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Testimony of Leo W. Gerard
International President
United Steelworkers
before the
Commission on the Future of Health Care in Canada
Sudbury, Ontario
April 11, 2002
Introduction
Thank you very much, Mr. Commissioner. My name is Leo Gerard. I am the International President of the United Steelworkers. I appreciate the opportunity to speak to you on behalf of our members regarding the challenges facing the Canadian Health Care System and the possible solutions.
Although I have lived in the United States for the last nine years, I am a Canadian. I was born in Sudbury, Ontario, and began my work and union career right here at Inco Ltd.'s smelter as a member of USW Local 6500.
As a Canadian labor leader of an International Union with members in both Canada and the United States, I am in a unique position to comment on the challenge facing the Commission and our nation. Our Union was among those that fought for the establishment of the Canada Health Act and we have fought since to protect and expand on its promise. As Secretary-Treasurer and now as President, I have seen the strengths and the shortcomings of the for-profit, private sector health care model that some advocate for Canada, a system that, among other things, denies health care coverage to some 38 million Americans -- and the number is growing.
The United Steelworkers
The United Steelworkers represents about 1.2 million active and retired employees, including 190,000 active members across Canada and over 450,000 in the United States. We are one of the largest private-sector Unions in Canada. Although we have about 65,000 workers in the steel and mining industries in Canada, we represent workers in every sector of the economy, including 3,000 health care workers, among them nursing home workers in Ontario and Western Canada and home care workers in the Maritime Provinces.
We bargain health care benefits in both countries. In Canada, our labor agreements contain employer-provided coverage for extended health care services and other benefits not covered by federal, provincial or municipal plans. In the United States, we bargain to secure health care coverage through the private sector health care system. And we bargain to improve the compensation and working conditions of 20,000 health care workers in both countries.
General Statement of USW's Position
The United Steelworkers has consistently spoken out and fought for universal publicly financed health care. We fought along side of Tommy Douglas to introduce the first provincial hospital insurance program in Saskatchewan in 1947. We opposed doctors, hospital associations, insurance companies and big business to help create a national hospital insurance program in 1957. We cheered when Saskatchewan's CCF government introduced North America's first public medicare program in 1962. And we supported the Hall Commission's call for a universal and comprehensive national health insurance program in 1965.
In 1979, we joined with the Canadian Labour Congress, churches, health care professionals, women, and consumers to call for the prohibition of "extra-billing" and for the adoption of the five core principles that in 1984 became the Canada Health Act.
Of course, those five core principles are: (1) public, non-profit administration, (2) comprehensiveness, (3) universality, (4) portability between provinces and territories, and (5) accessibility.
We are proud of that legacy. We remain deeply committed to the protection and expansion of the Canada Health Act and the principles of a publicly funded and administered health care system with universal access and comprehensive benefits for all Canadians. We consider health care a fundamental human right and hold that any system that denies its citizens this right is denying the entire society a necessary measure of social justice.
Today, we call for the Commission to keep faith with the Canadian people, and with the intent and spirit of the Canada Health Act, and to recommend the expansion of covered services to ensure that all Canadians have equitable access to health care on the basis of need -- not on the basis of their bank balance. By doing so we will ensure that social justice is not confined to a system of commercial exchange.
Until all Canadians have equal access to pharmacare, home care and long-term care services, the promise of the Canada Health Act will remain hollow and incomplete.
I am here in support of the recommendations of our Union's Canadian leadership and our retiree organization, SOAR. The Canadian Labour Congress has also submitted a report to the Commission with which we concur.
Lawrence McBrearty, our Canadian National Director, will testify before your Commission during the week of May 20th about the Union's specific policy recommendations. Several of our SOAR Chapters have also submitted eloquent testimony on the need for health care benefits. I will not attempt to duplicate their message, but do wish to urge the Committee and staff pay special attention to their words.
My purpose today is to relay my experience as a Union leader who has worked with employers in both Canada and the U.S. and has seen the inequities of the private, for-profit insurance market in the Unites States and how private market initiatives will harm private employers, their employees and other Canadians.
