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A perspective on health care and the employer.

IN RECENT YEARS, THERE HAS BEEN much debate over "socialized medicine," FASB 106 and the treatment of the cost impact of retiree medical benefits, along with long-term care, medical care cost containment and other health care issues. These collectively point to the mishmash of activity which sadly serves as the American way to cope with the great exposure our society faces with the array of injury and disease that threatens each of us every day.

It seems ironic that risk managers, who have more practical experience than most people about the costs and mechanics of various components of our medical care system, do not have a higher level of knowledge, concern and curiosity about who is paying the total bill, and how to critique and improve the system without getting trapped in the old methods of thinking which brought us to where we are today. Perhaps this is because too few risk managers have experience with employee benefits.

In my view, cost containment and long-term care are not innovative, effective management devices. Instead, they represent a "band-aid" approach, which at best, can only temporarily outwit a clumsy, but powerful, adversary. The inertia of the American medical establishment doesn't slow down for long; it adjusts to and overcomes the obstacles of piecemeal resistance. Temporary cost-shifting and whiz-bang accounting methods do not change the fact that effective medical care is becoming increasingly costly and unattainable for Americans. America's corporations may be directly footing too much of the bill, thereby adding to the fundamental problems of the system.

Since FASB 106 appears to insist that there is a difference between future unpromised but intended medical costs for retirees, and those for active employees, it is a good time for employers to take a look at all medical costs wholly or partially paid by them. Here is a list:

* Group medical benefits for active employees and their dependents.

--promised (collective bargaining).

--intended, but not promised (salaried).

* Group medical benefits for retired employees and their dependents.

--promised, bargained for.

--intended, not promised.

* Special executive medical coverages.

* Workers' compensation medical benefits.

* Medical portion of automobile and general liability claims.

* Related catastrophe or "stop loss" insurance premiums.

* Medicare premiums (including subsidy plans for older employees and/or retiree premiums).

* Direct and indirect costs of managing, administering and accounting for all of the above.

* Medical part of federal and state taxes:

--Medicaid and welfare medical assistance/clinics.

--Public (non-profit) hospital assistance and contributions.

--Medical benefits for government employees and their dependents--city, country, state and federal.

--Veterans'administration hospital/medical system.

--U.S. military hospital medical system.

Employees may also want to look at their individual contribution to the aforementioned items and consider the premiums which they and others pay for individual private medical insurance policies, such as COBRA coverage, group conversion plans, and personal outlays for coinsurance, deductibles and medical care not covered.

One day, both employers and employees are going to realize they have jointly become the unwitting victims of a semi-conscious conspiracy between government, insurers and the medical care establishment which has sold us on the idea that private employers should pay for most medical benefits and the rest should be picked up by employees, the idle rich and government. As a result, employers and their employees tolerate, if not actively support, a system of providers backloading costs so that group plans and workers' compensation plans pick up the costs of medical care which aren't paid by those who cannot or will not pay for their own care.

Certainly, any system of nationwide medical care is going to have its share of costly and bureaucratic inefficiencies--witness the so-called "system" we have now, run by a combination of disorganized hospital administrators, insurance company administrators, corporation benefits departments, and governmental Medicare and Medicaid units. Anyone who has observed the medical care systems in other industrialized nations, all which have standards of medical education and facilities that are equal or better than our own, has seen that virtually all of them operate national health systems, which certainly have their share of high costs and bureaucracy too. But our system is the most costly, just as bureaucratic and about equal to other industrialized nations in quality of care for those who can pay the price.

Those of us who have long been conditioned to respond with a "knee-jerk" reaction to any suggestion of "socialized medicine" should try to look at national health care as a variation of our national defense establishment. Corporations and employees don't sponsor regiments, air wings and warships to deal with perceived military threats against the welfare of our country. Most Americans realize that as costly and inefficient as the Defense Department is, it is certainly better than the alternative of not having one. The same might be said for a National Health Department. As the Defense Department must control the threats presented by military adversaries, the National Health Department must control the awful threats posed by accident and disease.

As an insurance and risk manager with an extensive background in employee benefits, I have, over many years, watched senior managers of several companies deal with the real medical problems of their organizations about as effectively as they might try walking through a swamp on skis. It is time risk managers unloaded their organizations' direct costs and involvement with group medical benefits (including FASB 106), along with workers' compensation. They should get on with what they do best -- pursuing the business goals of their organizations.

It won't happen overnight, but sooner or later, employers are going to decide they have no business wandering around in this stuff. They will form a group with a name something like, "Businessmen for a Rational National Health System." Then they'll come up with a plan for scrapping all employer-sponsored medical benefits and replacing them with benefits sponsored by a national health department.

Undoubtedly, when businesses pay their taxes, they will notice they are somewhat higher because of the national health system. They will also notice pressure to pay their employees a little more to help them with their personal tax increases. Of course, the funds for those increased payments will come directly from the enormous savings enjoyed as a result of no more workers' compensation medical bills, group medical premiums or self-insured claims, Medicare premiums, consulting and service fees as well as related insurance, administration and other costs. And they will make FASB 106 a dead letter because they won't have any direct liability for medical care.

William T. Howard Jr. is director of risk management for Arch Mineral Corp. in St. Louis, MO.
COPYRIGHT 1991 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Author:Howard, William T., Jr..
Publication:Risk Management
Date:Dec 1, 1991
Previous Article:Managing corporate liabilities under ERISA.
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