The American health care system, a patchwork of government-provided benefits overlaid on a voluntary system of private-sector coverage, is a case study in economic inefficiency. Companies that provide health care to employees put themselves at a disadvantage to competitors—domestic and foreign—that don't. And because uninsured people frequently receive care—from the government or hospitals—those who pay for health care are essentially subsidizing those who don't.
In the early 1990s, big business largely opposed Hillary Clinton's ill-conceived effort to establish a government-run universal health insurance plan. But over the past several years—and especially in the past year—large corporations, and the trade groups that speak for them, have been subtly changing their tune.
The first hint of change was Big Business's embrace of the Medicare prescription drug benefit. At the time, Moneybox noted that the Big Three auto companies, with their large unionized workforces and huge numbers of retired employees, would be among the largest beneficiaries of a greater government role in providing health care.
That interest in more government health care is spreading from automakers to other manufacturers. In December, a study released by two business establishment trade groups, the Manufacturers Alliance and the National Association of Manufacturers, found that when it came to structural costs—environmental compliance, taxes, and employee benefits—American companies pay more compared to many foreign competitors. Structural costs add 22.4 percent to the price of doing business in the United States—more than in Canada, Britain, or South Korea. The largest single structural cost borne by the American private sector is health care. The clear implication: Unless society (read: the government) does something to relieve manufacturers of their health-care burden, the sector will suffer further.
The health-reform meme is now colonizing another group of Fortune 500 companies—major hospital chains. This week, HCA, the nation's largest hospital company, unexpectedly lowered earnings estimates for the year by about 10 percent. The main reason: It had to set aside extra cash to deal with swelling numbers of uninsured patients who can't pay their bills. In the first quarter, HCA had to set aside 11.7 percent of its revenues of $5.9 billion for bad debts, up from 8.1 percent the year before. (Here's the report.)
Just as old-line industrial firms with unionized workforces and large numbers of retirees are seeing their balance sheets undermined by the health-care crisis, so too are full-service hospital companies. They're losing market share for lucrative procedures to small, start-up surgical centers. And because they treat the uninsured, they're forced to pay for the health care that employers and the government are not funding.
HCA's report further documents the root of the problem: Health insurance has become decoupled from work. HCA's treatment of the uninsured rose sharply in the first quarter of 2003, when the employment situation was better than it had been in years. And it rose sharply in March, the best month for job creation in several years.
HCA CEO Jack Bovender came close to calling for a single-payer system, though he still couldn't utter the phrase "socialized medicine." "Hospitals have become the ultimate safety net for health care services for the vast majority of America's more than 44 million uninsured," he said. "It is time for all sectors of society, both public and private, health care and non-health care, to participate in solving this societal issue, by providing affordable health insurance for all Americans and more equitably sharing this growing cost to society."
HCA's profit warning points to several other reasons why big business will eventually accept a Hillary-like scheme. First, because it's the largest hospital company—HCA has a market capitalization of about $20 billion—HCA's uninsured problem is Wall Street's problem. Expect more of the analysts, bankers, and credit-rating agencies who have a vested interest in HCA's future to start commenting on the need for a national solution to the health-care crisis. Second, because it was founded by Senate Majority Leader Bill Frist's family, HCA's problems are also Washington's problems.
We're still a long way from the entire Fortune 500 clamoring for Hillarycare. But we're getting closer. Which sector will be the next to clamber onboard the Hillary train? My bet: the airlines.
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