MORAL HAZARD….Several people have already pointed out the weirdness of this passage from today’s New York Times’s story about the new labor contract between GM and the UAW:
Beyond the bookkeeping effect of VEBAs, the health care funds could create a kind of incentive for Detroit companies and the union to modify their behavior.
….U.A.W. members, assured of health care benefits that were the envy of the labor movement, had little incentive to take better care of their health, since their generous coverage would pay for most any ailment.
By contrast, Toyota, which pays premiums only for workers, not their families, has fitness centers at its factories and requires newly hired workers to exercise two hours a day during their training period.
But this goes way beyond weird. Toyota funds employee healthcare through a mandatory payroll tax that stays the same regardless of whether its employees are healthy. The funding system itself provides no incentives one way or the other to stay fit. Furthermore, Japanese payroll taxes heavily subsidize the healthcare system for nonworkers, which means that, in essence, Toyota is paying for healthcare for everyone, not just its workers.
Japan has universal healthcare. Everyone is covered no matter what, so Japanese workers and their families have every bit as much incentive to overuse the healthcare system as American autoworkers. There’s nothing about this entire passage that makes any sense. What’s it doing in the story?