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Wednesday, January 12, 2005

 

Chapter 11

Interesting discussion this morning on WJR 760 am radio with Paul W. Smith...the center for Big Three and all things auto. Several auto writers (ashamed to say I can only remember Paul Eisenstein from CarConnection) were discussing the likelihood that one of the Big 3 could file Chapter 11 due to liabilities, especially around health care and retiree/pension liabilities.

The CEOs (Wagoner, Zetsche and Ford) have all joined ranks to ask for some health care relief from Dubya. The thought is that since the Germans and Japanese don't have huge health care packages around their necks, they have a cost advantage. And the "imports" that have US employees, tend to have younger employees who use less health care/pension. I agree to a point. Health care is a major, major issue...I know, we're a small business and the costs are outrageous, frankly.

If you're not sure about this, think a little about the cost structure of health care. Look around you. When was the last time you heard of an MD getting, "laid off." Or better, getting a "salary reduction." Mmmmm. Get the picture? It's one of the few businesses where the consumer has little, if any say in allowing market forces to select the best provider/treatment. Imagine that all your food was purchased through "food" insurance. Can't shop at Farmer Jack, Hollywood (names of local grocery stores) to find the best fruit, produce, prices etc. Basically, you get what you get...and you pay a deductible. Actually, some no name accountant somewhere decides, on your behalf, where you should go/shouldn't go based on a contract negotiation. No one tells you what's good, what isn't. And you don't shop based on price...you shop based on the "collective" intelligence of some insurance agent.

The system is awash in excess dollars...and I can't blame the MDs, health care professionals and the Pharmaceutical sales reps (who make hundreds of thousands of dollars for "encouraging" MDs to write prescriptions) for taking what's there for the taking. The system needs market forces and checks and balances. The system needs consumers to think before accepting treatment...to hesitate and question...do I really need this. And if I need this, who else can provide the service for less? Unfortunately, the system doesn't reward consumer "shopping." Right now, consumers don't worry about the costs of health care because, "the insurance will pay." Hey...we pay the insurance companies! Then...they pay the Dr! Everytime you get healthcare, the system (that being all of us) have to cover the bill.

Getting back to the Big Three and health care costs, it's only going to get worse. The collision is coming. More retirees are entering the system...the boomers are aging and those of us born after 1960 will see a different health care system than our parents. I think the burden can be minimized if consumers start getting access to the real costs and are forced to see what the Dr. is charging for his/her services vs. the competition.

Yeah, I know...I'm crazy. But that's how market forces control price gouging. Bureaucrats are notoriously bad at directing markets (e.g. Soviet Union, Cuba, etc.) Here's hoping that we can find a way to bring market forces to bear in health care...so the Big Three can be competitive on pension and health care costs.

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