Unions Calling in Their Chits

By Linda Chavez (Archive) · Friday, October 16, 2009

"That's not the change America voted for." The implied criticism of President Obama comes not from Rush Limbaugh or Fox News but from the AFL-CIO in a newspaper ad this week letting the president and congressional Dems know unions' "bottom line for health care reform." The unions are calling in their chits. If health care legislation doesn't include a public option, they won't support it. And if it does include a tax on so-called gold-plated plans, they'll oppose it.

No wonder White House chief of staff Rahm Emanuel has been meeting behind closed doors with Democrats trying to craft a final bill. He's more afraid of a few union bosses than he is the thousands of voters who have flocked to town hall meetings to oppose health care reform. Without the unions and their money, no Democrat can win the White House and Democratic control of the House and Senate might slip away.

The irony is that unions helped create the health care mess in the first place. Ever wonder why most Americans receive their health insurance through work? After all, we don't get our home or car insurance through our employers. Nor do most employers pay directly for other essentials like housing or food.

Our current employer-provided health insurance dates back to World War II, when FDR's National War Labor Board tried to impose wage and price controls to stem inflation during the war boom years. But the board found it easier to impose price controls than effective wage controls since it was possible to simply shift pay increases from cash into employer-provided benefits like health insurance. Such benefits were exempt from the board's control and weren't subject to taxes, making employer-provided health insurance even more attractive.

As a result, unions began demanding generous health care benefits as part of their bargaining strategy, which is why so many of the Cadillac health care plans cover unionized workers -- literally since the kind of plan envisioned is exactly what General Motors provided its workers. But what was bad for America was bad for General Motors, to turn an old adage on its head. GM's estimated $54 billion in health care obligations for its retired unionized workers helped drive the company into bankruptcy, from which it was only able to emerge by giving away 17.5 percent of the company's stock to the United Autoworkers' health trust fund.

But having employers buy health insurance for their employees never made good sense. For one thing, it made it difficult for an employee to change jobs without risking losing health care coverage. It also made it harder for individuals to choose the kind of care they wanted -- or to know what they were actually paying for when they went to the doctor's office. Lack of choice means that many people will pay for benefits they don't want or will never use. And third-party payment means doctors and their patients rarely have discussions about the costs of fees or tests -- driving up health care spending.

So now the unions want to have their cake and eat it, too. They want to make sure that those generous health care plans they demanded at the bargaining table still receive the same tax break all others do, while insisting that the government pick up the tab for those who can't afford the costs of health care they helped drive up. Of course the only way to pay for the latter -- without forcing the country ever further into debt -- is to tax the former.

The unions are no fools either. They know that the proposed 40 percent excise tax on insurance companies in the Senate Finance Committee-passed bill will be paid for by policy holders one way or another. Insurance companies will pass the costs on to employers, who, in turn, will either take it out of employees' pay or shift to lower-cost plans.

Democrats -- including the president -- can try to appease unions by passing a health care reform bill that can't possibly pay for itself. But following the unions' advice will be a bad bargain. Just look what caving into the unions did to GM: first the company went bankrupt, then it ended up owned by the unions. Is America next?

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