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Jan
14

Health care costs reaching critical stage

In a rather stunning announcement, GM announced it’s earnings in 2005 would suffer a significant decline, due in large part to (free subscription required) GM’s increasing health care costs.
As a global competitor, GM is hampered by the US health care payment system, which is largely employer-driven. This has a direct, and very signficant, impact on its competitiveness. To quote the Times:
” G.M. is the largest automaker in the world by volume, but its profits are dwarfed by those of foreign competitors like Toyota and Nissan. The company is hampered on numerous fronts, including the obligation to pay health care and pension benefits to about a half million American retirees and their families. Competitors based in nations with socialized medical systems do not have similar retiree health care burdens. ”
By way of comparison, GM’s annual health care budget of approximately $73 BILLION is equivalent to about half of the UK’s National Health Service’s annual expenditures.
The silver lining in this funnel cloud is easily discerned – when companies the size and stature of GM are finding their earnings dragged down, and dragged down significantly, by health care costs, we are getting closer to the point where we must address our national health care cost crisis.
Health care is rapidly becoming an issue of global competitiveness.


Joe Paduda is the principal of Health Strategy Associates

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A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.

 

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