Health Reform: Good Business

So far, corporate lobbyists have fought major reform based on two false claims

By Tom Daschle

The biggest frustration during my 26 years in Congress was our failure to address the health cost crisis. Ideological differences certainly made progress difficult. But more destructive were the mixed messages coming from the business community. Even as business leaders at home insisted that the current system was unsustainable, their lobbyists in Washington often blocked change. That gap must be bridged because Congress can make our health system more efficient and equitable only if the power of business is brought to bear.

You need only look at the auto industry for proof that our health-care system is broken. Ford (F ) and General Motors (GM ) pay nearly $1,500 in health-care costs for each vehicle they produce, while BMW pays $450 per car in Germany and Honda $150 in Japan. Unfortunately, every American company faces a similar burden. The Bush Administration reported that U.S. health spending hit a record 16% of gross domestic product in 2004, when businesses spent $448.3 billion on health benefits.

Detroit's continuing market-share declines show how these costs hurt competitiveness. But hefty health-care bills also affect jobs and profits. One in five employers expects to slow hiring in 2006 because of health costs. And health costs are likely to exceed profits at the largest corporations by 2008, according to a McKinsey & Co. analysis.

Relief requires major reform in the way we buy and finance health insurance, making care accessible and affordable to all. But reform will come only when business leaders recognize they have the most to lose from the current system and the most to gain from broad reforms. Unfortunately, so far we have seen a failure of leadership in both our nation's capital and its boardrooms in crafting a solution.

Beltway-based business lobbying groups have fought major reform based on two claims. The first is that government cannot do as well as private industry leaders in addressing the crisis. True, some companies succeed in providing workers with high-quality care at a reasonable price. But that's the exception. More often, small and rural businesses are unable to negotiate reasonable insurance rates, while large companies with aging, less healthy workers face ever-rising premiums. Meanwhile, a handful of large insurers and hospital systems have gained control of the market, reducing competition. The bottom line: Most employers face structural challenges that don't permit them to contain costs.

The second claim is that the "cure will be worse than the disease" because Washington will increase regulation and costs to businesses. This does occasionally occur, but it will almost certainly happen if businesses sit on the sidelines. Indeed, by spending nearly half a trillion dollars a year on health benefits, business has earned a seat at the table to fix the system -- it just needs to take it. Here are three ways it can:

First, business can help banish the myths that block reform. Too many Americans believe they have the best health system on the globe. But the World Health Organization actually ranks the U.S. 37th in world health system performance. No smart investor would accept such disappointing performance.

Second, business leaders can bring real-world experience in areas like disease prevention, achieving economies of scale, and expanding coverage to boost productivity and reduce costs. Such proven solutions, rather than President George W. Bush's "consumer-directed health care," should be the basis for real reform.

Third, business leaders themselves can demand that Washington make health reform a top priority. Despite their own enormous health costs, leading corporations outsource to Washington-based business associations the job of representing them in this area. These groups advocate little real change, since they must find the lowest common denominator among their members. Yet small businesses have different priorities than large businesses, as do those in different industries and regions. So those who benefit from the status quo, even if in the minority, tend to prevail.

That must change. American businesses, like American families, are suffering from today's health cost crisis. So it is time for business leaders, in the best interest of employees, shareholders, and the country, to pave the way for action.

Views expressed in Outside Shot are solely those of contributors.

Tom Daschle, former Senate Minority Leader (D-S.D.), is a Distinguished Senior Fellow at the Center for American Progress and special adviser at Alston & Bird LLP

    Before it's here, it's on the Bloomberg Terminal.