Chicago, IL
The American health care system is again in crisis. During the boom years of the late 1990s, few policy-makers or pundits paid attention to potentially troubling signals, as health care costs appeared in check and coverage was expanding. But union negotiators never lost sight of the fact that affordable, accessible, quality care for working families was imperiled by skyrocketing premiums, by drug prices that put needed medications out of reach for many, by inadequate staffing levels and work conditions that compromised patient care and propelled an exodus of dedicated, experienced, health professionals, and by medical errors that contribute to tens of thousands of deaths annually.
Today, the public is deeply troubled by these trends and wants action: In the March 2002 AFL-CIO Ask a Working Woman survey, health care was the top legislative priority for both women and men. Nine out of ten rated health care an "important" issue, and 69% called it "very important" - a 12-point increase in intensity of concern among women in just two years.
Health care has always been a top tier issue for American unions, with one of our greatest and most enduring accomplishments being the first-rate coverage and benefits we have secured for the workers and retirees we represent. Although ours is the standard for health care in America, our capacity to bargain for, and the capacity of our employers to continue to meet that standard while improving wages and other benefits, is jeopardized by the recurring crises in cost and quality of care.
Out-of-control costs: After a period of relative stability in the mid- to late-1990s, health care costs are spiking. Premiums, which as recently as 1999 had grown only 5%, were up 11% in 2001. Increases for this year averaged 12% to 15%, and according to a recent Hewitt Associates survey, HMO premiums will jump 22% in 2003. In April, CALPERS, the nation's second largest public employee benefits program, announced a stunning 25% hike in premiums next year.
Many forces are driving rising health care costs, including new technology and treatments; an aging population; industry changes, including consolidation of hospitals and insurers that enhances their market power and a trend toward conversion from non-profit to for-profit status; and higher drug prices coupled with a greater reliance on drugs to treat ever-more conditions and diseases.
The explosive escalation of costs is expected to persist for the foreseeable future and has spawned intensive and pervasive attempts by employers to shift the increased cost of health care to employees. Along with recent unemployment increases, estimated to have added add upwards of two million to the ranks of the uninsured, cost shifting to employees leads directly to a decline in coverage. An earlier AFL-CIO study found that premium cost shifting accounted for 75% of the decline in employment-based coverage between 1989 and 1996.
For unions, rising health care costs is the number one issue in bargaining. Across industries and almost without exception, companies have tried to force major health care concessions, such as premium, deductible and co-pay hikes; tiered pricing and closed formularies; steep cuts in family and retiree coverage; and caps on employer contributions for retiree coverage. Limiting cost hikes or benefit cuts for active employees is at the expense of wage improvements, with members agreeing to smaller increases or wage freezes for some or all of a contract in order to safeguard coverage. Cost pressures are also leading to distortions in payments to union health and welfare funds, as some consultants and advisors advocate reduced payments to home union trusts for work done outside the immediate area.
Employers that continue to provide good health benefits find themselves under intense pressure from unscrupulous competitors who evade their responsibility to provide health care for workers.
States, too, are feeling the pinch, as rising health care costs drive up their Medicaid expenditures at the same time that higher unemployment has increased the demand for public services and declining tax revenues have produced whopping budget shortfalls. Medicaid spending, which represents 20% of state budgets, rose by 11% in FY 2001 and by 13% in FY 2002. Such spending in FY 2003 is expected to rise by 6%, four times faster than state spending overall. Twenty-eight states expect to exceed their state FY 2002 Medicaid budgets by a total of $2.8 billion.
Federal and state policy-makers, unions, employers and health plans are exploring and implementing a number of strategies to reduce health care costs. The Senate took important steps in certain drug cost measures passed last week, but they are only a first installment in a much bigger package of needed reforms. Proposals to subsidize employers' health care premiums for retirees and active employees through tax credits or other strategies are under consideration by some in Congress; they have considerable promise and deserve a full and fair hearing. At the state level, the Wisconsin AFL-CIO and its affiliated unions are exploring a payroll-tax-based statewide health care system (similar to unemployment insurance contributions), which would serve a dual purpose of extending coverage to all workers and their families and help level the playing field between employers who provide benefits and those who free-load.