The Future of Medicare
The Canada Health Care system has been needlessly put under stress due to federal and provincial budget cuts, the de-listing of health care services and the weakening commitment of some to the fundamental principles of the Canada Health Act.
But, Medicare is not unsustainable, as some have charged. Nor is it in crisis.
Canada spends less than many other OECD nations on healthcare services. Canadians are healthier than at any time in history. Life expectancy at birth has reached 75.8 years for males and 81.4 years for females. Infant mortality has fallen to 5.5 per 1,000 births from 18.8 in 1970. And our standard of living is higher than at any time in history. These are facts of which we can all be proud.
The Canadian health care system is not perfect. But neither is it plagued with the millions of uninsured citizens as is its counterpart in the U.S. Nor are citizens here being subjected to the breakneck pace of rising prescription drug costs being suffered by citizens in the U.S.
Simply put, the Canadian system may be imperfect. But the American system is impossible.
The Canadian health care system can be improved for all Canadians. Some have rightfully raised concerns that waiting times for services such as radiology, chemotherapy and inpatient surgery have risen and are too long. No Canadian should have to wait long periods for admission to a hospital in an emergency or for cancer treatments. These are warning signs of a system under stress - with a demand for services that outstrips available resources and staffing. Steps should be taken to address these issues.
We applaud your efforts to help reform the health care system and help protect the health of Canadians for generations to come.
I would now like to turn to address a number of the specific recommendations that parties have made to reform Medicare.
The Advocates of Increased Privatization and User Fees are Wrong and They Know It
Alberta Premier Ralph Klein and his Advisory Council on Health have recently released a series of recommendations that are as misguided as they are disturbing.
The central point of the Premier and his advisory Council is that Albertans -- and indeed all Canadians -- can no longer afford Medicare and must make do with less.
We disagree. The truth is that Canada cannot afford to be without Medicare.
The Consequences of Benefit Cutbacks
The first suggestion made by Premier Klein and others is that we must abandon our commitment to comprehensive coverage of hospital and physician services across Canada. They assert that we must make choices about what services should be covered and what services are not. By reducing insured services, they argue, it will be possible to lower provincial health care costs and retain universal access.
Unfortunately, while it may be possible to solve a province's budget problems by reducing insured services, that "solution" will cause immediate, substantial problems for the majority of Canadians. Since the need for health care will remain unchanged, cutbacks in insured services will either transfer the payment and provision of those services from the public sector to a for-profit private sector -- or the need will go unmet.
The erosion of public insurance coverage will force individual Canadians to rely increasingly on employer-provided coverage or individually purchased private sector insurance. While many employers will provide their employees with supplementary coverage and Labour Unions will undoubtedly be successful in bargaining supplementary insurance with other employers, many employers will refuse to provide insurance coverage.
This dynamic is already having a corrosive effect on bargaining in the States, where employers routinely beggar the need for increased wages with demands for decreased benefits.
And as someone who has been fighting the unfair trading practices that are destroying the American steel industry, I find these proposals for changing to the Canadian system particularly ironic, since the burdensome cost of the private sector covering health care benefits is at the heart of what is undermining the competitive standing of the American steel industry .
The practical reality is that Canadian producers will resist assuming these costs, with the likely result that demanding them will lead to either labor strife or loss of benefits -- or both. What will happen then?
Canadians without employer-provided supplementary insurance will be forced to find and pay for private insurance. This may not be difficult for the wealthy or those in good health, however, Canadians that are older, in poorer health or in low-income jobs will find it nearly impossible to obtain adequate and affordable insurance.
This consequence is clear from our experience in the United States: in the U.S. many workers in jobs with low pay and high turnover don't receive employer-provided supplementary insurance and are unable to afford individual health insurance in the commercial market.
Were this system to be adopted here, Canadians would experience gaps in coverage for basic health services for the first time in 30 years.
Moreover, those employees who are fortunate enough to have employer-provided supplementary insurance will be increasingly reliant for their basic health care coverage, not on the provincial or federal government, but on their employers.
This reliance will expose millions of Canadians to a new risk: the loss of health care benefits when their current or former employer goes out of business. According to Statistics Canada, there were 10,405 commercial business bankruptcies in Canada in 2001. The proposed cutbacks in insured service would mean that when a business closes, not only would its employees lose their jobs, but would also lose their health care coverage.
