Thank you Chairman Specter and Ranking Member Harkin for inviting me to testify today on the issue of health care and the crisis in manufacturing. Since becoming President of the United Steelworkers of America in 2001, I have made health care a top priority for the union, because the rising cost of health care has contributed to the precipitous decline in the American manufacturing sector.
Since January 2001, the American economy has lost 2.7 million private sector jobs, including more than 2 million manufacturing jobs. Just last month, April 2003, the U.S. economy shed 95,000 manufacturing jobs, causing the national unemployment rate to rise from 5.8 percent to 6.0 percent. The U.S. now employs fewer manufacturing workers that it did in 1961, falling to 16.25 million workers in April 2003 from a high of 21 million in 1979.
While unfair and illegal trade has had the most detrimental impact on American manufacturing, one cannot discount the negative impact of rising health care costs on American manufacturing. The U.S. is the only industrialized nation in the world that does not have some form of state-subsidized or national health care. To put it another way, America is the only industrialized nation on earth that places the overwhelming burden of health care costs squarely on firms and their workers. By embracing a different social and economic paradigm than the rest of the industrialized world, the U.S. has created an artificial comparative advantage for foreign corporations that sell goods in the U.S. market. Additionally, thousands of American firms with significant numbers of retirees have a double burden of providing health care coverage for both their active and retired employees, whereas their industrialized competitors do not carry the financial burden of their retired workers.
The recent trends in the American health care system are disturbing and are wrecking havoc on American manufacturers and their workers. Average health premiums rose by 12.7 percent in 2002, 11.0 percent in 2001 and 8.3 percent in 2000, dramatically increasing the cost of providing health care for employees. In 2002, the average annual premium for a family was $7,954, a major burden for firms contributing significantly to their employees’ health care and competing in global markets. The greatest contributing factor to rising health premiums for workers and retirees is the skyrocketing cost of prescription drugs, increasing around 15 percent annually. The astronomical prices for prescription drugs in America
Over the past 15 years, while the percentage employees contributed for their health care stayed relatively steady, the actual dollar amount paid by workers in employer-sponsored plans rose dramatically because firms passed along rising costs to their employees. According to the Kaiser Family Foundation, in 1988 the average worker’s contribution for an employer-sponsored family health plan was $52 per month. The average monthly contribution level rose to $122 in 1996, $138 in 2000 and $174 in 2002. Despite paying more for their own health care, working families today receive less choice than they did 15 years ago, with almost 95% of Americans in 2002 participating in employer-sponsored HMO, PPO and POS plans instead of conventional health plans.
Recent information indicates that this trend of increasing health contributions for American workers will continue in 2003 and beyond. A Kaiser Family Foundation study found that in 2002, 53 percent of all firms ranked health care as their “greatest cost concern,” and 65 percent of all large firms cited health care as the “greatest cost concern.” 78 percent of firms in the KFF survey said that they would be “very likely” or “somewhat likely” to increase the amount their employees pay for health care in 2003.
In just about every contract negotiation today, the rising cost of health care is a central issue, if not the most pressing or contentious issue. Workers at General Electric (GE) nationwide held a two-day strike in 2002 to oppose the company’s call for major increased worker contributions for health care. In my union’s current negotiations with the Goodyear Rubber and Tire Company, health care is a major issue making it more difficult for both sides to come to an agreement. From the smallest to largest bargaining units, unions and employers are seeing increased health care costs erode away the wages of the workers and the profits of companies. Both sides are losing out in a system where the total necessary contribution for health care rises annually by 10 percent, and those who lose out the most are workers who become uninsured because of rising costs. A disappointing aspect of the American health care system is the growing number of uninsured Americans. While Americans spend the most per capita and in aggregate on health care – more than 14 percent of Gross Domestic Product – a recent Families USA study showed that more than 74.7 million Americans under the age of 65 had no health care insurance at some point during 2001 or 2002. Nearly four in five or 77.9 percent of the 74.7 million uninsured Americans were connected to the workforce. 20.2 million or 27.1% of all uninsured Americans were under the age of 18. The study also found that the likelihood of being uninsured decreases with higher income, but still 15.95 million or 16.5 percent of people with incomes four times the poverty line or greater were uninsured.
For decades the United Steelworkers of America has recognized the right to health care as a core right of every citizen in a democratic nation. The staggering number of uninsured Americans is a national tragedy. But USWA also concurs with other health care advocates that allowing more than 40 million Americans to be uninsured at any one time is an inefficient and illogical public policy.
Exorbitant health care premiums and rising numbers of uninsured Americans are symptoms of a larger problem – that our employer-based health care system is broken. This is particularly the case for firms that are disadvantaged by the health care burden in a global economy. The United States must either repair its employer-based health care system and relieve a considerable disadvantage for American manufacturing firms, or the nation must abandon our current system for a health system similar to Canada’s or other industrialized nations. For fairness, efficiency and the future viability of American manufacturing, the U.S. cannot continue to deny millions of Americans adequate health care and at the same time disadvantage American manufacturing firms with an increasing cost for lesser health services.