Purchasing pools can shift some bargaining power back to purchasers by amassing more health care dollars together, though the record of success in achieving savings through these collective efforts is mixed. Union funds have formed purchasing cooperatives in several areas in the country. Some initially came together to provide ancillary benefits such as prescription drugs, dental and vision care. Their ability to purchase collectively allows them to negotiate larger discounts from providers.
Programs that measure and control quality of care, reduce errors and promote disease management and wellness also can reduce costs. Unions using these approaches have found that the front-end investments reap savings in the long run, both in overall program costs and quality of life for active and retired members and their families.
Prescription drugs: Prescription drugs are a significant component of the health care crisis both because rising drug costs are the fastest growing share of overall health cost hikes, and because the persons most likely to need and rely on drugs - the nation's seniors - are also most likely to spend disproportionately for them.
Since 1995, national spending on prescription drugs has grown by over 10 % annually, a rate more than double the rate of growth of other aspects of health care spending (hospital care or physician and clinical services). Three factors have caused the growth in prescription drug spending: greater use of drugs; newer, high-cost drugs replacing older, lower-cost drugs; and, increasingly significant, the rapidly rising prices of prescription drugs. Brand-name prescription drugs cost significantly more than generic drugs and are growing at a much faster rate. A recent study of 50 drugs most frequently used by seniors found the cost of the brand-name drugs grew at nearly 3 times the rate of inflation. In contrast, generic drug costs rose at significantly less than the rate of inflation.
Rising drug prices affect all purchasers of pharmaceuticals, but the uninsured and the elderly are hit hardest. The elderly are only 13 % of the population, but their medication purchases account for more than one-third of all drug expenditures. Although Medicare provides basic health coverage for virtually all seniors, it does not cover outpatient prescription drugs. Nearly one-third of the nation's seniors, 11 million, lack drug coverage of any type in the course of a year. Their disproportionate need for drugs coupled with run-away drug costs forces them to make wrenching choices among basic life necessities, to stretch or skip medications, or to juggle exorbitant costs on fixed incomes.
Among seniors with drug coverage, the largest share (one-third) gets it under employment-based plans. But spiraling drug costs threaten their coverage as well, as employers, faced with prescription drug costs that total 40% to 60% of their overall retiree health costs, respond by eliminating drug benefits, capping their contributions or dropping retiree coverage altogether.
State governments have led the way in efforts to regulate drug costs and to make drugs more affordable to seniors and low-income individuals. Spurred on by the groundbreaking Maine RxHealth law, numerous states have passed or are considering programs that use their states' bulk purchasing power to negotiate steep discounts on drugs. Others have received or are seeking waivers from HHS to extend Medicaid prescription drug coverage to individuals with incomes up to 300% of poverty. But the industry is mobilizing in response: PhRMA, the drug industry's trade association, has sued to block both models, and the Supreme Court will review the Maine law next term.
Federal lawmakers have been less effective in grappling with prescription drug costs and benefits, though three just-passed Senate measures - facilitating generics access to the market, permitting re-importation of drugs from Canada, and authorizing states to use their Medicaid programs to negotiate discounts - should have a moderating influence. But prospects for a Medicare prescription drug benefit are dim. The House-passed bill is not a Medicare benefit: it guarantees no benefits to any senior; it bypasses Medicare and subsidizes HMOs to encourage them to provide coverage; it turns over to insurers all decisions regarding coverage; it does nothing to control drug costs; and it leaves a gaping hole in coverage for out-of-pocket expenses between $2000 and $4800. The Senate considered several proposals, with the best and most comprehensive plan - a guaranteed, comprehensive Medicare benefit - receiving a majority (and the largest number) of votes, but it still fell short of the 60 votes required for passage. With prescription drug benefits so pressing an issue for so many, the failure of Congress to enact a drug benefit is certain to be one of the most significant issues in this fall's elections.