Sadly, our Union has too much experience with bankruptcies and plant shutdowns. During the last two years, our Union has seen sixteen steel companies cease operations in the United States and halt the payment of healthcare benefits. Nearly 20,000 active employees have lost their jobs and active health care benefits and over 100,000 retired employees, surviving spouses and their dependents have lost their health care benefits.
The largest of these companies was LTV Steel, which had over 10,000 employees and 85,000 retirees, surviving spouses and their dependents. LTV Steel ceased operations in December 2001 and cut off health care benefits to salaried employees on February 28th and for USW-represented employees on March 31st. This happens to thousands of retirees throughout the United States each year.
Cutbacks in benefits are not the answer for Canada. We do not want to be a country that solves a budget crisis by creating a new crisis for working families and seniors. Balance sheets don't bleed, suffer and die for want of care -- only human beings.
The Unintended Consequences of Privatization
The second suggestion by Premier Klein and his Advisory Council is that the introduction of private, for-profit health care providers would give Canadians more health care "choices," improve access and reduce costs. They argue that the entrepreneurial spirit and discipline of the market would drive down costs and create a "customer first" focus.
They are wrong here too. The "benefits" claimed by the supporters of privatization are designed to sound appealing. After all, who could object to greater consumer choice? But, the real choice they offer will benefit very few at the expense of the principles of the Canada Health Act and the integrity of the Canadian health care system.
I'm reminded of Zola's comment that "the rich and poor have an equal right to starve beneath a bridge." Likewise, the wealthy and the working classes will have "an equal right" to "choose" quality care. In reality, it doesn't work that way.
Indeed, the health care markeplace is a particularly cruel place for suffering people to find comfort when they're hort on expendable income..
The only individuals who will experience greater choice under privatization will be the wealthy who will be able to afford the most comprehensive available private sector health care insurance. Working people and seniors will either pay more for their health insurance or be unable to afford it. The result: will be that fewer people will in fact have health insurance and those that do will pay more and receive less.
Market Segmentation, Price Discrimination and Barriers to Access
The greatest strength of the Canadian Health Care System is that the risk and costs of health care are spread among all Canadians. Everyone shares the risk of incurring health care costs and this makes health insurance more affordable for everyone.
Increased privatization would change all that. The introduction of private sector "choice" would come at the expense of universal access and comprehensive benefits. By allowing individuals to choose benefits other than the federal or provincial Medicare plan, you break up the Medicare's broad risk pool.
Canadians who were previously equal before man and God will be suddenly segmented into "good' risks and "bad" risks. With the "bad risks" guilty of the unforgiveable sin of having less to expend than the virtuous "good risks."
Since the goal of private sector insurers is to make a profit -- not to provide universal access and comprehensive benefits -- commercial insurance companies will try to offer insurance only to individuals or groups that are "good" risks.
Individuals that are deemed "bad" risks, will be forced to pay much more for health care insurance than they pay today or denied health insurance entirely, based on the expected claims of the particular group and the company's desired profit margin. Some will be unable to afford the commercial market premiums and will lose access to health care benefits as a result.
Other Canadians will be denied access more directly. Since they are in the business to make a profit, commercial insurance companies will attempt to avoid the situation where individuals who have a greater than average likelihood of incurring health care expenses -- and thus need insurance more than the average person -- attempt to obtain coverage. This phenomenon is referred to as "adverse selection," and can result in insurers experiencing substantial financial losses.
To control for this, insurers will exclude individuals with greater likelihood of experiencing medical expenses from obtaining coverage by using sophisticated "underwriting" methods to select and classify insurance applicants, such as waiting periods, preexisting conditions exclusions and benefit limitations.
Individuals will be forced to submit evidence that they are free of serious medical conditions or genetically transmitted diseases. Those that cannot will be forced to pay much higher premiums for private sector health care coverage or be unable to obtain insurance at all.
Thus, the real competition in the U.S. private sector insurance market has been to avoid having to insure those with the highest risk, but the greatest need for coverage.
