Ford Motor Company Vice Chairman Calls for 'Broad-Based Coalition' to Solve U.S. Health Care Woes

SEATTLE, July 20 -- Speaking at the National Governors Association Annual Meeting, Ford Vice Chairman Allan Gilmour called on the nation's governors to assist in establishing a "broad-based coalition" to find a solution to the U.S. health care problem "for the long term." The cost of health care is rising at an unsustainable rate and the health care system is "disjointed and inefficient," he said. "If left unfixed, it can both hurt our economy and limit good health care for everyone."

He noted that health care costs, as a percentage of GDP, are higher in the United States than in other western countries, yet the U.S. quality of care is 37th in the world. "We need to focus not only on controlling costs, but also on improving value," he said.

National health care expenditures were an estimated $1.67 trillion in 2003, growing at an average rate of 7 percent over the last five years, which is more than double the rate of inflation.

"The manufacturing sector -- particularly the domestic automotive industry -- has been hit hard," Gilmour said. Providing health care benefits adds about $1,000 to the sticker price of each Ford car or truck built in the United States, approximately one-third of that related to the cost of prescription drugs.

"Our foreign competitors don't share these problems," he told the governors. Non-U.S.-based automakers have younger employees, fewer retirees and different systems for paying for health care that the United States needs to look at and learn from, he continued. These health care challenges have created a "competitive gap that, if left unchecked, will drive investment decisions away from the United States."

In addition to controlling costs, the United States needs to focus on health care consumption, Gilmour added. "We have to help Americans become better health care consumers," he said.

Following is the complete text of remarks, as prepared for delivery on Monday, July 19, 2004, in Seattle, Wash.

I'm pleased to be here today, and honored to be sharing the stage with this panel.

As Mr. (Leon) Panetta and Mr. (Newt) Gingrich explained, the cost of health care in this country is rising at an unsustainable rate. This is a challenge for all of us -- big businesses, small businesses, non-profits, health care organizations, insurers and, of course, governments at all levels.

We don't often think of it this way, because so many believe that health care costs are only a problem for big businesses -- companies that provide benefits to thousands of employees, retirees and their families.

That's only part of the story. We have a problem, but we're certainly not alone. We share common ground on this issue with organizations of all kinds, with anybody who provides health care benefits to employees. And think, as well, of all the individuals who are concerned and worried -- who are paying higher premiums, or have higher deductibles and co-pays, or have inadequate insurance, or no insurance at all.

As governors, it seems to me that you have three major concerns about health care:

First, the rising cost of government-funded care, especially Medicaid.

Second, you are employers with a large number of employees. What coverage will you offer them? And who will pay for it?

And finally, you, as elected officials, are accountable to your constituents -- the insured and the uninsured. They are worried about health care costs, as I just mentioned, and what these costs will mean to their pocketbooks, and, too often, to their health.

When I was chairman of the board of Henry Ford Health System in Detroit, I attended a dinner where the retired head of the Mayo Clinic spoke. He described the expectations of patients quite accurately: "Everyone wants the best care, and they want someone else to pay for it."

So businesses and government share this health care problem. All of us are weighted down by a health care system that is government-based, employer- based, insurance-company-based and charity-based.

At the very least, our health care system is disjointed and inefficient. If left unfixed, it can both hurt our economy and limit good health care for everyone.

As you know, health care costs, as a percentage of GDP, already are higher in the United States than in other western countries -- and yet, according to the World Health Organization, our quality of care, on average, is ranked only 37th in the world.

Our life expectancy is lower than in some countries that spend less.

How is it possible that, with the bills we pay, we do not have better quality medical care? If we are paying more, why aren't we healthier, and why don't we live longer?

How do behavioral issues -- such as the rising rates of obesity-related diseases -- contribute to our lower life expectancy and our higher costs?

We need no less than a systemic solution to this problem -- one that focuses on the very types of tools we use to build any good organization: quality, effectiveness, measurability and consistency.

We need to focus not only on controlling costs, but also on improving value.

