A recent article in the New York Times illustrates an important problem of the auto industry bailout. By not addressing the cause of high costs in health care coverage the bailout discussion focuses only on finding the money to cover the expenses. The article was focused on General Motors need to restructure its debt obligations. One looming debt is a $10 billion payment next year into the UAW Health Care Trust. “G.M. has the most at stake with the U.A.W. Its future obligations for retiree health care are estimated at $47 billion, and by next year it is required by its contract to contribute more than $10 billion to the trust set up in 2007.” 

The article goes on to state, almost off handedly, that GM has already cut health care benefits to over 100,000 nonunion retirees. That is a quarter of the retired GM workforce.  The Unions for their part are trying to protect the “jewels’” of the UAW contract, one of which is health care for life. 

Any government bailout of the auto industry should focus in part on reducing the cost of health care. It is unconscionable that the federal government would take tax payer’s money to provide assistance to the auto industry and not require a restructuring of the health care system for retired workers. 

Several people have suggested solutions to health care reform related to the auto industry bailout.  One suggestion from David Yen , a bankruptcy attorney, supports giving the unions tax credits tied to the union health care bill rather than direct cash payments. This solution, while right in intent, would not address the problem of rising health care costs, as there would be no incentive for the unions to secure the best value in health care services. As we have seen with Medicare, benefits without incentives to reduce costs inevitably result in higher costs overall. 

Clearly, it is a high probability that if GM goes out of business or is restructured under bankruptcy the health care provision will be eliminated. It would seem in the UAW’s best interest to work the problem from the cost reduction end and provide assurances to GM and the government that their retired members will reduce the health care burden by taking measures to reduce costs. Those measures could include, bargaining for health care services as a group, providing their membership with cost comparisons of service providers, or instituting health improvement measures such as smoking cessation and healthy lifestyle programs for their members.

Without addressing the high cost of health care the auto industry bailout will only be perpetuating the current health care pricing system that ignores transparency, price comparisons, and cost reductions in favor of “business as usual.” This country can no longer afford “business as usual” health care.