California businesses are breathing sighs of relief.
A legislatively required employee health-care report delivered last week by the state's health and business agencies did not, as business feared, launch a Deukmejian Administration attempt to make all employers help insure their workers. Hours later in Washington, a congressional commission did announce a mandated employer health-care proposal, but early indications are that it will be as peppered with criticism as were draft versions of the Sacramento report.
Relief, however, will be only temporary as employers continue sinking into the quagmire of health finance.
For 11 million private employees in California, health care is part of a day's pay. Employers are buying this care at prices growing about 20% annually. Estimated conservatively, this year's price tag will be $22 billion--nearly 10% of the $280 billion in wages employers will be paying in 1990. At current trends, by the mid-1990s a single year's increase in health-care spending by business will be larger than the total corporate and income taxes they will pay the state.
Most firms not now covering their employees would do so willingly, especially in a tight labor market, if the price were tolerable. In the meantime, these firms' 3 million employees and their dependents continue to get health care catch-as-catch-can at a cost partly shifted to regular paying business customers.
Larger businesses are fighting costs by getting more involved in employee health choices. Southern California Edison has a 160-person staff overseeing a contracted network of doctors and hospitals for its 17,000 employees.
Companies without the clout to fashion a cost-management enclave face ever greater price hikes. Hewlett-Packard's sophisticated health-care management program is successful by most standards. But success means reducing annual cost increases to 15%, a rate still eventually crushing.
Even the largest, most innovative businesses should not expect to hold off the relentless economics of the health system for long. Why? California employers' $22 billion share is one-third of total health spending in the state. The other two-thirds comes mainly from government programs that doctors and hospitals say pay less than a fair price for their services. They compensate by getting part of the difference from the business share.
At the same time, many insurance companies raise premiums when a high-cost illness strikes even one employee in a firm.
These factors, when combined, largely explain the contrast between 20% premium increases and recent 8% annual increases in the consumer price index's cost component for medical care (where health insurance premiums get only a 2.4% weighting alongside the direct cost of medical goods and services).
A system that better spreads the cost of serious illness would help business. Such a proposal was a bright spot of compromise described in the Sacramento report. Ironically, the major insurance firms say the proposal won't work unless every employer is required to participate--the very element that is anathema to business.
Although the impasse deprived Gov. George Deukmejian of a way to meet his twin criteria of providing coverage for the uninsured without unreasonably burdening business, he pledged to continue working for a "consensus on a practical plan."
No matter how coverage is organized, costs won't be curbed without changes in areas such as hospital and clinic capital investing, monitoring of doctors' fees, drug pricing, liability law and patient behavior when care costs nothing out of pocket.
Labor shares business' desire for an end to medical-cost escalation. But this promising fusion is cooled by business' attempt to make its employees co-activists in cost control by requiring them to help pay for their health care. The percentage of employees who struck over health-benefit issues quadrupled during the late 1980s.
California business has two basic options. One is to attack costs directly, going mano a mano with doctors, hospitals, attorneys, insurance companies and, to a degree, with the high expectations of their employees. A victory in any proportion means becoming ever more entwined in the health business.
The other option is to try persuading government to assume more responsibility for health care, an approach that becomes more difficult as it illuminates the cost in tax dollars.
The rodeo comes to mind. Bronc riders at the ending buzzer are helped off their horses by a pickup man. But business is riding a 2,000-pound Brahma. Bull riders, when their ride is finished, have to figure a way to get off all by themselves.