U.S. manufacturers spend twice as much on health care as competitors

 No comments  
 E-mail Story
 Print Story
  Share

 digg it!
 Facebook
 del.icio.us
Seed Newsvine
Fark It
Reddit

Text Size: 

Tools Sponsor

By LISA GIRION/Los Angeles Times

U.S. manufacturers that provide health insurance spend an average of $2.38 per worker per hour on health care — more than twice as much as the their foreign competitors pay, an analysis released last week concluded. found.

The study provides support for the now-familiar lament of employers — that rising health-care costs are eating into the corporate bottom line.

American automakers say employee health coverage adds $1,500 to the price of each car, and many U.S. manufacturers have blamed rising health-care costs for decisions to drop health benefits for workers or shift jobs overseas.

Some economists have dismissed the idea that U.S. businesses were hurt by their comparatively high health-care costs. Instead, they have suggested that companies would pass those costs onto workers by lowering wages or onto consumers by raising prices.

But the new analysis suggests that neither lower wages or higher prices is an option for most companies. Employers can’t slash wages fast enough to keep up with rising health-care costs because of minimum wage laws, union contracts and other factors, said economist Len Nichols, the analysis’ author and a policy director for the New America Foundation.

“There’s no question that if employers could push this into wages they would,” Nichols said.

“But every single year, healthcare costs rise faster than productivity and wages,” he said. “Thus, they try to push it into prices. But with China and India competing against you, you can’t do that.”

Manufacturers also say competition for workers prevents U.S. employers from reducing wages.

Nichols found that healthcare costs are outpacing wages and productivity. With stiff global pricing competition, that means healthcare costs have got to come out of the bottom line, he said.

“That,” he said, helps “explain why so many employers are hyper focused on health reform this time around compared to 1992-93.”

Nichols said said his study was prompted by a question from a manufacturer in the Midwest who was shifting his jobs overseas. “My question for you is this,” Nichols recalled, “Who is going to buy my stuff? If we move jobs overseas, who is going to be able to buy our middle class stuff.”

Foreign manufacturers’ health-care costs are lower because they are the beneficiaries of government-run programs that are not primarily employer-financed, he said. Additionally, he noted, many competitor nations enjoy greater health-care efficiency, spending less for better outcomes.

But at least one policy expert said health-care costs were not U.S. manufacturers’ biggest problem in the new global marketplace.

“What really drives international competitiveness is whether the U.S. company has a better product to sell at a better price,” said Joseph Antos, a health-care and retirement policy analyst at the American Enterprise Institute.

“If you are not competitive in the business you are in, then having somebody bail you out in health insurance is not going to help.”