UAW and Health Care
The UAW is about to become one of the country’s biggest purchasers of health care.
Under the agreement, responsibility for the retiree health plan willshift to a Voluntary Employees’ Beneficiary Association managed by theunion. Details about how the VEBA will be funded have not beendisclosed. But it is expected to involve a one-time payment of as muchas $35 billion by GM, providing the union with money to invest and useto pay for retiree benefits while reducing the company’s futureexpenses by billions of dollars. Creation of the retiree health trustis to be monitored by a judge and the Securities and ExchangeCommission, according to GM’s statement this morning.
At a Detroit news conference, UAW president Ronald A. Gettelfingersaid the memorandum of understanding outlining the health fund wouldsecure retiree health benefits for decades to come.
Presumably, the UAW will pick up the retiree health care for Ford and Chrysler, as well.
I’m glad the strike was successful and I’m glad it’s over (though it looks like MI is going to have a shutdown). But I’m especially intrigued by the possibilities of unions exerting a lot of sway in the health care industry. As the UAW becomes a bigger and bigger buyer, for example, they’re going to be able to demand price reductions. Which means they might be able to offer affordable health care to unaffiliated workers who join the union.
In other words, if UAW plays this right, they may well have another benefit to offer union members, which could be used to start growing union numbers again.
If the government cannot negotiate prices where will any one else pick up that privilege ?
To accept less than universal health care, to speak about less than universal health care, to consider anything but universal health care is counterproductive to the future of our civilization. If we do not demand our right to vote on this matter, we are going to become the third world.
I am very happy that a behind the scenes, secret, sweetheart deal has been spun by some, but it is an insult to the rest of us in this country that have to pay thousands a month for health insurance that covers nothing.
Please Marcy, don’t go down this road. It is defeat staring back at you. We, the people, must demand our rights. Insurance companies are parasitic organisms that have government help each time they refuse to pay off a claim.
they must be eliminated before civilization can move forward. If we do not destroy them, they will kill us.
Didn’t G.M. have the incentive to demand price reductions? Of course they did. And they were not successful or not successful enough.
Does this agreement reduce the incentive to G.M. to get single-payer health insurance passed? Does it increase the incentive for the union?
Since it is just retirees (covered in part by Medicare), the answers are unclear. Mostly, the status quo (health care for current workers) is unchanged.
But Tom, this is not just GM. It’ll be Ford and Chrysler, too. So a larger pool.
oldtree
Yes, I understand your point. This will limit the degree to which the auto companies will get behind universal coverage (though they still insure their white collar workers and working union employees. Yours is an important point.
But I do think this shifts power in the health care discussions, and may well shift the position of the union in the country.
So presumably GM did some NPV calculation that showed they are better off shedding the liabilities and paying some number (lets call it $35B for arguments’ sake) today to the union.
And presumably, the union did some NPV calculation that showed that they could take on the liabilities and meet them with a one-time payment of $35B.
So, either:
1. Both of them calculated that the NPV of the liabilities is exactly $35B, and it’s a complete wash either way (in which case, I’m not sure why there was a strike)
or
2. The union’s calculation showed a NPV of the liabilities that was less burdensome than GM’s calculation
or
3. There are non-economic incentives I know nothing about going on here
#2, for instance, might be plausible if, for example, the UAW thought that by adding Ford & Chrysler’s workers they would have more pricing power than GM. #3 could be if the UAW thought it might lead to a path towards expanded membership.
Any idea which of the three it is? (Or if I missed a possibility?)
Apologies in advance to the many fine and ethical physicians who visit TNH and FDL, but IMVHO, one aspect of this pits union against union. The Liaison Committee on Medical School Education is controlled by the AMA. It artificially restricts the number of graduates of U.S. Medical schools. That’s what causes too many patients to chase too few physicians. The physician shortage is also one important aspect of why Medical School education is so outrageously expensive. Medical schools have to pay physicians as faculty at a competitive rate. The physician shortage, contributes to mal-practice, which drives up the cost of their insurance (and which they never cease to complain about). Physicians are the primary fulcrum in the entire system between patient and treatment. Their decisions inevitably control new technologies which could improve care and lessen costs. The physician shortage also contributes to quality control breakdowns throughout the system. Physicians are reluctant to disclose their peers who make mistakes, often because specialists depend on other physicians for â€referrals.†Their primary loyalty is supposed to be to the patients, not to their peers. Right now the shortage is probably most glaring wrt primary care physicians. FWIW, there appear to be plenty of plastic surgeons.
Andrew
I think one of the factors involved is that GM has to report to Wall Street, and the UAW doesn’t. By shedding retiree costs, GM can start to show profit numbers that are more real compared to the way Honda and Toyota are judged (though the US manufacturers are still less efficient than the Japanese manufacturers on time-to-market with a car and on everyday operating efficiency). So GM can take a one-time charge, but going forward it is going to be judged as a car company, rather than as a retirement company.
EW
That sounds very right. An accounting driven decision, with a fixed liability for GM replacing one that might become variable over time with unforeseen results.
Healthcare is as important to the vitality of the Nation as the Goods and Services it produces.
BushCo’s selective support for Healthcare is more a reflection of their Ideology’s class-like belief in ’worthies’ and ’not-worthies.’ Basically, if you’ve got the money, power and favor, then you’re ’worthy,’ otherwise…
GM (and Ford and Chrysler) and the UAW can see the blue-print for Economic competitiveness.
This might be the little *boom* at the top of the snow-covered slope that will sweep Hillary right into the Oval Office: Bush won’t ’tolerate’ equal health care talk, but everyone – Business and the People – can already see *the obvious answer* on this issue.
It’s just that Bush wants instead for all that that money to go to fight his War/Occupation in the Middle East for decades more…
Bush is the only thing between US and Universal Health Care. Not even the Healthcare Insurance Industry Lobby will be able to stop it for long, once he’s out of office.
The thing I don’t understand is why the costs for retirees are so high, since retirees can go on medicaid at some point and presumably only have very limited costs after that.
EmptyWheel,
I agree with your logic. But the risks are part of the equation as well.
I think the UAW saw the writing on the wall and understood that the liabilities were going to sink GM. They didn’t want to cook the goose that laid the golden eggs.
And they didn’t want the retirees to be stranded without GM to back their health care costs in the future. If the Big 3 sink under the surface, it seems to me there are few guarantees about the retirees’ future.
The trust fund is secure and the retirees are no longer dependent upon GM as a going concern.