Everybody's Business: Reform Would Help Corporations

Jun 15, 2009

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This column is a collaboration between KHN and The New Republic.

One of the more promising signs for health care reform over the past two years has been the apparent support of the business community. Corporate executives and trade groups have repeatedly spoken out about the problems of our health care system. Even more remarkably, they have joined coalitions pledged to finding comprehensive solutions--the sorts of plans that would bring affordable insurance to all Americans while easing the financial burden many companies now face. The lack of business support helped doom the Clinton administration’s effort in 1994, but this time, it seemed, would be different.

But now that the debate over health care has moved from abstractions to legislative specifics, the story is starting to sound familiar. A prime example: recent statements by the National Manufacturers Association, which represents large industrial companies. Most reform proposals would require businesses to contribute toward the cost of their employees’ health insurance, either by providing coverage or paying into a fund for the uninsured. An NAM official told a USA Today reporter the group wanted the employer mandate “out of there.” Other business groups, like the U.S. Chamber of Commerce, seem equally skeptical.

It’s not surprising that many employers would resist this requirement. They argue, as they have before, that a mandate would impose a crushing burden--one that would chill growth and job creation, driving weaker companies into bankruptcy. But if the response is entirely predictable, it’s no more sensible than it was before, at least when it comes to large employers. Most of these companies already provide health benefits. And they’re already buckling under that burden--or, in some cases, collapsing under it. Just ask the executives of Chrysler and General Motors Corp., if they’re not too busy dealing with Chapter 11 filings.

If the government were to undertake the sorts of reforms President Obama and his congressional allies have in mind, these companies might finally see some relief. A comprehensive reform plan would alleviate the burden of paying for the uninsured and underinsured--whose bills corporations pay indirectly, as a “hidden tax,” when doctors and hospitals pass along higher charges. More important, reform holds out the (realistic) hope of reducing the growth in health care spending, by weeding out some of the unnecessary care that drives up costs and focusing resources on prevention and chronic care.

Alas, many corporate executives--including, quite possibly, those who shape policy at NAM--seem to think they could do a much better job of controlling costs than the government ever could. The way they see it, in a private marketplace they can use their clout to bargain for lower prices from doctors, hospitals and drug-makers--and to encourage more responsible behavior from their employees to reduce the demand for medical services. The only problem with this argument is that present reality undermines it. Corporations already have these abilities, after all. And it’s not really helping.

That’s not surprising. While an individual company can influence the behavior of--and tinker with the insurance of--their workers, they are powerless to address the broad causes of rising health care costs, which are built into our system. They can’t develop a national electronic medical record; they can’t temper the demand for expensive but unproven medical technology; they can’t wring the administrative waste out of a fractured insurance industry; they can’t even do that much to bargain down prices, given the extent to which they’re inevitably paying for somebody else’s care. Only the government has that kind of reach. This is why a few far-sighted CEOs--like Steve Burd, of Safeway--have joined the call for comprehensive health reform, even though they’ve had some marginal success at reducing their own employees’ medical expenses.

Reform would provide one other boon to business--and, more broadly, the American economy. Right now, a company can beat a competitor not by building better products or providing better services, but simply by figuring out how to spend less on its workers’ health care. It can do that by providing less generous benefits, no benefits at all, or even coming up with policies that discourage employment by people who are likely to incur higher medical bills. But with an employer mandate, the government creates a level playing field. All companies have to pay into the system and--depending upon the accompanying regulations--they won’t be able to get a leg up on the competition just by conjuring up clever ways to get out of paying big medical bills.

Admittedly, to believe in such a system is to believe in a sense of shared responsibility--to believe that leaders of industry have some obligation to society as a whole, even as they have an obligation to their shareholders. But that’s not a notion foreign to the U.S. For much of the post-World War II era, the business establishment saw itself as the steward of the public good--not ignorant of its own self-interest, for sure, but not focused on it to the exclusion of all other concerns. And while that spirit has been gone for a while, it can always return.

Jonathan Cohn is a Senior Editor of The New Republic.