Health-Care Cost Issue Unites Unions, Firms

Management and union negotiators used to spend many a sleepless night, sometimes endangering their own health, as they fought furiously over the cost of health care for workers.

Those battles came between the late 1970s and early 1980s, after medical costs began to skyrocket and before a revolution in the health industry began to have its dramatic effect with the advent of large-scale group care and a massive influx of new doctors.

Until about three years ago, the medical profession managed to stand aloof from the fray, watching the angry disputes over who would pay their bills with seeming unconcern.

Representatives of management and labor still often have marathon discussions about health-care costs. But, increasingly, the issue has become a powerful force unifying instead of dividing them.

They are demonstrating a long overdue spirit of cooperation and an acceptance of the fact that management, workers and their unions all have major roles to play in getting adequate health care for workers and their families at costs they can afford.

Most company and union representatives have decided--as they should have done years ago--that they can and should work together to protect their pocketbooks from the providers of health care, whom some of them privately call their common enemy.

Physicians, hospitals and others in the industry had once been widely regarded as epitomizing the concept of rugged individualism. They usually set fees that they themselves decided were appropriate to their own economic desires, which were not negligible.

They left the unpleasant details, such as how to pay increasingly hefty medical and hospital bills, to corporations, to unions and to individuals.

At first, companies, for the most part, obliged by just paying the increased bills. When workers were unionized, unions almost automatically included increased health-care costs as part of their contract proposals. But the medical bills themselves were rarely questioned. After all, doctors were, and are, a much needed and admired group of workers.

As medical costs soared about 20% a year, well above the average inflation rate, insurance premiums kept pace. That was when management began first to quietly balk at the higher costs and then gradually to begin shouting “no!” to union proposals that companies maintain benefits for workers as they had done for years.

In contract talks with management, labor fought company efforts to get workers to shoulder part of the increasing costs--or to accept less medical care. The trigger phrase for many a battle was “maintenance of benefits” (commonly called “MOB”) clauses in union contracts. Before medical costs began rising with such startling speed, companies usually agreed to MOB clauses, paying whatever was needed to maintain health-care benefits for their employees.

But, soon, arguments over the MOBs dominated many labor negotiations as management struggled to modify or even eliminate them from union contracts. Often, strikes resulted from the conflicts.

But even as the union-management fights continued, and as non-union companies tried desperately to meet spiraling medical costs, revolutionary forces were at work within the health-care industry.

Young men and women, often attracted, in part, by the handsome incomes of doctors, entered the medical profession in increasing numbers. Now there is a doctor for every 470 Americans, compared to one for every 700 in 1965. Thus, the competition for customers, or patients, has stiffened.

Entrepreneurs, also attracted by the glowing reports of high profits, entered the heath-care industry, slowly at first and then on a massive scale. Before 1980, there were few alternatives to the traditional “fee for service” system that means companies or individuals pay--directly through self-insured programs or through insurance firms--whatever fees the doctors and hospitals decided they wanted to levy.

But more and more alternative systems were created, such as health maintenance organizations (HMOs), preferred provider organizations (PPOs) or variations of those plans. Such systems provide health care for a fixed fee, or cut-rate fees, and they began competing not only with the ruggedly individualistic doctors in private practice but with each other.

By 1980, there were still only an estimated 5 million Americans using some alternative to the old fee-for-service system. At that point, though, the alternative systems began to proliferate at an astonishing rate. Between July, 1984, and June, 1985, for example, the number of HMOs alone increased by 24.9%, according to Washington-based health-care consultant Ruth Hanft. The HMOs now amount to an $18-billion-a-year business--the kind of money that is bound to attract more and more competitors in the field.

Today, more than 30 million workers and their families, or about 12.5% of the U.S. population, are covered by some alternative to the fee-for-service system. Hanft predicts that, in the next four years or so, 20% or more of the population will be covered by an alternative medical-care program.

