Hollywood, Florida
The deepening health care crisis occupies center stage in the life of the nation and in the lives of millions of Americans – an urgent situation that requires the union movement to show unstinting determination and unwavering leadership in leading a renewed campaign for comprehensive health care reform that will ensure affordable, high quality health care for all. No issue is more important to the men, women and children who have no health coverage or to the ever-growing ranks of those who are at risk of losing it. For unions and their members, health care is at the top of the bargaining agenda.
The economic downturn that is being aided and abetted by the failed policies of the Bush Administration is wiping out incremental gains in health care coverage achieved in the late 1990’s. Once again, it falls to the American unions to mount the campaign for comprehensive health care reform.
In contract negotiations large and small, we need to hold the line against employer attempts to push health costs onto working family budgets. At the grass roots, we must demand action from both state and federal legislators to constrain costs, expand access to coverage, level the playing field among employers, and improve the quality of care.
As much as anything else, we need to turn the 2004 elections into a referendum on whether all Americans should finally be able to get affordable, high quality health care with their right to choose their own doctor.
A large and growing number of Americans have no health insurance at all: 41.2 million people had no insurance in 2001, 1.4 million more than the previous year. Out-of-control health care cost increases are putting enormous pressure on job-based health plans. State-based health insurance programs are threatened not only by spiraling costs but also by the growing state fiscal crisis and the lack of help from the federal government. And Medicare recipients still have no access to a comprehensive prescription drug benefit through that universal program.
Job-based health insurance is a critical but fragile source of coverage for Americans. Health care cost pressures are placing big strains on employer-sponsored plans, and many employers are reacting by passing costs onto workers and cutting back on coverage. Health care costs are rising at rates that cannot be sustained. Benefits experts expect the costs of employer-sponsored health plans to increase at double-digit rates for the third straight year in 2003—by as much as 15 percent or more. Health care costs could double in just five years if that rate continued.
One Hewitt Associates survey found that many employers are likely to pass along at least 25 to 30 percent of these price hikes to their employees. A Kaiser Family Foundation survey of employer-provided health benefits similarly found that employers dealt with cost increases by passing along premium hikes to their employees. On average, worker premium costs increases by 27 percent for single coverage and 16 percent for family coverage in 2002. Three-quarters of the employers the foundation surveyed said they are likely to pass along even more costs to workers in 2003.
Health care cost shifting inevitably adds to the ranks of the uninsured: An earlier AFL-CIO study found that between 1989 and 1996, premium cost shifting accounted for 75 percent of the decline in employment-based coverage.
Workers are fighting to preserve hard-won health benefits at companies across the country – like GE, where 20,000 workers struck for two days in January to protest cost-shifting and like the Peterbilt company, where 700 workers have been locked out since the day after Labor Day. Workers are also fighting to win health coverage for those workers whose low wages and high health costs makes insurance unaffordable, such as janitors in Boston as well as other cities and hotel workers in Chicago.
Prescription drug costs are likely to lead to deep cuts in or elimination of retiree health coverage. Drug costs constitute 40 to 60 percent of employers’ retiree health care costs, and steep price hikes are prompting employers to eliminate drug benefits, cap their contributions or drop their obligations altogether. The Kaiser Family Foundation survey found the share of large employers offering retiree coverage declined from 66 percent in 1988 to 34 percent in 2002. A significant share of employers that continue to provide retiree coverage has passed along substantial cost increases to retirees.
In addition to soaring costs, public need-based programs for the uninsured are facing increased demands for services during the economic downturn and the worst state financial crisis since World War II. The Kaiser Commission on the Uninsured reports that 40 states expect shortfalls in their fiscal year (FY) 2003 Medicaid budgets, and 49 states and the District of Columbia are implementing FY 2003 cost-containment plans for Medicaid spending. In California, Connecticut, Massachusetts, Missouri, Montana, Nebraska, Nevada, New Jersey, Oklahoma, Tennessee and Washington, at least one million people, largely in working poor families, stand to lose health care coverage altogether if the cuts proposed in these eleven states are implemented fully. And the crisis will only worsen next year when Medicaid enrollment is predicted to grow 7.7 percent on average because of the sluggish economy.
After so many years of talk in Washington, D.C., Medicare recipients—seniors and disabled workers—still do not have access to an outpatient prescription drug benefit as a standard feature of the Medicare benefits package. Beneficiaries desperately need a prescription drug benefit to address the significant role that prescription drugs play in modern health care and the soaring costs of drugs. Enactment of a truly comprehensive prescription drug benefit also would relieve some of the cost pressures being felt by state Medicaid programs and employer-sponsored retiree health plans.
The health care crisis confronting the nation demands real leadership, but President George W. Bush has failed to offer constructive responses to the country’s health care challenges. Instead, he is playing a shell game with families’ Medicare and Medicaid benefits and putting forward private insurance proposals that threaten to weaken the security of workers’ health benefits.