In recent years, the USWA has teamed up with the steel industry in urging the U.S. Congress to reduce the retiree health care costs of American steel companies. For several reasons, including reduced capacity and rising productivity, there are around 600,000 steel industry retirees and fewer than 200,000 active steel industry employees. The three to one ratio of retired to active workers added major operating costs for older steel companies. For many of the 35 bankrupt American steel companies with significant retiree health care costs, the cost of retiree health care alone can add $10 to $25 per ton of steel or around five to 10 percent of the market price of a ton of steel. Bethlehem Steel, a company that no longer exists today, spent $224 million or 6 percent of its overall revenue on retiree health care in 2002. An inadequate Medicare system that does not subsidize prescription drugs for America’s seniors exacerbates the problem of rising health care costs for manufacturing firms that supplement Medicare for their retirees.
Although the steel industry and the USWA offered numerous proposals to protect the health care of steelworker retirees and the financial stability of America’s steel producers, more than 200,000 steel retirees have lost their health care benefits due to company liquidations and asset sales. Thousands of families have gone uninsured for months and even years, as a result of these health care terminations. Even when COBRA has been available, families lack insurance since COBRA coverage can cost thousands of dollars a month. More than 50,000 of these retirees are not yet eligible for Medicare, although some of them may qualify for a 65 percent advanceable, refundable Health Coverage Tax Credit (HCTC), created by the Trade Adjustment Assistance Reform Act of 2002. More than 150,000 Medicare-eligible steelworker retirees are now in a similar position as millions of other seniors who must choose between basic necessities and filling their prescriptions.
The rising cost of active and retiree health care for American manufacturers is not just a problem for steel companies. Health care is problem for the aluminum and tire companies where USWA members work hard throughout America. It is a problem in the auto and airline industries. It is a problem and a concern for every firm that produces a good and must compete in the global economy. Furthermore, it is a bankrupt idea to tie a worker’s retiree health care to the financial health of his or her company, especially when our government has created incentives for offshore production that weaken American manufacturers.
On May 12 the Wall Street Journal reported the following health care liabilities for major American companies, which demonstrates the major burden of health care:
• General Motors – 150,000 current employees and 460,000 retirees. $5 billion health care costs in 2002 • Ford Motor – 95,000 current employees and 107,000 retirees. $1.9 b illion health care costs in 2002 • United Airlines – 2,000 current employees. Number of retirees unavailable. $151 million health care costs in 2002. • US Airways – 28,840 current employees and 9,867 retirees. $55 million health care costs in 2002. • U.S. Steel – 20,351 current employees and 88,000 retirees. $212 million health care costs estimated for 2003. • A.K. Steel – 10,300 current employees and 32,000 retirees. $149 million health care costs in 2002.
Last year, I worked with my fellow industrial union presidents of the AFL-CIO to create an Industrial Union Council (IUC) to cooperatively address issues like health care, trade, and labor law reform. Together we are promoting a health care agenda that will reduce the cost of health care for retirees and working Americans. We are promoting an agenda that rewards corporations for providing active and retiree health care, and levels the playing field for American companies competing in global marketplace. Our health care agenda includes the following: • A Medicare prescription drug program that provides a generous benefit to all seniors. The drug program must be within the Medicare system and provide a subsidy to firms that already provide a prescription drug benefit to retired employees. • Increased subsidies for employers who offer comprehensive health care coverage to their employees, especially companies that cover older pre-Medicare-eligible individuals. • Expanded and improved tax credit for trade-affected laid-off workers and pre-Medicare-eligible Pension Benefit Guaranty Corporation recipients.
Attached to my testimony are recent articles from the AFL-CIO’s May edition of America @ Work and a May 12 edition of the Wall Street Journal that featured a USWA member who worked 37 years at LTV Steel in Cleveland before retiring. Chuck Kurilko, who lost his health care when LTV liquidated in 2002, takes 18 prescription medicines to treat his diabetes, heart condition and other health problems. His wife Carolyn takes 8 prescription drugs, and overall the couple spends around $800 to $900 out of pocket every month. Kurilko’s pension was reduced from $2,500 a month to $1,500 a month, and he could not purchase COBRA because it would have cost him $2,864 per month. Kurilko and his wife skip prescriptions and recently have turned to a Canadian service to purchase their prescription drugs.
Kurilko said the following in the AFL-CIO’s America @ Work: “Every other major country in the world has some kind of universal health care plan and helps people buy their medicines. Why this country doesn’t is beyond me.”
I couldn’t agree more with Mr. Kurilko about the need for health care reform in this country and the necessity of protecting the health of hard-working citizens like him.
Thank you again Senators Specter and Harkin for allowing me to share the views of the United Steelworkers of America on the need for health care reform.
