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Detroit’s Socialists

My first trip to the nation’s capital was in 1994, during the announcement of President Clinton’s plans to nationalize health care. “Hillary Care,” as it came to be known, was stopped dead in its tracks by the reasoned opposition of Senator Phil Gramm of Texas, who called into question the basic economics on which the plan was based.

My first trip to the nation’s capital was in 1994, during the announcement of President Clinton’s plans to nationalize health care. “Hillary Care,” as it came to be known, was stopped dead in its tracks by the reasoned opposition of Senator Phil Gramm of Texas, who called into question the basic economics on which the plan was based. Which was easy for the former Democrat turned Republican, as he had taught the “dismal science” at Texas A&M.

I thought of the former senator from Texas recently while reading of the Big Three’s insistence that the government take over their health care burdens. There is nothing quite as repulsive as corporate executives that pay lip service to free markets and free trade when it suits their needs, and who cry like spoiled children when they don’t. It’s even more repulsive when you realize that their inability to reduce a problem back to first principles stands in the way of solving the problem of rising health costs—not just for them, but for all of us.

Asking the government to pay the bill is easy, until you realize one thing: the government doesn’t earn money, it collects it in taxes. Which means Rick, Bill, and Dieter are asking each taxpayer to pay for their employees’ health care. The cost disadvantage they cry about vis-à-vis their Japanese competitors is shifted from approximately 10 million domestic new car buyers to more than 200 million taxpayers. However, tacking a few dollars onto the automatic withholding in each paycheck doesn’t solve the problem. Health care costs will continue to rise because there is nothing to constrain spending.

That’s because covered employees have every incentive to demand gold-plated health care coverage when they’re not paying the bill, and third-parties have no incentive to control payouts until cost pressures on the employer demands their action. Which eventually increases co-pays and decreases coverage. This can’t continue forever. Often, the deteriorating situation creates an outcry for a government solution when one that places responsibility for cost containment and coverage decisions back in consumers’ hands is needed. Because the government’s tools are broad, dull, and clumsily handled, rationing—of the same type that caused blocks-long gas lines in the 1970s as bureaucrats, not demand, decided who got fuel and when—becomes the only answer. You’d think Detroit’s Three Musketeers would know this based on their experiences with their European, Japanese, and Canadian operations.

Speaking of which, these automakers must also realize the costs shifted directly from the car buyer to these national economies have greatly restricted health care choices and access, created incentives to work around the government-imposed system, and caused a drag on the European, Canadian, and Japanese economies. A better answer would push for basic “catastrophic” coverage, place the money now spent in providing health care bene-fits directly into the hands of employees, and give them the opportunity to choose how much they are going to spend. Then the American OEMs might find that health care costs remain flat or fall across the board. It’s what has happened in the direct-pay world of cosmetic surgery, where cosmetic surgeons publish price lists and compete for customers. Then again, shoving the problem off onto the taxpayer is simple, easy, and much less messy.

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