The market segmentation and price increases brought about by greater privatization will also impact employers. Small employers are generally less successful in negotiating favorable arrangements with private sector providers, carriers and administrators. This will put them at a competitive disadvantage or result in the loss of insurance for their employees.
Privatization, Employer Provided Coverage and the Uninsured in Coverage in the United States
One needs only to look to the experience in the United States to see the consequences of privatization of health care delivery. The United States spends more on health care, and at 56%, a greater share of which is privately funded, than any other country in the world.
Only 24% of the United States population receive public health insurance. Public insurance programs cover people over the age of 65 and those with long-term disabilities, low-income families with children, and the military.
The remainder of the population must obtain coverage through the private sector. The majority of people, at 64%, have some form of coverage through an employer (in other words, their employer or the employer of a family member).
However, employer-provided health insurance is not uniformly available. Not all firms provide health insurance, and even among those that do, not all employees are covered.
Employees at Small Firms Have Lower Rates of Employer Coverage
Employees in small firms have much lower rates of employer provided coverage than other workers. Overall only 57%n workers between the ages of 18 and 64 have employer provided health insurance. Although 70% of those working at firms with 1,000 or more employees have employer-provided health insurance, only 56% of employees at firms with 25 to 99 employees have employer-provided health insurance and only 32% of employees at firms with less than 25 employees have employer-provided health insurance.
Low Wage Workers Have Lower Rates of Employer Coverage
Firms with many low-wage employees are the least likely to provide health insurance, as are firms with high employee turnover.
According to data from the Kaiser Family Foundation, low-wage workers have much lower rates of employer-provided coverage than other workers do. In its 2001 survey, it found that only 55% of employees in low wage firms are covered through their own employer, compared to 71% of workers in high-wage firms.
It also concluded that among the reasons that worker at low-wage firms had lower coverage rates was that they were required to pay a greater share of the premium, an average of 38%, compared to an average 25% share of the premium for employees at high-wage firms.
Most low-wage workers find it difficult to pay for the basic costs of living, let alone afford commercial market health insurance premiums.
Part-Time and Temporary Workers Rarely Have Employer Coverage
Part-time and temporary workers are rarely offered health insurance by their employers. A survey by the Kaiser Family Foundation found that only 49% of part-time workers and just 6% of temporary employees were offered health insurance.
Employer Coverage for Retiree Health Insurance
The number of firms that provide employees with health insurance after retirement has also declined. The Kaiser Family Foundation found that only 34% of large firms offered employees retiree coverage.
Private Insurance Market in the United States and the Uninsured
Without public or employer-provided health insurance, individuals must purchase insurance through the private insurance market or go without coverage. However, affordable commercial health insurance is hard to find.
The majority of people in United States without public or employer-provided health insurance are uninsured. According to the U.S. Census Bureau, 39 million people or 14% of the U.S. population were without health insurance during the entire year 2000. Only 8%ns had some form of health insurance through the commercial insurance market or some other group.
Individual health insurance in the commercial market is estimated to cost over 50% more than the cost for equivalent group insurance through a large employer. This makes individual health insurance nearly impossible to afford for those who can least afford unexpected health care expenses: low-wage workers and seniors.
A recent study, the Kaiser Family Foundation concluded that comprehensive health coverage is often not available even to healthy consumers, that coverage for maternity, mental health and pharmacare befits was very limited, and that the application process makes it difficult for consumers to comparison shop.
Consequences of Going Without Health Insurance
Without employer provided coverage and with individual insurance unaffordable or unavailable, most people go without health insurance. This lack of coverage has serious consequences for the individuals and the health care system, even in the short run. According to a study by the Commonwealth Fund, over two-thirds of short-term uninsured adults went without needed care or had difficulties paying medical bills.
Furthermore, 27% of the uninsured and 31% of adults with a recent period without health insurance reported problems with medical bills so severe that they had to change their way of life significantly:
· 70% had to use all or most of their savings,
· 66% had to borrow from a friend or relative,
· 25% took out a loan or mortgage on their home, and
· 50% had problems paying for basic necessities such as food or rent.
