Peering from a small, rain-soaked plywood shack plastered with strike signs, Al Hamovitz offers his advice on how not to control health-care costs.
“Why should they take it from us who can’t afford it?” grumbles Hamovitz, 44, a burly, bald-headed man who had triple-bypass heart surgery last year. The plant he works for in Creighton, Pa., has been shut for three months.
“Why don’t the corporations go after the doctors and hospitals?” he asks.
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Several miles away, in the sleek, downtown Pittsburgh offices of PPG Industries Inc., the nation’s largest flat-glass maker, Russell Crane reflects a distinctly different perspective.
Before global competition intensified, says the PPG human resources director, the company could shoulder nearly all worker health costs, despite high medical inflation. Now, times have changed. “It was a promise made in good faith, but the assumptions are no longer valid,” Crane says bluntly.
With President Clinton expected to unveil his health-reform plan next month, the dispute between PPG and some of its union workers illustrates just how politically and emotionally volatile medical cost control will be.
As the cost of medical care tripled during the 1980s, most of the extra cost was absorbed by employers and such governmental insurance programs as Medicare and Medicaid. And while consumers paid more for health care, the percentage of their share of the costs actually declined, government statistics show.
But today, companies and the government are trying to put more responsibility for cost onto consumer shoulders. That’s being resisted by many Americans who, polls show, think that fraud, abuse and greed by doctors and hospitals are the real villains in medical inflation.
Nowhere is that resistance more fierce than in the American labor movement, which pioneered health benefits during World War II and, in the following years, succeeded in almost totally insulating many workers from worries about medical costs. Changing that presents a political minefield.
Says Uwe Reinhardt, a prominent health-care economist at Princeton University, “The worker is under the illusion that … health care is a free lunch.”
Under pressure from employers, unions have increasingly retreated, accepting greater health-care costs. But the adjustment is hard for some unions, which distrust employers’ long-term motives and still see health-care coverage as a right not to be bargained away.
And so, nearly all of the health-care cost hikes passed onto employees have been shouldered by non-union workers, who account for about 85 percent of the nation’s workers.
In 1990, health care-including the emotional subject of medical benefits for retirees-was the key issue in three of four contract disputes, according to the most recent AFL-CIO figures. By comparison, about one in five strikes in 1986 was related to health issues, according to the Service Employees Union International.
Indeed, in an era in which unions increasingly fear that a walkout will lead to a quick loss of their jobs, the issue of health-care benefits remains one of the few able to command a consensus that a strike is worthwhile.
One reason is that big, unionized companies are the last stronghold of so-called “first-dollar” coverage, in which the employer pays all medical expenses without a co-payment or deductible being charged to the worker.
At PPG, for instance, the Aluminum, Brick and Glass (ABG) Workers International union has protested for years any move to make its members pay any share of the health costs.
But because 15 other PPG unions, as well as unions with competitors, were more flexible, PPG chose to press cost-sharing in negotiations with the ABG this spring. The result: The union’s 1,300 members struck at five plants, including a Mt. Zion, Ill., facility.
PPG officials say they can’t wait for Washington to act. Moreover, they’re eager to apply the same cost-sharing to the union’s 3,000 retirees once the issue is resolved with active workers.
Unions like the ABG are often in a no-win situation. When they resist sharing health-care costs, employers often resort to trimming workers’ wages and benefits.
Erica Groshen, a labor economist with the Federal Reserve Bank in Cleveland, says health costs are the main reason that pay hikes for U.S. workers in the last 18 months have been the flatest in 30 years.
An October 1992 study by the non-partisan Congressional Budget Office agrees. “Although employers initially pay a signficiant portion of employee-provided health insurance, in the long run employers shift most of their costs to workers in the form of lower wages or less-generous non-medical benefits,” the CBO concluded.
It added grimly, “The sharp rise in health costs, together with slower growth in productivity and total compensation, are the main reasons for the weak growth in workers’ real (inflation-adjusted) wages and salaries over the past 20 years.”
The trend of simply having employees pay more for their health benefits, rather than hiding the increase in lower wages, is becoming clear.
In 1985, for example, a worker at a firm with more than 100 employees paid $38 a month in premiums for family coverage. By 1991, the figure had jumped to $97 a month, according to the Bureau of Labor Statistics. And by 1991, 67 percent of workers with health coverage contributed some or all of the premium payment.
In PPG’s case, it wants its ABG members to pay a $10 monthly premium for family coverage by the third year of a new contract. At the same time, PPG wants the union’s workers to pay a $100 deductible for individuals and $300 for families and have a 15 percent cost-sharing of bills.
By comparison, federal figures show a typical cost-sharing of 20 percent of bills and a median $150 deductible for an individual in 1991. (No family figure is available.)
Says PPG’s Crane, “We are running out of moves (to control costs).”
Though PPG’s proposed deductible appears modest, the simple act of eliminating “first-dollar” coverage is what’s important, says William Custer, director of research at the Washington-based Employee Benefit Research Institute. “It gives the insured individual some incentive to be cost-conscious as they purchase health-care services,” Custer says.
PPG, which earned $319 million last year, has actually fared better than most companies in keeping medical costs from eating up profits.
Starting in 1984, the company began to trim health expenses by shifting costs to its non-union workers and undertaking measures such as pushing managed care, which includes use of health maintenance organizatons.
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The firm’s health-care costs for its non-union workers grew a meager 2.9 percent in 1992, 5.5 percent in 1991, and 1.5 percent in 1990, far beneath national averages.
Indeed, PPG’s success shows up most dramatically in the growing gap between its health costs for salaried and union workers. In 1989, the company paid $3,270 for each ABG member and $3,459 for its salaried workers.
Last year, however, the cost per union worker climbed to $5,412 compared with $3,913 per salaried employee.
The showdown over cost-sharing precipitated by that discrepancy has been resolved at three union plants. A fourth, in Ford City, Pa., was closed during the strike.
Harvey Martin, secretary-treasurer of the St. Louis-based union, says of the union’s concessions elsewhere, “We knew we had to absorb some of the costs, but not what PPG wanted.”
But in Creighton, where PPG started 110 years ago, workers continue to hold out-in part, they say, because their base wages are lower than at other plants.
They begrudgingly say they’ll make the same concessions but want their pay put on a par with the other factories.
If the Clinton administration successfully moves the U.S. health-care system to managed competition, such strikes are likely to become relics. Large, competing health plans will vie for workers directly, without company intervention.
“The managements will delegate the agony,” says Princeton’s Reinhardt.
That type of reform, however, lies at least several years in the future, notes researcher Custer.
At the strike shack, there’s no talk of macroeconomic health models or U.S. global competitiveness. Here, medical care, and who pays for it, are gut issues of urgent importance today.
“If you don’t stand up for something, you’ll fall for anything,” declares Hamovitz-who repeats the phrase because he likes the way it sounds.