Lawmakers To Vote On $15B, Short-Term Financial Assistance Package For Big Three Automakers

Main Category: Health Insurance / Medical Insurance
Also Included In: Seniors / Aging;  Public Health
Article Date: 09 Dec 2008 - 4:00 PDT

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Lawmakers this week likely will vote on a $15 billion financial assistance package for the Big Three automakers, although passage of such legislation remains uncertain, the New York Times reports (Vlasic, New York Times, 12/8).

On Tuesday, officials for the automakers presented to lawmakers individual proposals that included requests for as much as $34 billion in financial assistance, as well as revisions to their obligations to a fund that will provide health benefits to United Auto Workers retirees. Under contracts negotiated last year, the automakers agreed to contribute about $56.5 billion to a voluntary employees' beneficiary association, which UAW will manage. The VEBA, which will take effect in 2010 and remain operational for 80 years, will reduce retiree health benefit liabilities for the automakers by about $100 billion.

In addition, UAW on Wednesday agreed to allow the automakers to delay their contributions to the VEBA and make other concessions to help the companies obtain financial assistance from the federal government (Kaiser Daily Health Policy Report, 12/5).

Senate Banking Committee Chair Chris Dodd (D-Conn.) said that congressional Democrats hope to pass a short-term, $15 billion financial assistance package for the automakers and that any long-term package would require the companies to take significant steps to restructure their operations. The $15 billion would come from a Department of Energy program designed to promote the development of fuel-efficient vehicles, he said.

Sen. Carl Levin (D-Mich.) on "Fox News Sunday" said that lawmakers and the Bush administration have moved "very close to a deal" on a financial assistance package for automakers but added that passage of such legislation is a "much more complicated question." Levin said that the Senate likely will vote on such legislation on Wednesday.

UAW Concessions
UAW President Ron Gettelfinger during an appearance on ABC's "This Week" on Sunday discussed the agreement to allow the automakers to delay their contributions to the VEBA. However, lawmakers have asked UAW to accept smaller contributions or take some of the payments in stock rather than cash -- "concessions the union hasn't been willing to make," the Detroit News reports (Shepardson/Trowbridge, Detroit News, 12/7).

Detroit Hospitals Prepare for Decline in Revenue
Detroit area hospitals are "bracing for major changes and deep work force cuts" following restructuring plans by the Big Three automakers, the News reports. According to the News, layoffs by automakers and plant closings could reduce the number of people seeking care from area hospitals, "which have long thrived" because of the Big Three's generous health benefits. The reduction in revenue could force hospitals to implement additional efficiency measures, as well as reduce staff and spending on new medical technologies and close underused facilities.

In addition, automaker layoffs could prompt an enrollment increase in government-sponsored health coverage programs -- such as Medicare and Medicaid, which pay less than commercial insurers -- and lead to a rise in uncompensated care at the hospitals. According to Smith, a public health professor at the University of Michigan, such a scenario "would require a very different health system than we have now."

Bob Hoban, chief strategy officer for St. John Health, said, "You could have a scenario where there is a fair amount of surplus in the industry and that could lead to some facilities closing," adding, "Whether or not we get into a situation of that magnitude, it's still too early to tell." Some hospitals are considering greater collaboration to reduce overlapping services and spread out the financial burden of an increase in the number of uninsured patients, according to Smith. He said, "We may end up with a more efficient system and more cooperation so there isn't so much competition." He added that hospitals also will have to reevaluate any long-term building plans (Rogers, Detroit News, 12/5).

In related news, Detroit's no-cost health clinics already have experienced an increase in patients because of the current economic recession, the News reports. As a result of the increase, people seeking care at the clinics can wait weeks for an appointment or for several hours as a walk-in (Stolarz, Detroit News, 12/5).

Editorials

• Philadelphia Inquirer: UAW "is showing it understands the seriousness of the crisis" for the automakers with the agreement to allow the companies to delay their contributions to the VEBA and make other concessions, but those steps "probably don't go far enough to ensure the companies' return to profitability," an Inquirer editorial states. The editorial concludes that lawmakers must require "stringent goals for more fuel-efficient cars and leaner operations as conditions for this bailout" (Philadelphia Inquirer, 12/7).
  
  
• Philadelphia Inquirer: The agreement by UAW to allow the automakers to delay their contributions to the VEBA and make other concessions makes the financial assistance package a "reasonable risk to take," an Inquirer editorial states. However, "American cars will never be able to compete in the global marketplace until U.S. automakers no longer are burdened with the costs of health care for their current and retired workers, which right now add about $2,000 to the cost of each car" (Philadelphia Inquirer, 12/8).
  
  
• Springfield Republican: UAW "at long last" is "stepping up to offer some concessions intended to demonstrate that the automakers -- from the top to the bottom -- are serious about changing their ways," a Republican editorial states. The agreement by UAW to allow the automakers to delay their contributions to the VEBA and make other concessions "will not in itself secure federal funds for the Big Three, but it marks a real and surprisingly big step," the editorial states (Springfield Republican, 12/5).
  
  
• Washington Post: UAW, in addition to the agreement to allow the automakers to delay their contributions to the VEBA and suspend a jobs bank program, must "agree to bring wages and benefits of its active members into line with those of nonunion workers at foreign-owned plants, immediately," to prevent bankruptcy at GM, according to a Post editorial. "If GM, the union and the bondholders don't get it done by March 31, then the government would get its money back and the company would go bankrupt," the editorial states (Washington Post, 12/7).
  

Broadcast Coverage
ABC's "This Week" on Sunday included comments from Gettelfinger about a possible financial assistance package for the automakers (Stephanopoulos, "This Week," ABC, 12/7).

"Fox News Sunday" on Sunday included comments from Levin and Sen. Richard Shelby (R-Ala.) about such legislation ("Fox News Sunday," Fox News, 12/7).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

© 2008 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

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