FROM COMPANY TOWN TO WELFARE MINI-STATE

Anderson, Indiana Now Survives on General Motors “Welfare”

The Author is from Indiana and frequently returns to Indiana. So he follows news of his hometown and home state closely. An article in today’s New York Times about the receding fortunes of Anderson, Indiana, entitled “A Company Town Relies on G.M. Long After Plants Have Closed”[i], foreshadows economic problems that will soon engulf many American communities-the decline of rich retiree benefits and the prospect of aging baby boomers with less to live on. (But the Author will let someone else worry about that.)

When the Author was a kid, Anderson High Schools had powerful basketball teams that frequently appeared in the Indiana State High School Basketball Tournament. Interstate 69 also skirts the edge of Anderson and is a frequent stop on the road between Fort Wayne and South Bend.

Anderson now longer has any G.M. plants. The generously paying UAW jobs are gone. But G.M. revenue still supports Anderson:

Now there is not a single G.M. plant left, and just two parts plants that G.M. once owned still survive. Anderson, about 50 miles northeast of Indianapolis, had 70,000 people in 1970 and now has fewer than 58,000.

But in many ways, Anderson is still just as dependent on G.M. as it once was. Only now, rather than being dependent on General Motors, the corporation, it is dependent on General Motors, the welfare state.

The company's generous medical plans, prescription drug coverage, dental care and pension checks are a lifeline for the 10,000 G.M. retirees and an untold number of surviving spouses and other family members who still live in the Anderson area

I HAVE A SNIFLE. GIVE ME AN MRI.

Obscenely high, and inexorably escalating healthcare costs, are the greatest threat to American workers and the American economy. The US throws about 16% of its GDP into the maw that is American healthcare, a healthcare system that leaves about 50 million Americans underinsured. Every other western democracy pays about one-half less on healthcare and has universal healthcare coverage. And higher measures of health status of their citizens.

G.M stopped offering retiree healthcare coverage to current and future retirees 13 years ago. But its legacy of rich benefits will probably drive the company into bankruptcy.

Earlier this month, G.M.'s chief executive, Rick Wagoner, expressed sympathy for those faced with paying more for their coverage. "When these benefits were conceived decades ago, no one could have foreseen the explosive cost inflation that we have been experiencing in recent years," Mr. Wagoner said.

G.M. CEO Wagoner is correct in stating that when these benefits were offered in the 1950s and 1960s, no one saw the explosive rise in healthcare costs. But ironically, the generosity of the G.M., and of some government entities, helped to precipitate the high costs that are now overwhelming them.

UAW healthcare benefit plans are the “Lincolns” and “Cadillacs” (pun intended) of employee benefit plans. Obscenely generous fee-for-service plans with no disincentives to employee overuse. Providers kept raising fees and performing unnecessary services. It was a trough and the medical community put in all four feet and snout. And by the time that these healthcare costs were threatening profitability, it was too late to shut off the succubus.

AMERICAN HEALTHCARE IN CRISIS? YEAH, WHAT’S NEW?

The Author was reared in healthcare economics. But while he was promoting cost cutting and expanded access, he watched the provider community, the trial lawyers, the pharmaceutical companies, and some elements of the payor community, spurn any attempts at cost cutting to preserve their own share of the booty. He spent the 1990s writing and promoting reform. His work was published in national journals and large city newspapers. National policy makers had access to his work.

He did all this while working as a full-time healthcare attorney and without a tenured job at a major university or research institute behind him. A fat lot of good it did. Bitter, a little. Sick of healthcare economics? Damn straight.

WE NEVER SAY ”I TOLD YOU SO” IN THE DESERT OF THE REAL. BUT IT IS REGRETTABLE THAT WE SO OFTEN HAVE THE OPPORTUNITY TO DO SO!

[i] www.nytimes.com