NCPA - National Center for Policy Analysis


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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