June 04, 2004

Paying for Hank McKinnell's fun ride

Some of the nation's big dogs of business have been schmoozing on Mackinac Island as part of the Detroit Regional Chamber's annual Policy Conference.

While GM's CEO G. Richard Wagoner complains about how rising health care costs are crippling American business, Pfizer's Henry McKinnell reminds us that not every American business has been crippled by the high costs of health care.

While GM's Wagoner didn't single out the cost of prescription drugs, I wonder whether he ever considered mentioning it. Did it ever cross his mind?

Decades ago, Chrysler Chairman Lee Iacocca started grumbling about the costs of health care. It was partly because of Iacocca that the managed care revolution happened at all, back when everyone thought HMOs would save us from skyrocketing health care costs. Despite the bad rap that managed care has earned for itself, it might just have worked if the only engine driving health care inflation was the fee-for-service system where third party payers coughed up whatever a doc decided to charge, without question.

We know now that fee-for-service wasn't the only thing driving the rise in costs. Most people who follow the issue these days agree that there are many different reasons why health care costs continue to rise so quickly. Drug prices are one factor getting a lot of attention. So far, the argument that any serious attempt to lower these prices will destroy all hope of ever developing any new drugs has held sway in Washington, with the help of pharmaceutical industry lobbying dollars to make the logic more persuasive.

But how much worse do things have to get before the chairman of GM stops whining about the high costs of health care and actually proposes to do something about it? And when he does, what solutions will he suggest? Will he and Hank McKinnell be able to conjure up some scheme that doesn't touch Pfizer's profits, or will Rick Wagoner say to Hank: "Hank, you've had a great ride. But the rest of us have been buying your circus tickets for way too long."

Posted by Carey at June 4, 2004 09:28 PM

At the time that Iacocca was grumbling, it was fee-for-service that was driving health care costs. Look at the stats from the period; we didn't have a lot of drugs to choose from and the Big Pharms had their work cut out for them convincing everybody that their version of old drugs (digoxin, thyroid, phenytoin, etc.) were superior to other brands on the market.

The other thing driving costs at that time was the knee of a tsunami - a wave of retirees that were living longer than expected. That trend continues, and will continue as the Boomers became joining their ranks.

I understand your focus on prescription drug costs, Carey, but there were/are a lot of other factors in play here.

Posted by: Alwin at June 4, 2004 11:19 PM