but all businesses," columnist David Lazarus writes in a San Francisco Chronicle opinion piece. Lazarus suggests that the automakers and other major employers "use their considerable political clout" to steer lawmakers toward health care reform. Such reform could result in "a single-payer system similar to the universal coverage available in every other industrialized democracy" or something "in between, with the federal government playing a greater role in meeting the needs of those with chronic health problems." Lazarus says that in order to "standardize insurance payments and rein in growth in health care," a "partnership between the public and private sectors" is required (Lazarus, San Francisco Chronicle, 10/29).