National health care expenditures were an estimated $1.67 trillion in 2003, and have grown at an average rate of 7 percent over the last five years. That's more than double the rate of inflation.

This already has proven to be too big a problem for some companies. The percentage of large firms that provide health insurance to retirees has dropped by 28 percentage points over the last 15 years.

The manufacturing sector -- particularly the domestic automotive industry, which offers some of the best employee benefits in this country -- has been hit hard.

This is a serious issue for established companies like ours because we provide coverage not only to a very large group of employees and dependents, but also to several generations of retirees. As well we should.

We are a global company, and while our home base may be the Motor City, our health care coverage extends from coast to coast -- to plant employees, to sales and marketing, to Ford Credit, to every aspect of our business in offices nationwide.

We pay for health care in retirement states like Florida and Arizona, which attract so many retirees from our plants and offices in other parts of the country.

Today, providing health care benefits for all those people adds about $1,000 to the sticker price of each Ford car or truck built in the United States. And approximately one-third of that is related to prescription drug costs.

Our total U.S. health care bill was $3.2 billion last year for our 560,000 salaried, hourly, and retired employees and their dependents.

Because of these high health care costs, Ford spends more each year on health care for employees and retirees than we spend on steel!

As health care costs escalate and we pay them, we must divert funding from new products and other business investments. That, frankly, threatens the health of our business.

I know the other domestic auto companies face similar challenges. These challenges put us all at a disadvantage in the marketplace. They already have created a competitive gap that, if left unchecked, will drive investment decisions away from the United States.

Our foreign competitors don't share these problems. No -- that's not because they are smarter. It's because, with newly opened plants here in the United States, they have younger employees and far fewer retirees. And, in their home countries, the systems for paying for health care are different -- and we had better take a close look at what they are doing and learn from it.

What we need is a national focus on the problem. No -- I'm not talking about a national health care system. I'm talking about getting control of costs and improving value while moving our health care system into the 21st century. I'm talking about a national challenge with broad-based solutions.

We have to remember, however, that costs are only part of the picture. We can only control the cost of health care to a certain extent; we also need to focus on the other side of the equation -- the consumption or utilization of health care -- the demand side of the supply-and-demand equation.

It is important to encourage wellness, fitness and disease prevention so people stay healthier, longer. Everyone who receives benefits should take personal responsibility for his or her health.

We have to help Americans become better health care consumers.

And our current system doesn't help. We have insufficient incentives to manage or control our care. All too often, we can consume the care we want, when we want it and even whether or not it is medically necessary.

On the other side of the coin, there is little emphasis on prevention. Why do most health care plans pay when people get sick, but do not pay to keep them well?

And information. If the individual consumer is key to managing his or her own care, how will the individual make good decisions? They -- we -- need good, comparative and timely information.

It is clear that the solutions need to come from all of us -- new and old- line businesses, drug companies, health care providers, governments and individuals. We need good, coordinated thinking.

We are taking steps at Ford. We are developing ideas and concepts that we hope to bring to this discussion.

We are working with hospitals and insurers on benefit design and administration so we can offer our employees better quality at a lower cost.

We're pushing e-prescribing. Electronic medical records are the standard in at least one of our major hospitals. We're auditing everything we can find to audit.

On a policy level, we are working with groups like the HR Policy Association and others to find solutions for the uninsured problem.

But in many ways we all are just nibbling. Only by taking bigger bites can we hope to resolve this problem.

This makes me think about the memoirs of Dean Acheson, who served as Secretary of State in the Truman administration. He wrote that, in his next job, he would have three boxes on his desk: In, Out, and Too Hard.

Health care really belongs in "Too Hard." But, at this point, we cannot afford to file it away for later. We need to put it in the "In" box -- and do the hard work necessary to fix it.

As governors, you're right in the middle of this. We, as employers, need your leadership -- perhaps including the establishment of a broad-based coalition -- to find a solution for the long term. Not a quick fix for the present.

Significant reform is necessary, and we won't get there unless we work together to figure out what to do and then do it.