Uninsured individuals indirectly pass their health care costs on to the U.S. health care system. Community hospitals in the United States provide services to low-income or uninsured patients are forced to pass those costs on to their patients who have insurance coverage. As a result, everyone's group and individual premiums rise. The burden on community hospitals continues to grow as fewer and fewer for-profit hospitals and medical groups will treat indigent or uninsured patients.
The situation is further worsened by the fact that the uninsured are often forced to wait until medical problems become critical before they seek treatment and are then forced to obtain care through the hospital emergency room, the least-cost effective and efficient way to receive or provide medical services.
Privatization is Not the Choice for Canadians
Certainly, this is not what we want for Canadians. Privatization will not improve choice or lower costs. Working people and seniors will pay more for their health insurance or be unable to afford it. In the end, a substantial number of people will go without health insurance at all -- and those who can afford it will pay more and receive less.
For-Profit Health Care Delivery and Waste, Fraud and Advertising
Some people, including Premier Klein and his Advisory Council, suggest that for-profit health care providers and the discipline of the market will drive down costs and improve access and reduce costs.
Unfortunately, there is no evidence that the market-based, for-profit health care model controls cost or provides services more efficiently than the public sector. For-profit companies constitute a substantial share of health care providers in the United States. Yet, the U.S. has higher health care expenditures as a percent of GDP and infant mortality than Canada and other OECD countries. If for-profit health care delivery were so cost-efficient and effective, the United States would not have its current level of health care inflation or spending.
Instead, the profit motive adds layers of profit margins and expenses (such as administrative, overhead and advertising costs). According to data gathered by the Kaiser Family Foundation, major pharmaceutical manufacturers spent more than twice as much on marketing and administrative activities than on research and development (34% versus 14%). Moreover, profits also exceeded research and development expenses (24% versus 14%).
Pharmaceutical manufacturers spent $16 billion on promotional activities in 2000, including $2.5 billion in direct-to-consumer advertising.
These costs - like all costs in a for-profit system - are passed on to the consumers, and will only serve to place basic health care out of the reach of many working families and seniors.
Indeed, the introduction of for-profit health providers will increase fraud and waste and result in higher administrative expenses to the Canadian Health Care System. These consequences will only serve to increase costs and weaken public confidence.
That is exactly what has happened in the United States, where there is strong evidence that public confidence in the health care system is low, and getting lower. For example, The New York Times recently reported that one of the largest suppliers of hospital buying groups had a financial interest in its supplier of injectable generic drugs. Federal authorities are investigating whether the company conspired to keep a cheaper generic drug off the market. With stories like this, it is not surprising that for-profit hospitals and HMOs place money for their executives' pockets - and not the welfare of patients - at the center of their motives.
For the same reason - money -- for-profit health care providers also have strong incentives to cut the wages and health care benefits of their employees. It is estimated that there are 2 million direct health care workers in the United States who earn on average less than $8 per hour and often lack health insurance.
This situation not only affects the quality of life for the caregiver, but the patient receiving care. A recent report by the U.S. Department of Health and Services found that more than 90% of the nursing homes in the United States had too few workers to care for patients properly. As result, patients were more likely to experience bedsores, malnutrition, weight loss, dehydration, pneumonia and serious blood borne infections.
Yet the Bush administration has declined to require that homes achieve a minimum staffing levels. Instead, it prefers to rely on the misguided belief that market forces will correct under staffing - the same market forces that are causing the problem.
For-Profit Health Care is Not the Answer
For-profit health care is no solution. The first and foremost concern of hospitals, physicians and health care administrators should be patient care -- not the bottom line of a financial statement.
The Consequences of the Introduction of User Fees on Lower Income Canadians
Some who have testified before this Commission advocate user fees as a means for raising additional revenue to pay for rising health care costs and forcing individuals to take so-called "greater responsibility" for their health care.
The USW strongly opposes the introduction of user fees. User fees would create inequities, fail to achieve the desired result and have harsh effects.
The rhetoric used by proponents of these approaches masks their true aims. They claim to support the fundamental principles of the Canadian Health Act. But, the co-payments and user fees that they advocate will erode the very hallmarks of the system - and betray the same fundamental principles -- that they claim to support.
Absent from their proposals is any discussion of the severe impact that these changes will have on low-income families or seniors. The reason for this is obvious: if they did, they would reveal the wolf beneath the sheep's clothing.
