Wednesday, April 20, 2005

Socialized Healthcare and General Motors

Professor Stephen Bainbridge has predicted that General Motor's financial crisis would jump start the call for a National Universal Single Payer Healthcare System for the United States:

Back when the Clintons tried to push through Hillarycare, they ran into serious opposition from business lobbies like NAM and the Business Roundtable. In 1994, the business groups were heavily influenced by the insurance companies who were dead set against anything remotely resembling a single payer system. (See John Hood's article for background.) The next time a Democrat gets into the White House, however, business likely will be pushing for a single payer system. (FYI: Newt Gingrich says Hillary herself will be "very formidable" in 2008.)

Why am I making this prediction? Take a close look at what new GM CEO Rick Wagoner told the WSJ($):

We have, I think, one specific issue that has reached crisis proportions. That would be the health-care cost issue. It's clearly outrunning our ability to hold it off with other cost cuts. ...

I think the health-care cost situation is a crisis. It's, by the way, not just a crisis for General Motors ... it's a crisis for this economy. We certainly are "the canary in the coal mine" because all the conditions hit us very hard because of structure and history and many other things.

In sum, Wagoner mentioned health care in answers to 5 questions, including one that asked what GM's problems were other than health care costs!

Now, it seems that this is exactlty what the UAW is pushing to General Motors Management:

General Motors and Ford are struggling to sell cars to anybody other than their own employees and friends. Their stocks are trading at deep discounts reflecting virtual bankruptcy.

So what does the United Auto Workers tell General Motors as the company probes the idea of reopening the current contract to cut health care costs? "As long as we work within the framework of our [existing contract], we'll make joint efforts to lower costs where it's possible," UAW President Ron Gettelfinger was quoted as saying.

Translation: Nuts.

Last year General Motors' 119,000 hourly workers paid only 7 percent of their health care costs, compared with about 27 percent for the company's 38,000 salaried workers. Even at 27 percent, such a system virtually guarantees gross abuse of health care services by providing virtually no incentive to economize on the use of drugs, physician services and hospitals. No wonder GM's health care tab for its 1.1 million workers, retirees and dependents is closing in on $6 billion a year, or about $1,400 per car.

The UAW knows all of this. But its strategy is to use the crisis to jump-start the drive toward a fully socialized health care system -- or, as Gettelfinger put it, a "government-led, national health care plan."

That must come as music to the ears of the likes of Hillary Clinton, still smarting from the humiliating rejection of her health care juggernaut in 1994. But a national health plan would still be a bad idea -- a very bad idea. As the humorist P.J. O'Rourke aptly summed up back during the Hillary-care debate, "if you think health care is expensive now, just wait until it's 'free.'"

The point was there is no such thing as free health care. Ultimately somebody has to pay for all the health care, as all those European countries staggering under the weight of their national health plans have been discovering.
However, what the unions, democrats and the Clintons desire does not automatically translate into national policy. Tthe costs of a universal single payor healthcare system are enoromous. The federal government is running massive deficits and will continue to do so for at least a decade. So, where will they get the money? Borrow more and push up inflation and then interest rates - stifling growth? Doubtful.

General Motors and Ford have been mismanaged for decades. They have given away too much already to the UAW and their employees and now management will pay the price in the marketplace. Healthcare amounting to $1,400.00 per car - perposterous. Any move to socialize healthcare to bail out GM employees and retirees is simply unfathomable.

Socialized healthcare systems are the worst. Flap has reported on this numerous times here, here, here, here, and here.

Hiliary Clinton will use the National Healthcare issue ONLY if the issue is expedient. As a true political opportunist she is too smart to be burned twice.

Sorry are incorrect.....

Update #1

Virginia Postrel has her take on the GM financial mess here.

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