The number of HMO and PPO users varies from state to state. About 24% of Californians, for instance, are in such programs, but, in some Southeastern states, fewer than 5% of the people are in them.

Faced with sharp competition and incomes that were no longer rising rapidly, or, in some cases, actually declining, many individual doctors and hospitals began either creating their own fixed-fee health-care programs or trying to get into those already established.

Although management and union leaders are now often working together with significant success to cut or at least hold down increases in medical costs, health-care programs are still not cheap--a reasonably good one can cost about $100 a month per worker and $250 or more for the worker and his or her family. And that does not include vision or dental care.

Health-care cost increases have slowed from the 20%-a-year rate to about 8%--still higher that the overall inflation figure but a dramatic drop.

Doctors do not seem to be suffering unduly, although the rate of their income increases is also slowing down.

The American Medical Assn. estimates that doctors’ mean income for 1984 was more than $108,000 after expenses but before taxes.

Robert Zager, vice president of the New York-based Work in America Institute, notes that almost every state, and many industries, have created special organizations to try to coordinate methods of cutting health-care costs.

Thus, there seems at last to be a clear understanding that decisions on setting the price for health care should not be left to the unrestrained self-interest of those who provide that care.

Some Left Unprotected

Like so many revolutions, the one taking place in the nation’s health-care industry is helping many people but is either not helping or even hurting others.

The increasing number of doctors and the rapidly growing alternatives to the old fee-for-service system has dramatically slowed the rate of increase in health-care costs.

But there remains an increasingly serious problem: More and more Americans have little if any health-care cost protection. The American Medical Assn. estimates that about 51 million people under the age of 65 are either without any insurance or are badly under-insured. Most of those over 65 have some coverage under Medicare.

One problem is that, while medical-care cost increases have slowed significantly, many workers are employed in firms that provide no insurance, and, as individuals, they are not able to afford private medical insurance. Also, the continuing, relatively high level of unemployment--hovering around 7%--means that many jobless workers have no health-care coverage.

Hundreds of thousands of workers who once had such protection under union contracts in auto, steel, rubber and other industries have lost those jobs, and many who have found new jobs are employed in small firms that provide no medical insurance. The latest figures available show that an estimated 6 million workers and their dependents lost their employment-based health insurance in 1983. The increasing number of unprotected Americans just might renew demands for some form of national health insurance that would give all Americans government-sponsored medical insurance similar to that created for the elderly under Medicare in 1966.

The concept of national health insurance has been successfully rebuffed by the medical profession and others who denounce it as “socialized medicine,” just as they labeled Medicare.

The last serious attempt to get national health insurance through Congress was in 1948, when President Harry S. Truman pushed for it.

Before that, there were some small-scale efforts to devise some less ambitious system of health-care delivery different from the fee-for-service system.

In the late 1920s, for instance, organizations such as Los Angeles-based Ross-Loos Medical Group were created, providing almost all medical-care needs to its members in return for a fixed fee.

During World War II, Henry J. Kaiser, head of Kaiser Industries, created Kaiser Permanente, one of the first major health maintenance organizations; it provided medical and hospital care to its members, who were recruited mostly from among Kaiser workers covered by union contracts.

Kaiser today has many competitors, but it is still growing, covering about 5 million members in 15 states.

Then there were some vain efforts to get unions and management to unite their forces to give them a greater voice in setting medical-care standards and fees.

One ambitious but futile try was made in 1966 by Einar Mohn, then head of the Western Conference of Teamsters, who created the California Council for Health Plan Alternatives.

An alternative was needed to the fee-for-service system because, he argued, “our (management and union) trustees of private health-care programs serve mostly as collection and disbursement agents for the doctors and hospitals.”

Mohn’s dream has now been largely realized. Alternatives are available. But Congress still seems far from giving serious consideration to the rational idea of adopting a national health insurance program that would make sure that all Americans have adequate health care.