A GLOBAL HEALTH CARE PRESCRIPTION

"Fasten your seat belts; it's gonna be a bumpy ride."

-Bette Davis, "All About Eve"

Economists warn that national governments that sacrifice social obligations, especially guaranteed health care, to attract capital run the risk of fraying the threads that enable free trade in the first place. If anything, an open market increases the need for financial security, as the citizenry becomes more vulnerable to change at the same time it becomes wealthier and lives longer.

But the compelling desire of many country leaders to compete effectively in the global marketplace often means they give short shrift to welfare considerations. Not surprisingly, governments, along with multinational corporations, now have to contend with a growing backlash against globalization and its nasty habit of stripping away local cultures and traditions. In developed countries, the active privatization of social security, an emotive as well as economic issue, can further fuel the backlash.

Protectionism may seem the only way for a people to hold onto its uniqueness and regain financial security. But the relentlessness of globalization suggests this relief not only will be temporary but also may raise the human and economic cost of inevitable integration.

For multinational companies, cutbacks in social obligations, particularly in health care, pose new challenges and spotlight changes that have been astir for some time.

U.S.-based multinational companies have been preoccupied at home, in what historically has been their largest market and employee population, with managed care. International health care has been a low priority. Today, however, many companies earn substantial income from operations outside the United States, employing large numbers of local national staff. They are waking up to find health care no longer is an insignificant cost of doing business.

U.S. multinationals often presume that national health care systems deliver quality care automatically, thereby obliging employers merely to make social security contributions. To the extent that supplementary plans-medical, dental and vision expenses and disability pay-have become competitive practice in some countries, these often are considered, especially for executives, as top-ups or gap fillers to the basic national health plan.

In countries without national health plans, employers typically sponsor primary health care programs but find attempts at creative design and financing constrained by local conditions-for example, collective bargaining agreements and such issues as quality of and access to health care providers. In contrast to the hands-on nature of U.S.-style managed care, health programs in many countries continue to be fully insured. To attempt cost controls, employers can only resort to traditional underwriting tools, maintaining an arm's-length relationship with the insurance industry.

The managed care movement has educated U.S. employers about the universal trends behind the increased cost of health care: an aging population, lives that are longer and healthier, and costly new medical technology. But, outside the United States, in developed and developing countries, the phenomenon of passively privatizing social programs has had a significant impact on health care, and as a consequence, on the employer's role in guaranteeing coverage. This phenomenon is not always perceived by U.S.-based multinationals, which are familiar with a well-developed private health sector and a lack of national health care. They simply aren't used to partnering with government to respond to a changing health care environment.

In passive privatization, the private sector develops independently of governmental policy change to fill the gap between the demand for health care and the ability of the national health system to respond adequately.

Supplemental employer-sponsored plans are likely to transmute into primary sources for benefits when the quality and accessibility of care deteriorate under the social program, or social spending is reallocated to needier population segments. Employers often don't recognize the impact on their bottom line of these incremental cutbacks in social benefits, especially when employer programs are integrated with social security. The upside of attractive company programs can be increased productivity, higher employee retention and new ways of delivering health care, but a lack of oversight can result in skyrocketing costs and programs that are inappropriately designed or financed.

While most large U.S. corporations have established global initiatives for supplementing retirement income, they have ignored health care. The need for and provision of income in old age is universal, and delivery on promises, particularly defined benefit promises, requires considerable planning and investment by employers. Not only is there a clear financial imperative to manage retirement programs, but U.S. compliance and tax legislation also ensure that employers catalog retirement programs and project their benefit liabilities.

Consequently, U.S. multinationals have a system that acknowledges the privatization-active or passive-of state pensions.

Health care, on the other hand, is a more local and subjective matter. No comparable decrees exist to compel employers to catalog health benefits. As the impact of changes in state-provided health care systems around the world becomes more evident, it will be essential for employers to develop a framework to respond. Active privatization will demand employer response by focusing public attention on the quality, equity and efficiency of health care.

For many U.S. multinationals, the key to a successful health care policy is managed care. This uniquely American invention is popularly viewed as a cure-all for all types of inefficiency, despite the controversy in the United States about its effect on quality and access to care. Unfortunately, the focus on efficiency presumes sufficient resources to be reallocated when, in fact, a common problem-especially in countries moving to private from state economies-is an insufficiency of quality providers. Consequently, in developing a global framework for managing change in health care delivery systems, it is important to avoid being trapped by the managed care imperative into oversimplifying complex and unique situations.

No guidebooks or hard-and-fast rules exist on how to respond to the changing global health care environment, but a few prescriptions seem in order:

A company should develop a global corporate philosophy on health care that conforms to its compensation and benefits policies and supports its business objectives. How much choice should employees have, and how much should they be expected to contribute toward the cost of benefits in general and health care in particular? What is the company's approach to managed care in the United States, and is it successful?

Catalog employee benefit programs and track the factors that determine costs. If costs rise more than expected, the company will understand why.

Concentrate on the countries or business units key to the company's growth strategy and analyze how change in the market, including privatization, is likely to affect the company and local staff. Active privatization may compel employers to take action by specific dates.

Consider opportunities to opt out of core national health care programs through a rebate of contributions or a tax break. Pay less consideration to privatized fringe elements of the social system that may not be essential or cost-effective to address. Before taking out a calculator to compare rebates or tax savings with the cost of replacement, look first at the options in the private sector and the quality of providers.

Opting out should enable employers to provide their staffs more choice to better care-givers and eliminate the waiting time under government-run programs. The objectives are improved employee relationships, higher productivity and lower absenteeism. So, be prepared to accept that opting out may be a good deal in the long term but not necessarily an immediate financial windfall.

Before making changes or developing new programs overseas, study how health care is delivered, determine what the local perception of quality is and evaluate the cultural receptivity to managed care ideas. In the development of the private health care market, government, labor and employers all have decision-making roles. Consider what other companies of similar size, business or location are doing.

Devise a long-term strategy for each operation that is in keeping with the company's philosophy, but move ahead cautiously and incrementally. Don't make long-term commitments the company may not be able to keep or that impose radical change on unreceptive employees. As a foreign employer, it is especially important to cooperate constructively with unions and collective bargaining units and develop consensus for change.

Finally, communicate change to employees using culturally acceptable channels, thereby demonstrating consideration for local customs and tradition.

We've entered a brave new world of health care. Yes, there will be bumps ahead. The multinational employer needs to fasten not only his or her own seat belt but also must diligently monitor health care costs and trends. Where corporate policy warrants change, it should be enacted cautiously on a country-by-country basis, with careful evaluation of the social and economic factors-all the while keeping an eye on the emotional issues globalization stirs up.

Holly J. Jeske is an associate in New York with benefit consultant William M. Mercer Inc.