Labor unions and their benefit plans, along with other private and public purchasers, are experimenting with a wide range of drug cost-containment strategies. These include multi-tiered formularies, which set different rates for generics and preferred drugs; incentive and evidence-based formularies; mail order programs; mandatory generic substitution; case management and independent research on drug effectiveness. Unions are also key players in a lobbying for the types of major legislative and regulatory changes now under consideration by Congress, state legislatures and regulatory agencies.
Quality and safety of care: Despite having the most expensive and technologically advanced health delivery system in the world, shocking problems in quality and basic safety exist. In 1999, the Institute of Medicine (IOM) reported that medical errors account for up to 98,000 patients' deaths each year. The total direct costs to the nation associated with medical errors range from $17 billion to $29 billion annually; indirect costs are much harder to quantify and also significantly greater.
Modern drug treatments and therapies are great science, but they are wildly expensive and very error-prone because of the complexity of the technology and the complex interaction of multiple drug therapies. According to the IOM, the cost of medication errors occurring within hospitals alone is an estimated $2 billion, an amount that represents only a small share of overall costs since most medication-related errors take place outside of hospitals.
Preventing medical errors and protecting patients requires a front-end focus on safety. Steps recommended by the IOM - and endorsed by AFL-CIO unions - include creation of a better nationwide system of reporting medical errors, whistleblower protections for employees who make reports, tough performance standards for health care institutions with corresponding systems to monitor compliance and a focus on staffing levels, and better education for the health care workforce to limit mistakes.
A number of unions are working directly with employers to reduce the rate of medical error in hospitals that contract with their plans, by agreeing to certain patient safety measures through contract language and through participation in national coalitions such as the Leapfrog Group. Implementation of the group's three top safety recommendations - requiring computerized entry of doctors' medication orders, evidence-based hospital referrals and staffing of ICUs with doctors trained in critical care medicine - has been shown to reduce medication errors by 50% in the former case, and to reduce the risk of death by 30% and 10%, respectively, in the latter two.
Unions also play an active role in the National Quality Forum, an outgrowth of the Clinton Managed Care Commission that was created to develop and implement a national strategy for health care quality measurement and reporting. Other unions have developed new measurement tools on their own or in conjunction with local or national efforts such as the National Committee on Quality Assurance and the Foundation for Accountability. Finally, several unions and employers are working together in labor-management committees to jointly select providers based on agreed-upon quality measures. Collectively, all of these approaches to quality and safety are designed both to improve patient outcomes and to reduce health care costs.
Staffing concerns: Throughout the country, in hospital after hospital, there are alarming reports of nursing shortages, a problem only expected to get worse. By 2010, the shortage is expected to be 725,000 nurses, and by 2020, when the majority of the baby boomers will be seeking care, it will exceed 1.2 million.
Nursing shortages are in part a product of short-sighted responses to financial pressures on health care facilities, which have sought to meet budget shortfalls or raise profits by cutting or out-sourcing staff. But the shortages are also a barometer of the toll that changes in working conditions - including a combination of more seriously ill patients and technologically more complex care - have taken.
A particularly devastating consequence of the nursing shortage is abuse of overtime in health care organizations, with employers relying more and more heavily on mandatory overtime to solve staffing gaps. According to a 2001 survey, nurses in acute care hospitals work an additional 8 ½ weeks of overtime on average per year. Slightly more than ½ % of acute care nurses plan to stay in hospitals until they retire, yet fully 68 % of nurses say they would be more likely to stay in acute care if staffing levels in their facilities were adequate.
The increasing use of mandatory overtime in response to shortages is actually exacerbating the very problem it is attempting to solve. Overworked and unable to meet the needs of their patients, nurses are leaving hospitals for less stressful and more rewarding jobs elsewhere. The proportion of the nation's registered nurses working in hospitals declined from 68 % in 1988 to 59 % in 2000. In a survey last year by Peter D. Hart Associates, 21 % of nurses said they planned to leave the profession in the next five years because of job dissatisfaction, but three-quarters said they would consider staying if conditions were improved - primarily in regard to staffing and hours worked.
The capacity to deliver high quality care is seriously compromised and the likelihood of making serious mistakes greatly enhanced when nurses are exhausted from long hours of work and insufficient time off. The Joint Commission on Accreditation of Healthcare Organizations found that almost one-quarter of serious medical errors have inadequate nurse staffing as a major underlying factor.
