Get ready for a bigger chunk of your pay raises to be allocated to health care costs.
In fact, the "health care crisis" in the U.S. is so severe, said Michael Buck of Association Benefits, that there will likely come a day in the not-so-distant future when 100 percent of pay increases - in the building trades and other professions - will be allocated to paying for health insurance.
"Today's contributions are inadequate to tomorrow's costs, and costs are going up every single month," Buck told delegates to the Michigan Building Trades Council Annual Convention last month. "We've been hoping that hours worked will go up to offset the effects of inflation and increased medical costs. But I think we've reached that intersection. The hours aren't going to increase to meet those costs. We're going to have to pull the trigger on making some decisions that are really difficult."
Association Benefits is a health care insurance consultant and independent agent for seven union funds.
Some of the options, he said, are to cut back on services, limit eligibility, or more likely, drastically increase contribution levels. None of those options are apt to sit well among building trades workers or any other American. We're a nation that demands good, universal health care - but we're squeamish about paying the bill.
Health insurance costs rose 15 percent last year in Michigan and they're expected to climb even more this year. A report by Families U.S.A. found that in Michigan a standard health insurance plan costs $5,532 a year for a 25-year-old and $6,060 for a 55-year-old, the second and 11th highest rates in the nation, respectively.
A number of factors are driving up health care costs. One of the biggest problem, Buck said, is us: humans are living longer. "Every eight seconds in this country someone turns 50," he said. "The reality is, like an old car, we're going to require additional services, and with the technology we have in place to treat people, and with the effects of inflation, we're going to continue to see our health care costs going up."
In fact, this year, Medicare patients are expected to pay more than $1,000 out-of-pocket for their prescriptions, up from $813 in 2000. And it now costs an average of $13,500 per year for health care costs for the average senior citizen age 75-85, many of whom are living into their 90s.
Other factors that contribute to higher costs include government regulation, litigation, fraud, medical treatment enhancements, and the granddaddy of them all: the price of prescription drugs.
Buck pointed out that the top nine prescription drug companies spent $45.4 billion on marketing their drugs in 2001 - compared to $19.1 billion for research and development.
The Wall Street Journal reported earlier this month that employers, public interest groups, insurers and politicians are "all trying to stop - or at least slow - an annual rise in drug costs that has accelerated to double-digit rates and is slicing increasingly larger chunks out of consumer pocketbooks, government budgets and corporate profits. Total spending on prescription medicines rose 16 percent in the U.S. last year to $142 billion - about 10 percent of the nation's $1.42 trillion in health spending."
Many union workers haven't felt the pinch - yet. According to a report in The Detroit News, "The main reason why rising insurance costs have not cost Michigan employees their medical benefits, most analysts agree, is the strong presence of organized labor. Unions have locked the Big Three automakers and other unionized industries into long-term contracts that prevent them from reducing these benefits. The union presence forces even non-unionized companies to maintain union-level benefits to compete for workers, something economists call the 'halo effect.' "
The price Michigan pays for good health care is that Michigan has been ranked the eighth most expensive state to do business, which may have contributed to a 2 percent drop in employment last year, while the nation as a whole was nearly even.
In addition, personal income in Michigan is 2.5 percent lower than the national average and is growing at the second slowest rate among the 50 states. The News report said "Michigan employers, who until now were asking only that workers help defray rising medical costs through higher co-payments and deductibles, have begun demanding that workers accept lower wages in lieu of maintaining their health care benefits."
Pipe Fitters Local 636 Business Manager Jim Lapham, who has helped negotiate several collective bargaining agreements on behalf of his members, said the first warning shot about higher health care costs came several months ago from management trustees on the local's health and welfare fund. They're proposing that the local's retirees pay for more of their coverage.
"Up until recently that hasn't been an issue," Lapham said, "but now it is. We've been struggling for a year and a half now with our costs, and that's why we went to a self- insured plan. We won't know for a couple of months how much money we're saving. But there's no question that costs are going up, and we're going to have to find a solution."