Auto’s Big Three Health Care Costs Study

U.S. Autos Conduct Multi-State, Independent Analysis Of

Certificate of Need (CON) and Health Care Cost

Chrysler, Ford & GM conducted independent studies using their 2000 employee health care claim data from states where they had significant employee populations and published in 2002.  All three companies had similar benefit programs covering nearly homogeneous populations.  Each of the three auto company analysis compared their cost per covered life in Michigan with states with CON, without CON and weak CON programs.  The list of the other states varied somewhat between the three different analyses as did the medical services that were compared.

The conclusion arrived at by each of the three analyses was the same: their cost of employee health care was lower in states with meaningful CON programs than in state without CON programs or with weak CON programs.

 

Summary of Individual Analysis

Chrysler:

Health care costs represent an important ingredient in decisions on where to build new factories, expand or renovate facilities or to close factories.  Health care is Chrysler’s largest single component cost in producing a vehicle so Chrysler closely tracks the relative cost of health care in each of its major production areas.

This health care analysis used the employee health care claim data from the year 2000, in six different areas where Chrysler had statistically meaningful populations.  The benefit programs were identical and the data was standardized for gender and age. The results were as follows:

Location Annual cost per covered life CON Status
Kenosha WI $3519 No CON program
Indiana $2741 Revoked its CON program in early 1990
Newark , DE $2100 Weak CON
Michigan $1839 Strong CON
Syracuse, NY $1331 Strongest CON

Because of this strong correlation between the cost of health care and the strength of a state’s CON program Chrysler joins the vast majority of other health care stakeholders in Michigan in strongly supporting the Michigan CON program.

 

Ford Motor:

Ford Motor is a multi-state employer, with the same benefit plan that covers populations with similar age, gender and health status.  The year 2000 data from five states (Michigan, Indiana, Ohio, Kentucky and Missouri) in which Ford Motor had at least 10,000 covered lives, excluding HMO participants, was used for this analysis.  The analysis focused on hospital in-patient and out-patient costs, coronary artery bypass graft and MRI imaging services.  The conclusion of the overall analysis was as follows:

Location Relative findings CON Status  
Ohio & Indiana Consistently highest relative costs Eliminated CON in early 90’s
Michigan Consistently lowest relative costs CON on wide range of services
Kentucky & Missouri Also had relative lower cost CON on many services

This consistent correlation between CON and lower costs was quite notable because the pattern was the same across a range of different services, including hospital in-patient and out-patient services.  Indiana’s hospital inpatient relative costs were 18% higher than Michigan’s and their out-patient services were 21% higher.  Ohio’s inpatient relative costs were 12% higher and out-patient costs were 21% higher than Michigan’s relative cost per covered life. Kentucky’s and Missouri inpatient costs were only 5% and 2% higher than Michigan’s and their out-patient costs were about the same as Michigan’s. The conclusion of the focused study on MRI was that Ohio’s relative cost was 20% higher and Indiana’s relative costs were 11% higher than Michigan’s.  The coronary bypass study showed that Indiana’s costs were 39% above and Ohio’s cost were 20% above Michigan’s cost per covered life.

In states with meaningful CON programs, Ford Motor has lower health care costs.

 

General Motors:

General Motors is the largest private purchaser of health care services in the US and in the year 2000 spent $4.2 billion on health care benefits for its 1.2 million employees, retirees and dependents.  At GM, we believe improving quality means preventing overuse, underuse and misuse of the health care delivery system by reducing unnecessary, duplicative and wasteful services.  We do not believe that unbridled expansion of health care services will lead to improve quality, affordability or accessibility.

The following GM’s data for 1996- 2001 in Michigan, Ohio, Indiana and New York, four states with significant GM populations, shows the age adjusted cost per covered life:

1996 1997 1998 1999 2000 2001 CON Status
IN $1,611 $1,629 $1,613 $1,706 $1,846 $2,008 No CON for many years
OH $1,556 $1,559 $1,465 $1,606 $1.746 $1,834 Recently repealed CON
MI $1,487 $1,487 $1,483 $1,560 $1,606 $1,732 Has CON
NY $1,306 $1,228 $1,204 $1,271 $1,347 $1,501 Has stringent CON

While the GM populations served and the benefits and cost-sharing provisions are quite similar in all four states, GM’s health care costs are highest in Indiana, a state with no CON regulations and lowest in New York, a state with stringent CON regulations.

General Motors believes that Michigan’s Certificate of Need Program should be retained as an important tool to ensure cost-effective, high quality health care services.