THE UAW'S HEALTH-CARE DREAMS
July 27, 2007
America's former Big Three auto makers are teetering on the brink of bankruptcy. And one big reason for their dire state is their ever-escalating health-care expenses. Every car they produce, they plaintively assert, contains $1,500 in health costs that their Japanese competitors don't face because of their national health care system, says Shikha Dalmia, a senior analyst at the Reason Foundaion.
But do Japanese workers really live in some single-payer, health-care heaven where all their medical needs are covered by general taxpayers with no cost to them? Hardly, says Dalmia:
- The employee plan requires a premium equal to 9.5 percent of a worker's annual income.
- Employees themselves pay about 45 percent of the premiums from their paychecks while their employers the rest.
- This works out to $1,557 for an employee with an annual income of $36,500 -- average wages for a blue-collar Japanese auto worker -- according to figures provided by the Japanese Ministry of Health and Labor Welfare.
But that's not all Japanese workers are on the hook for:
- Working families also face a 30 percent co-pay -- capped at $677 per month for a mid-income family -- for medical expenses such as in-patient and out-patient hospital charges, drugs, doctor's visits and diagnostic tests.
- Because these services are exceedingly cheap (thanks to massive price controls), in practice the average Japanese family pays only about $720 a year in co-pays.
- This adds up to total out-of-pocket annual expenses of about $2,300 for every Japanese household, which is comparable to what active UAW workers pay after the 2005 deal in absolute dollars.
What all of this shows is that the so-called competition gap that Motown auto makers and the United Auto Workers (UAW) complain about is created by the lavish health-care and pension deals they wrote themselves -- not by Japan's nationalized health care system, explains Dalmia.
Source: Shikha Dalmia, "The UAW's Health-Care Dreams," Wall Street Journal, July 27, 2007.
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