Thursday, November 20, 2008

Bailout Auto Industry with Retiree Health Insurance Relief

Let's not give Detroit a bailout. If there are problems with the GM, Ford, or Chrysler business model, those are problems that the market -- and reorganization through bankruptcy -- will solve. It worked to modernize the airline industry. It will work for the auto industry, as Mitt Romney explained so well yesterday in The New York Times.

HOWEVER -- there is appropriate economic relief that the Federal government can give Detroit, and that is relief from the burden of health insurance for ALL of its retirees. GM recently cut what the benefits for its salaried retirees, saving the company more than $1.5 billion. But that is pocket change. As Nick Bunkley wrote in The New York Times on November 8,

In fact, paying the cost of hospital stays, surgeries and expensive drugs for retirees, a group now larger than G.M.’s active work force, is a major reason the company’s financial woes are so great. G.M. says it spent $4.6 billion in 2007 on health care for its one million employees and retirees and their dependents.

Two-thirds of GM's insurance costs go to cover retirees, most of them untouchable because union contracts protect their benefit amounts. So -- moving those union retirees into the Federal health care system, with a declining co-pay from GM -- could save Detroit billions.

Of course, this would mean that the Big Three would have to declare bankruptcy so that the union contracts could be loosened and this provision made possible.

I know this roils the Democrats traditional "joined at the hip" relationship to big labor. But this is a national crisis - a time for leadership that looks beyond small-minded politics to the larger issues at play.

And this is true fairness. Detroit is being crushed by the burden of our failure to enact meaningful health care reform.

I know how good those retiree benefits are. I managed my mother's care after her GM salaried retiree husband died. She paid about $15 a month for insurance while I was paying about $400 as a self-employed adult.

In today's economy, letting an entire industry bleed to death to preserve "gold-plated" benefits just doesn't make economic sense. Allowing retirees to have a soft landing in the Federal health insurance system means this solution makes political sense.

Any takers?