Health care's high cost: manufacturers sort out solutions to nation's troubled system.

Author:Alpern, Peter B.
Position:Management strategies

One day each month, the employees at Quality Float Works settle down into a chair and while away an hour as a stylist snips and styles their hair. There's free year-round access to a kinesiologist, who outlines individual workout sessions and offers dietary guidance. Even the shoes worn by workers at the Schaumberg, IL-based firm are ergonomically designed to limit the stress on their feet.

Such pampering is hardly the image one conjures of a manufacturing plant. But it's at least one owner's answer to the highly complex question of how to fix the nation's troubled health care system.


"It's very hard to find good people," says Sandy Westlund-Deenihan, president and design engineer of the manufacturer of the metal float products manufacturer. "When you have them, you want to retain them. And benefits are the only way to do that."

Health care costs are far higher in the United States than in any other advanced nation. Those costs have been rising significantly faster than the overall economy or personal incomes for more than 40 years, affecting every facet of the American economy. But nowhere have those costs been felt harder than in the manufacturing sector.

"The manufacturing sector is the most trade-intensive sector of the entire economy," says Jeremy Leonard, an economic consultant for the Manufacturers Alliance/MAPI. "In excess of 80 percent of the value of U.S. exports are manufactured goods. If you think about that, 14 percent of our economy is responsible for 80 percent of our exports. And health care costs play, a huge role in our competitiveness with rival countries."

Manufacturers have been outspoken in the need to address the health care issue for a decade. But how to do it efficiently and affordably, while retaining quality, has never been answered. Certainly a healthy employee base is the easiest route to lower costs. Some are achieving that through wellness programs, while others are investing heavily in on-site health centers.

Nearly every step of the manufacturing process can be categorized, priced, and predicted. The only piece to the puzzle that manufacturing leaders have found unmanageable is health care.

"We have nothing to say about those costs," says Rich Smith, owner of Dugger, IN-based Northside Machine Co., which produces precision parts for military and automotive industries. "It seems like it gets harder every year. It keeps going up by leaps and bounds."

Footing the bill

General Motors pays out more in health care than any other U.S. company: some $5 billion a year. Health care costs add $1,500 to the price of every GM vehicle. Over recent decades, the company negotiated extraordinary retiree health benefits with the United Auto Workers. Even after negotiating back a little relief from the UAW last fall, General Motors still bears costs that its foreign competitors don't.

One of the most common statistics bandied about health care circles is that 1 percent of the beneficiaries eat up 30 percent of the costs. And...

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