The overtime problem is so severe that nurses have struck over it, states have implemented or are considering bans on forced overtime, and legislation has been introduced in both houses of Congress to limit nurses' mandatory overtime. Stopping the practice of mandatory overtime is an immediate, significant step towards improving the working conditions of our nation's nurses.
Beyond limits on mandatory overtime, additional monetary investments and changes in working conditions are necessary to improve the nurse staffing situation. Recent federal legislation is a good start. It provides new monies to fund scholarships for nursing students who will, in turn, work in critically understaffed health facilities, and it provides grants for geriatric training and to improve hospital work environments.
Other needed improvements include laws and regulations that set staffing standards in hospitals, protect patients and health care workers who blow the whistle on staffing problems, and provide adequate oversight of hospitals by the federal government. In addition, more research is needed into the links between the working conditions of health care workers and safe, high-quality patient care.
Next steps on health care: The piecemeal approach to solving health care problems and avoiding recurring crises has not worked. While some Americans continue to enjoy the best health care money can buy, many others can afford little or none, and most of us risk losing some or all of the benefits we have or paying much more to preserve them. This is a madness that must stop.
The union movement believes that health care is a basic right. Now as always, we are committed to the goal of universal coverage. Ultimately, there is no other way to avoid the recurring crises that leave millions uninsured, force millions more to forego needed treatments or receive them only at the expense of other basic life necessities, wreak havoc on families' economic and health security, fuel tensions in bargaining, and exacerbate the competitive disadvantage and uneven playing field confronting our employers.
The union movement must marshal its resources for a renewed all-out assault to end the current health care crisis and to put the nation on a course toward guaranteed accessible, affordable, high-quality care for all. There is no institution in America better suited or better able to take on this task.
Our unions and the working families we represent are connected to every aspect of the health care system, as consumers, health care professionals, plans and providers. On behalf of each of these interests, we have an enormous stake in working to create a more rational, fair and competent health care system - and a profound obligation to do so. To that end, the AFL-CIO and its affiliates will:
· Aggressively recruit employers to join the union movement in a campaign for comprehensive health care reform at the federal and state levels;
· Join forces with our allies in coalitions such as the Covering the Uninsured Campaign and the National Coalition on Health Care in pursuit of comprehensive health care reform;
· Focus on collaborative efforts with employers at the bargaining table and in political venues, with a goal of controlling health care costs, while providing high-quality health care benefits for working families;
· Continue to push for federal and state laws that rein in drug costs, extend prescription drug assistance to all seniors, provide tax rebates or other subsidies or incentives to encourage and reward employers who provide health coverage for active employees and retirees, extend Medicare to younger retirees, and expand CHIP and Medicaid to cover more poor and near-poor children and their families;
· Build purchasing pools and otherwise leverage the collective power of our health care plans to negotiate better prices for medications and treatments;
· Under the auspices of the AFL-CIO Strategic Approaches Committee, work collaboratively to develop and implement bargaining strategies and campaigns designed to maintain affordable and high-quality health care for our members and their families and to help inform our future legislative efforts. In particular, we will:
· Hold conferences devoted to sharing health care bargaining knowledge and expertise and reaching consensus about health care bargaining best practices;
· Disseminate health care bargaining best practices through teaching materials, training sessions and other methods; and
· Target for assistance high-profile negotiations where health care benefits are a major issue and make special efforts to mobilize AFL-CIO affiliates and labor allies in highly visible support of health care benefits demands;
· Step up efforts to educate our members, plans, providers and the public about the importance and effectiveness of safety and quality initiatives in reducing illness, preventing medical errors and lowering costs, and about the role of working conditions for health care workers in improving safety and quality; and to provide support in implementing quality and safety programs;
· Make our decisions about candidate endorsements at every level of government based on where they stand on working family issues, including health care. We will educate our members about elected officials' and candidates' records on health care. And we will take our message on health care to the voting booth this fall and in 2004.
As a nation, we must come to grips with this crisis - and as a movement of health care consumers, workers and providers, the AFL-CIO and its affiliates must take the lead.