|The Facts||The Fallout|
What's the Problem?
General Motors, like other U.S. automakers and many other corporations, agreed decades ago to guarantee health care coverage for employees and retirees.
Like Social Security, most employer-sponsored health plans are set up so a larger number of employees can support a smaller number of retirees.
As the American workforce ages and the cost of funding employee health care climbs, companies are looking for alternatives.
What’s the Deal?
What’s a VEBA?
Four Big Concerns
Underfunding: Some UAW members worry that $35 billion is insufficient to sustain the VEBA and does not anticipate a continued upward spiral in health care costs.
Caterpillar Debacle: A 1998 contract between the UAW and Caterpillar Inc. included a VEBA trust established with $32.3 million the union set aside in special training and overtime accounts. Six years later, the VEBA was bankrupt, leaving 20,000 retirees to pay much of their medical costs.
Premium Surge: UAW retirees pay premiums of $10 a month for individuals and $21 a month for families, very low compared with national averages. Some benefits analysts say those numbers will have to increase.
Transparency: Anti-union activists question whether anyone, including the Securities and Exchange Commission, will be able to adequately monitor the billions of dollars at stake.
The Impact on Medicaid
"It could cripple the program" in Michigan, state Medicaid Director Paul Reinhart told the Detroit News.Why? The federal government credits a VEBA as per-capita income. The higher a state's income, the lower the federal Medicaid reimbursement rate.
States Alarmed: Michigan could lose $360 million a year in federal Medicaid funds over three years if the UAW reaches agreements with Ford and Chrysler similar to the one with GM. Other states would face Medicaid funding cuts as well if employers set up VEBAs for their own retirees.
Hospital's Pain: Cutbacks in Medicaid would have obvious implications for hospitals with significant percentages of low-income patients. People who can't afford primary care go to emergency departments for nonemergent health issues or they forgo care altogether until they are sicker and need more intensive treatment. Hospitals can expect their proportion of charity care to climb.
New Health Care Muscle
|Sources: Associated Press, Bureau of Labor Statistics, Chicago Tribune, CNNMoney.com, Detroit Free Press, Detroit News, Health Research & Educational Trust, Kaiser Family Foundation, Labor News, The New York Times, Oakland (Calif.) Press, Rockford (Ill.) Register Star, The Tennessean, U.S. Census Bureau, The Wall Street Journal, The Washington Post and H&HN research, 2007.|