2-03-06, 9:49 am

In his 2006 State of the Union address, Bush once again advocated benefit plans that require workers to pay for benefits that were once fully employer-funded. It is the first time in the history of the United States that the federal government has moved to unravel a benefits system that took union workers half a century to build.

At a time when the personal savings rate stands at its lowest level since the Great Depression, Bush proposed savings-based benefits. He offered no provision to increase job security or wages to allow workers to set aside money to pay for basic benefits.

The tax advantages that Bush pushed in his address help only higher-income employees. And he made no mention of cost control programs to address the soaring price of health care – the core of the health care crisis – or to provide coverage for the uninsured.

With real wages falling for the third consecutive year, promoting benefit plans that depend on a worker’s ability to save is simply a smoke screen for the end of workplace health care and retirement programs.

The benefits won by union workers over the last half century set a floor for the entire working population. Unionized employers were forced to extend the benefits to their supervisory and managerial nonunion employees; nonunion employers were forced to provide benefits to compete with unionized companies.

Employers grew increasingly chaffed under the health care and retirement agreements they had negotiated as health care costs soared and the pension plans required new contributions during the 2000-2003 business downturn.

Deunionization and ongoing high rates of unemployment and job insecurity in both the union and nonunion sectors have provided employers with an opportunity to end the benefit agreements that have underpinned living standards for U.S. workers for decades.

Bush’s election in 2000 and re-election in 2004, as well as the Republican landslides in Congress, ensured that employers would receive the political and legal backing they needed to finally put an end to employer-funded health and retirement plans.

The health savings accounts (HSAs) and defined contribution retirement plans that Bush endorses require that workers take a significant portion of their already thin paychecks to pay for medical care and their retirements.

HSAs, health plans similar to HSAs and defined contribution plans such as 401(k)s have been offered for years. The fact that many workers who have access to these plans do not earn enough to contribute to them is well documented.

By some estimates, half of all workers covered by HSAs do not put money into the accounts. One fourth of all workers covered by 401(k)s do not fund their accounts, while those who do contribute amounts that are too small to provide for a secure retirement.

Bush’s HSAs also fail to address the roots of the health care crisis – the unbridled ability of providers to charge ever-higher prices. Although Bush argues that forcing citizens to pay for more of the costs directly will make them better consumers and eventually lower costs, the evidence indicates that this will not be the outcome.

Instead, individuals in HSAs, who are forced to pay for at least the first $1,050 of medical expenses out of pocket, and families that have to pay at least the first $2,100, will simply forego medical care.

A new study from the Employee Benefits Research Institute found that individuals with these new high-deductible plans were significantly more likely to avoid, skip or delay health care because of costs than were those with more comprehensive health insurance. The study found that this problem is particularly pronounced among those with incomes of less than $50,000 – the majority of American workers.

The high-deductible plans that accompany HSAs allow employers to set an annual out-of pocket cap of up to $5,250 for self-only coverage or $10,500 for family coverage. With the average annual earnings for nonsupervisory private sector workers now at $26,800, these high caps spell disaster.

Bush’s State of the Union address made no mention of the pension crisis now facing millions of workers as employers rush to freeze or terminate their plans. Social Security and other public retirement programs provide less than 40 percent of retirement income for production workers. With the abandonment of pension plans and wages falling, where will the other 60 percent come from?

Bush’s health care and retirement plan endorsements are nothing more than a distraction in the middle of the biggest shift in the terms of employment in the postwar period.

Sufficient evidence exists in other countries to show that the only way to truly control health care costs and provide medical care and retirement security for all citizens is to shift to a single-payer health system and a meaningful public pension plan.



From Labor Research Association