Manufacturers doubt U.S. will reform health care

CHICAGO Thu Feb 28, 2008 5:04pm EST

CHICAGO (Reuters) - Chief executives from the U.S. manufacturing and transportation sectors say something must be done about soaring health-care costs but doubt the ability of Washington to come up with meaningful, bipartisan reform.

"There is a lot of work that needs to be done on the part of the politicians to rein in some of these costs," Lincoln Electric Holdings Inc (LECO.O) CEO John Stropki said at the Reuters Manufacturing Summit in Chicago this week, adding: "I have very little confidence in Washington."

In some cases, U.S. companies say they are focusing on "wellness" programs to cut health-care costs, including encouraging employees to eat well, exercise and quit smoking.

U.S. health-care costs have seen double-digit increases for much of the past decade and are set to keep on rising.

"Something eventually has to give there," said Wick Moorman, CEO of U.S. railroad Norfolk Southern Corp (NSC.N). "This is a critical issue that is confronting our economy."

According to the U.S. government's Centers for Medicare and Medicaid Services (CMS), by 2017 health-care spending will account for 19.5 percent of the country's gross domestic product, up from 16.3 percent in 2007. Annual expenditure will nearly double to $4.3 trillion, the CMS said in a forecast.

"It's not a show stopper, it's not a reason you would pull manufacturing out of the U.S.," said Herb Henkel, CEO of diversified manufacturer Ingersoll-Rand Co Ltd (IR.N). "But it's a cost element that has to be effectively managed."

It is also a key issue in the 2008 U.S. presidential election. Democrat Hillary Clinton wants a public-private partnership to provide mandatory health insurance for all Americans, including mandates on large employers to provide health insurance or help pay for it. Subsidies for the poor would be provided along with small-business tax breaks.

Her rival Barack Obama's plan would create a national public insurance plan, allowing everyone the same options to buy affordable health care enjoyed by federal employees. It would cover most Americans and mandate coverage for children. Employers would have to contribute to health coverage for their employees or to the cost of the public plan.

On the Republican side, likely nominee John McCain favors tax credits and health savings accounts to help individuals pay for health care.

Manufacturing CEOs, however, are unimpressed.

"I'm not hearing anything from the presidential candidates to make this better," said CEO Dave Cote of Honeywell International Inc (HON.N).

"This needs to be a bipartisan effort, we need to start with an objective and work back from that. But everyone just wants to point to their own private nemesis," he added.

Even if Washington manages to overcome partisan differences and comes up with a comprehensive reform package, some CEOs said they doubted it would lead to any meaningful improvements.

"I really get nervous when Washington tries to do anything because they usually don't do it very well," said Bill Zollars, CEO of YRC Worldwide Inc (YRCW.O), the big trucking company.

"The worst thing that could happen from my perspective would be a single-payer alternative where the government takes over the majority of the process. I don't think that would work very well," Zollars said.

Many companies have focused on cutting health-care costs and promoting "wellness" programs devoted to prevent illness.

"We were spending more on health-care than we were on steel," said CEO Jim Owens of Caterpillar Inc (CAT.N). "We're working hard to help people quit smoking, to control their weight ... we've got more co-pays, deductibles and premiums."

"We want them to be involved," he added. "They do a better job of shopping ... when they've got some skin in the game."

In 2004, Caterpillar stopped fully funding medical care costs for more than 1,000 retirees -- a move that has shaved millions off its benefit outlays but also sparked a class-action lawsuit against the company.

Lincoln Electric's Stropki said his company also actively discourages unhealthy practices among employees.

"We ask new employees when they sign on if they are non-smokers or if they are a smoker that they commit to quit smoking," he said. "Lifestyle issues will be important to driving down the cost of health care."

"Why should someone who lives a healthy lifestyle by choice be responsible for insuring someone who lives an unhealthy lifestyle by choice?" Stropki added.

(For summit blog: summitnotebook.reuters.com/)

(For more on the Reuters Manufacturing Summit see <ID:nN25228243>

(Additional reporting by James B. Kelleher, editing by Phil Berlowitz)

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