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Prescription for a system in crisis.

Here are a set of principles that address cost, access, and quality in reforming the American health care system.

The health care crisis facing our nation is an issue far broader than steel industry concerns. It is an issue affecting both the public and private sector, an issue affecting everyone in some way in our country.

We all must face the fact that our nation's fragmented health care system is simply not working. It is not meeting the needs of the American people by providing affordable, quality, and efficient care to all of our citizens.

Simply put, can our society afford the out-of-control health care costs that are double and triple the rate of inflation year after year? The answer is "no"!

The facts speak for themselves: * Health care costs in 1990 were 12.4% of GNP -- more than $675 billion, or about $2,500 for each and every American. * If current rates cost increases continue, these costs could represent 25% of GNP by the year 2000. * In spite of all this spending, we still have over 30 million people uninsured.

As to the business sector, 1990 was a disaster, with health care costs for private employers increasing an average of 21.6%. Worse yet, smaller companies experienced increases exceeding 30%.

And, finally, getting closer to home for me, the health care cost charge to the hourly payroll in January 1991 was $4.12 per hour for the steel industry. That was 15.4% of total employment costs. A decade earlier, in 1981, the charge was $1.49 per hour, or 7.4% of total employment costs. That is an increase of 176% for health care compared to only a 21% increase in all other employment costs for this 10-year period.

The bottom line is that our industry's health care costs are now two to three times higher than those for the rest of the world's steel industries. For example, in 1990, each active hourly steelworker in Canada supported health care costs for active and retired steelworkers of approximately $3,200 per year. By comparison, each American steelworker is burdened with an annual cost of $7,000 for health care costs covering the same group. This is a staggering difference when you recognize that steelworkers in the United States and Canada have essentially the same benefit package. The Canadian example is not unique, and the difference is even greater in many countries -- and, unfortunately, the gap keeps widening.

Steel is now an international commodity, and we must complete in the global market -- and the global market now includes our domestic market. Already burdened by more stringent environmental regulations than most countries and facing unfair trade practices by virtually all countries, our domestic steel industry is further, and significantly, disadvantaged by runaway health care costs. Especially disturbing is the fact that our customers face the same problem.

Personal concerns

To give a better perspective of my personal concerns, consider these Bethlehem Steel numbers: * We provide comprehensive medical coverage for our 30,000 active employees. * Right or wrong, as a result of labor negotiations many years ago, we also provide similar coverage for 70,000 retirees. * Adding to these numbers the dependents and spouses of these two groups, we presently provide medical coverage for a total of about 170,000 people -- all being carried by a current work force of just 30,000 employees.

Similar numbers apply in varying degrees to others in manufacturing -- another good reason for us to be concerned.

Fully recognizing the problem years ago, Bethlehem and other steel companies have not been standing still. In recent years, we've increased employee cost sharing and implemented extensive managed-care programs to control rising health care costs. Unfortunately, these efforts represent "band-aids" that only momentarily slow down the escalation in cost. They do not -- and cannot -- attack the underlying inflation that is driven by uncontrolled increases in charges by medical providers.

Even though Bethlehem's health care plans include the full range of managed-care programs, we saw our costs rise by 26% in 1990, from $162 million in 1989 to $205 million in 1990. About one-half of the increase was due to increased costs for retirees, and the balance, or an increase of about 13%, was due to escalating medical service costs for all covered personnel.

One final comment on the industry's health care costs. I am concerned about the need to provide access to the 30-plus million Americans who do not now have health insurance. We need to expand access, but we must at the same time control costs and address quality. The principles of cost, access, and quality are interdependent. Failure to address access without addressing cost and quality will not solve our health care crisis, and it could significantly worsen it.

Currently, the private sector does not have a level playing field in health care. Cost shifting has devastated the private sector employers, both large and small. In fact, cost shifting may be the most important factor in the destabilization of the U.S. health care system. Without fundamental reforms -- that benefit all health care payers -- cost shifting can only make matters worse.

Obviously, as we look back and look ahead, we in the steel industry fully recognize that something must be done -- and done now! Joining us is a growing national consensus that the American health care reimbursement and delivery system must be changed.

In short, our health care system is in crisis. We have a systematic problem that requires a systematic solution that, I believe, can only be addressed at the national level. If we are to expand access and control costs, then I'm convinced we must accept the need for a stronger federal role in health care. Our national goal should be to restructure our health care system to ensure a healthy society for all Americans at affordable costs.

A national solution

We at Bethlehem Steel believe that a national solution should be consistent with the following principles addressing cost, access, and quality: 1. Federal cost-containment legislation is needed to ensure that public and private payers pay the same for health care. Regional reimbursement schedules for hospitals and physicians should be established to ensure that all payers pay the same for the same care. Disruptive cost shifting must be eliminated. 2. National spending targets should be established at the federal level to reduce annual increases in costs to an acceptable level. 3. To address the growing problem of the uninsured, companies not providing health care for their employees should be encouraged to do so through the use of tax incentives or penalties. 4. Actions to address the quality of health care should include:

-- the development of practice protocols;

-- technology assessment;

-- quality measurement systems; and

-- continual quality improvement processes in health care. 5. Federal legislative reform is needed to reduce the explosion in costs associated with medical malpractice suits. 6. Medicare must remain as the primary payer for the elderly. 7. Finally, immediate action on reforms is needed now, even though implementation may extend over a period of several years.

The bottom line is that we must have across-the-board reform. Competitive market forces have not worked to control costs and provide access; and band-aid solutions like the multitude of managed-care programs have been only modestly effective, as they do not address the underlying price-driven inflation in health care.

Build a coalition

Bethlehem recognizes the need to work with others who seek fundamental solutions to our national health care crisis. We are working with the National Leadership Coalition for Health Care Reform, the United Steelworkers of America, and other groups to build a coalition for advocating comprehensive restructuring of our health care system to improve quality, increase access, and control costs.

But we need help. Congress must direct its attention to comprehensive health care legislation. A piecemeal approach will not solve the problem, as the problems of cost, access, and quality cannot be addressed separately. Obviously, the status quo in health care is no longer an acceptable alternative. Walter F. Williams is Chairman, President, and Chief Executive Officer of Bethlehem Steel Corp. He joined the company in 1951 in the management training program, was elected President and COO in 1980, and was elected CEO in 1986.
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Title Annotation:Chairman's Agenda: Managing Health Care Costs; US health care system
Author:Williams, Walter F.
Publication:Directors & Boards
Date:Jan 1, 1992
Words:1367
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