If the federal or provincial governments need to raise additional revenue for Medicare - and we believe they do - it is best done through equitable tax increases or reductions in other government expenditures.
User fees represent a regressive tax increase on those least able to afford it - those with the greatest need for public health care services. Of course, if you are wealthy, the use of health care premiums, co-payments and other user fees instead of an increase in federal or provincial taxes will represent a substantial tax cut.
Demand for health care services is not sensitive to price - unless some one cannot afford the price, at which point it is unobtainable.
User fees will cause Canadians with lower incomes to receive poorer health care. Research has repeatedly found that higher co-payments and deductibles will save costs, but may discourage use of needed services. User fees will cause the health care of Canadians to suffer.
The Impact on the Competitiveness of the Canadian Manufacturing Sector
The Canadian health care system provides world-class health care services at costs that are spread across a large stable population. Employers do not have the burden of paying the cost of health care for employees who have retired or been laid off, the uninsured or dependents who work elsewhere.
Since cutbacks in public health care services will shift costs to employer-provided insurance, Canadian employers will experience sharply rising labor costs.
These costs will be passed onto Canadian consumers and the cost of services and goods manufactured for export. As a result, Canadian manufacturers will lose an important competitive advantage in the global economy. Canadian manufacturing firms, already under pressure from imports from low-wage countries, will come under increasing pressure. Canadian manufacturers will have even greater incentive to relocate abroad.
For example, manufacturers in the U.S. paid an average of $1.75 per hour or 7.9% of total compensation for health care benefits for active employees in March 2001. However, this figure is low, since it is averaged over workers without employer-provided health coverage and does not include the cost of health care benefits for retired employees. Companies with a greater proportion of employees covered by health insurance and a larger number of retired workers have much higher insurance costs.
In the steel industry, for example, insurance costs for active and retires hourly employees averaged $6.36 per hour or 18% of total employment costs in 2000. The comparable figures in the Canadian manufacturing and steel and auto industries are much lower. Algoma and Stelco's production costs are C$50 to $120 million lower per year than if they had to pay the same health care costs as steelmakers in the United States.
The Canadian auto industry, in particular, has a huge cost advantage because of the cost of health care benefits and currency exchange rates. General Motors had health care expenses of $800 to $1,200 per vehicle in the United States in 2000. Its health care costs for vehicles assembled in Canada are a fraction of those amounts.
Furthermore, the effectiveness of universal comprehensive public health has caused hourly labor costs in the manufacturing sector to rise much more slowly in Canada than in the United States. This has protected jobs and benefited Canadian employers competing abroad.
There is no question that the erosion of universal comprehensive public health care will hurt the international competitiveness of Canadian businesses.
The Impact on the Labour Relations and Canadian Competitiveness
A shift in health care to employer-provided insurance will introduce new, contentious items into Canadian labour relations, which will likely result in additional labour disputes and lost work days.
Labour disputes arise in only about 3% of USW negotiations. They rarely occur over a single issue. More often many items are involved. However, the rise in health care costs in the United States has made collective bargaining much more difficult.
The majority of the labour disputes in which our Union, as well as the entire Labour Movement, has been involved over the last ten years in the United States have involved health care issues in some way.
The additional health care pressures on employers and demands on behalf of workers that will be brought about by benefit cutbacks and increased privatization will complicate collective bargaining throughout Canada.
Conclusion
We remain deeply committed to the protection and expansion of the Canada Health Act and the principles of a publicly funded and administered health care system with universal access and comprehensive benefits for all Canadians.
Our health care system unites us as a people. We are a stronger, more democratic nation because of the Canadian Health Care System. But it is not perfect. The health care system is under stress and clearly needs greater public investment.
Benefit cutbacks, increased privatization and the growth in for-profit health care providers are no solutions and threaten the fundamental principles of the Canada Health Act.
Again, we call for the Commission to keep faith with the Canadian people, and with the intent and spirit of the Canada Health Act, and to protect the access of all Canadians to health care on the basis of need, not on the ability to pay.
Thank you for this opportunity to discuss these important issues.
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HEALTH CARE WORKERS COUNCIL
