GM Healthcare Costs

Today, G.M. and Chrysler must submit a government-mandated recovery plan to Congress.  The N.Y. Times reports that G.M is trying get the United Auto Workers to agree to cutback in its employee and retiree health care benefits.  “[G.M.] has to address how a company that lost more than $20 billion last year can afford $5 billion a year in medical bills.”  Five billion dollars in medical costs seems like a lot, but how much is it really?

According to the Kaiser Family Foundation, Medicare expenses in the following states were less than $5 billion in 2005:

• Alaska, Arkansas, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Kentucky, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Utah, Vermont, Washington, West Virginia, Wyoming.

Wow.  I couldn’t believe this either when I compared the numbers.  The N.Y. Times article continues stating ” [G.M.’s] future obligations for retiree health care are estimated at $47 billion, and by next year it is required by its contract to contribute more than $10 billion to the trust set up in 2007.”

This is certainly a tough situation.  G.M., Ford and Chrysler are on the hook for billions of current employee and retiree medical expenses.  On the other hand, retired Big 3 autoworkers who put in 30-40 years of service with the promise of life-time healthcare may now be left with limited or no medical coverage.

Like everyone in this economic recession, belt tightening is needed by all parties involved.