The administration’s proposal to change Medicare—by spending $400 billion over the next 10 years to create a prescription drug benefit within the Medicare+Choice program and propping up the floundering Medicare+Choice managed care program—is deeply flawed and falls short of meeting seniors’ pressing needs. The president’s plan forces seniors to leave the Medicare coverage they trust and turn instead to profit-motivated Health Maintenance Organizations (HMOs) for both their drug coverage and their basic health care. That means insurance executives rather than Medicare would decide how much to charge and what to offer.
Far more than the $400 billion the president proposes is needed to provide a meaningful drug benefit to seniors. According to the Congressional Budget Office’s newest projections, the cost of outpatient prescription drugs for Medicare beneficiaries over the next 10 years (2004–2013) will total $1.84 trillion.
The president’s plan also would not appear to reduce cost pressures on employers that provide drug coverage for their retirees. A key design feature of any drug plan is whether and to what extent it provides cost relief to existing employer health plans that provide prescription drug coverage to retirees. Although very few specifics have been shared with the public on the administration’s plan, if it tracks last year’s Republican congressional proposals, it will not provide any such relief because employer contributions do not count as payments that trigger Medicare coverage.
The states and their residents who depend on Medicaid for basic health coverage desperately need help from the federal government. But the president’s response, outlined in his FY 2004 budget, is a proposed Medicaid block grant that provides no real financial relief for the states and leaves beneficiaries open to harsh benefit cuts and, for some, elimination of health coverage.
The president calls for an additional $12.7 billion in Medicaid funding over seven years—$3.25 billion in FY 2004—but the added resources are limited to states that agree to convert to a Medicaid block grant with capped funding regardless of the number of new beneficiaries joining the program. States that prefer to continue under the existing program are ineligible for additional assistance. The president describes his approach as giving states a “choice,” but at a time when states are starved for resources, “coercion” is a more apt description.
In fact, even states that go along with the president’s plan will get no increase in funding over the next 10 years. The extra resources the president proposes stop after seven years; thereafter, participating states essentially are required to pay them back as federal Medicaid contributions decline.
The administration’s flagship proposal to address the growing ranks of the uninsured—a refundable tax credit for the purchase of health insurance, costing $89 billion over 10 years—fails uninsured Americans and jeopardizes job-based coverage for low- and middle-income workers.
The proposed premium credit assistance ignores the high costs of individual polices and the difficult circumstances facing those most in need. According to a recent study by the Center for Studying Health System Change, premiums for individual policies in 1998 and 1999 ranged from $1,452 a year for a young adult (age 18 to 29) in excellent health to $3,276 per year for an early or near retiree (age 55 to 64) in poor health. Under the Bush plan, an individual who had $20,000 in annual income and no dependents would be eligible for a $556 premium credit, only slightly more than one-third the cost of the least expensive policy. Maximum benefits under the Bush plan are available only to individuals who earn $15,000 or less per year (in modified adjusted gross income) and who have no dependents and to all other filers with $25,000 or less in income.
The Bush tax credit proposals also threaten to undermine job-based coverage for low- and moderate-income workers. If young, healthy workers believe they can find adequate coverage with the tax credits, they may abandon employer-sponsored plans. As a result, employers’ risk pools would dry up and lead to higher per-worker insurance costs for those who remain. Some employers—especially those with predominantly low-wage workforces—may eliminate their health insurance plans altogether and urge their workers to rely on the Bush premium credits even though they may be inadequate.
President Bush’s proposal to create Association Health Plans (AHPs) raises troubling questions. AHPs are described often by proponents as a panacea for small businesses trying to purchase affordable coverage in an era of double-digit health care inflation. In fact, proposals, such as President Bush’s, that would exempt AHPs from state regulation would do little to address the current small employer insurance crisis and would leave all working families paying more for less health coverage.
At best, AHPs would offer minimal benefits that are attractive only to young and healthy workers, raising costs for older and sicker workers remaining in other group health plans. The Congressional Budget Office has estimated that less than 1 percent of the uninsured will gain coverage through AHPs and four out of five workers in small firms will see their premiums increase.
To the extent that younger, healthier workers migrated to AHP’s on the promise of lower costs, traditional group insurance coverage would see costs rise dramatically, especially for small and medium size firms, where costs are already rising over 20 percent per year. Insurers in this market, notably Blue Cross Blue Shield, believe that the group insurance market could be destroyed as a result, an outcome that many independent experts also believe possible.
At their worst, AHPs are at high risk for fraud and abuse. The strong consumer protections and solvency standards that exist in every state must be there to safeguard working families from the health insurance scams that have left millions of dollars in unpaid medical bills and thousands without coverage.
Far better alternatives to the president’s flawed proposals exist. Congressional proposals to establish a meaningful Medicare drug benefit, with substantial cost relief for employers, are being advanced, as are proposals to lower prescription drug costs for all purchasers by making it easier to bring generic drugs to market. The AFL-CIO remains convinced that only comprehensive, national health care reform will solve the problems of health care cost, coverage and quality. A special challenge exists at time in recruiting employer support for comprehensive reform. In this regard, the work of the National Coalition on Health Care is especially important.
Congressional proposals have again been put forward that would require most, if not all, employers to provide health benefits or to enroll all Americans in a single, unified system of health care funded by contributions by employers and workers. National unions and labor movements at the state level, along with their community allies, are on the leading front of initiatives to expand coverage and reduce costs.
At the same time, the lack of leadership in Washington is leading states to tackle comprehensive reform at their level.
A number of states are exploring statewide health care reform, using a variety of models. In Wisconsin, the state labor federation is garnering support for a payroll-tax based system (similar to the state’s unemployment insurance program), which would serve four purposes: first, extend coverage to all workers and their families; second, constrain costs by having all employers, union plans, and major public programs purchase care through a single insurance pool; third, level the playing field between employers who provide benefits and those who currently freeload; fourth, provide a platform for introducing proven methods of improving quality and reducing preventable medical mistakes. Though details remain to be worked out, preliminary cost estimates indicate that the plan is an affordable way to expand coverage without compromising care. Importantly, the Wisconsin approach preserves options for collectively bargained plans to expand on the basic coverage under the state program, either by providing richer benefits or absorbing greater shares of workers’ costs.
The labor movement is working on coverage initiatives in other states, as well. A pay-or-play proposal, which would require employers to provide a minimum level of coverage or pay into a state fund, has been developed by the California Labor Federation and introduced in the California State Senate. A single-payer proposal is also being introduced in California, with considerable union backing. Other state labor federations also are developing new approaches to expanding health coverage at the state level.
State labor movements have also been major players in local efforts to control 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. For example, the Washington State AFL-CIO is leading an effort to enact legislation that will create a statewide prescription drug purchasing pool that includes public, private and individual purchasers.
Unions are also seeking to use pooled purchasing arrangements to reduce overall health care costs. The American Federation of Teachers, for example, is promoting group purchasing for its members’ health care through both voluntary cooperative agreements and statewide legislation.
Recent efforts to collect and report quality data on health care providers are an important step in promoting improved quality and reducing costs. The U.S. Department of Health and Human Services, under the leadership of Secretary Thompson, has led the way in health quality measures with its ground-breaking work on nursing homes and home health. In addition, efforts by hospital associations to report hospital performance measures represent meaningful progress.
AFL-CIO affiliated unions are playing singular roles in negotiating for programs that measure and control quality of care, reduce errors and address chronic disease and wellness. Their experience is that the front-end investments in these programs reap savings in the long run, both in overall program costs and quality of life for active and retired members and their families.
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 intensive care units with doctors trained in critical care medicine—has been shown to reduce medication errors by 50 percent in the former case and to reduce the risk of death by 30 percent and 10 percent, 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.
Now, even more than in the past, the AFL-CIO believes strongly that universal coverage is the best and ultimately only way to achieve the goal of extending affordable, high quality health care to all Americans. Until we are able to move to such a system, the AFL-CIO and its affiliated unions, along with state federations and central labor councils, will:
- Maintain a broad-based and focused educational and informational campaign about the crisis in health care, targeting activities at the national, state and local level;
- Explore and analyze the cost, feasibility and strategies to provide comprehensive, high quality and affordable health care to all Americans,
- Continue to support federal legislative and regulatory initiatives to cut health care costs, improve quality and expand coverage, including efforts to enact an affordable, comprehensive prescription drug benefit within Medicare that is available to all beneficiaries and that recognizes and supports the contributions of employer-sponsored retiree plans,
- At the federal level, seek waivers and other appropriate legislative and regulatory measures that will allow states to engage in responsible innovation designed to boost coverage, improve quality and lower costs,
- Oppose irresponsible strategies that will not ultimately lower costs, improve quality or expand coverage, including specifically proposals such as President Bush’s individual tax credit and AHP plans that threaten to undermine existing health coverage,
- Oppose efforts to block grant the Medicaid program, while also pushing for more federal support to help states meet demands under their Medicaid programs and to expand coverage under State Children’s Health Insurance Program to reach more low income children and their parents,
- In bargaining and otherwise, urge our employers to join the union movement in backing and participating in campaigns and initiatives designed to boost health care coverage, reduce costs and improve quality,
- Through legal actions and otherwise, resist efforts by industry giants and their trade associations, including the Pharmaceutical Research and Manufacturers of America, to block adoption and implementation of prescription drug plans and other initiatives, and
- Host three regional meetings this spring and summer (one in the northeast, one in the Midwest and one on the west coast) to explore further the crises in health care bargaining and in health care in general, and to assist unions in health benefits bargaining and in broader public policy work.