By on October 14, 2015

 

A United Auto Worker retiree medical fund created to reduce healthcare costs and increase services for more than 700,000 people reported a $20.7 billion difference between assets and future liabilities, Bloomberg reported Wednesday (via Automotive News). The shortfall increased by more than $16 billion over the last report.

A similar system proposed for Fiat Chrysler Automobiles workers in the union’s first proposed contract — which was rejected by workers nearly 2-to-1 — was scrapped in the second contract.

Accounting for future inflation and longer average lifespan are to blame for the increased shortfall, according to the report.

When it was created in 2007, the fund for retirees was created to stem out-of-control healthcare costs for former workers and their families, and to move health care costs off of the automakers’ books.

Funded in 2010 by $59 billion from the union and automakers, Bloomberg reported that the $60 billion in assets reported by the fund for 2014, was roughly the same as what it started with when it began.

The Wall Street Journal reported that conservative accounting and discount rate projections by the fund led to the higher-than-expected shortfall.

“Both of these changes … impact all private pension and retiree medical plans in the country,” the fund said, according to the Wall Street Journal.

The retirees’ health care fund filings were not made public before FCA’s first round of voting on its proposed contract.

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58 Comments on “UAW Retiree Medical Fund Reports $20.7B Shortfall...”


  • avatar

    no surprise here. granted health costs are nuts but union leaders sold out their members when they agreed to VEBA.

    • 0 avatar
      jjster6

      As opposed to selling out their members by driving the automakers bankrupt by leaving them with the skyrocketing costs?

    • 0 avatar
      TW5

      The labor movement sold out its members when it agreed to pay FICA tax for benefits that would be exploited primarily by people who didn’t need them. Nothing is more labor-friendly than taxing young people and immigrants out of the economy so middle-class John Doe can use SS to buy a new truck. Murican Socialusm.

      Don’t worry UAW, the taxpayers will bail you out with Medicare.

  • avatar
    RideHeight

    Phil, Prince of Insufficient Light, has visited that factory.

  • avatar
    RogerB34

    Major disaster coming when the Fed market bubble deflates to defined benefit pension plans, 401k, health plans.

  • avatar
    DeadWeight

    They’ll make it up on volume, O-Care and Medicare.

    Hire Paul Krugman, stat, to solve this gap, since he’s doing such a bang-up job regarding advising Japan’s PM & Central Bank on reigning in their national debt (now highest in developed world relative to GDP).

    • 0 avatar
      highdesertcat

      Hire Jonathan Gruber to assist and advise Paul Krugman on the stupidity of Americans.

    • 0 avatar
      28-Cars-Later

      Krugman is not available, he is in douchebag fantasy camp all week.

      • 0 avatar
        Nick_515

        Maybe Thomas Friedman can help. You know, an anecdote or two from his trips voila capitalism explained.

        • 0 avatar
          VoGo

          You guys realize that this is about the accounting projections for the UAW’s retirement healthcare fund, and not Medicare or any Federal government program, right?

          Or is today ‘Pick on Jewish Economist Day’, and I missed the memo?

          • 0 avatar
            jkross22

            The most common trait those 3 share is douchebaggery. Their religious affiliation plays a distant 8th fiddle.

          • 0 avatar
            28-Cars-Later

            Just coincidence, right?

            Funny how the criminals of broad and epic proportions are never prosecuted but as libs point out a fat black man gets whacked for selling untaxed cigarettes in New York. Krugman should be hanging from a lamp post in Japan for destroying their economy. String up Friedman beside him for this gem:

            “One of Friedman’s theses states that individual countries must sacrifice some degree of economic sovereignty to global institutions (such as capital markets and multinational corporations), a situation he has termed the “golden straitjacket””

          • 0 avatar
            VoGo

            28CL,
            You want to kill economists for writing things you disagree with?

            Wow. Maybe we get back to cars now?

          • 0 avatar
            DeadWeight

            VoGo, nice “anti-Semite!” anti-Semite!” strawman.

            Krugman’s idiocy, and my pointing it out, has NOTHING to do with his ethnicity nor religion.

            You might’ve have as well claimed I was singling him out because I despise bearded people who stroke cats.

          • 0 avatar
            28-Cars-Later

            I wrote a really concise comment and the system ate it and logged me out. Yay.

            Essentially evil people writing bad policy caused the death of millions of people in the Soviet Union and Occupied Europe, so don’t excuse these f*ckwads, their bad ideas, and questionable motives.

            Thomas Friedman suggested independent countries should surrender a portion of their economic sovereignty, but TO WHO? World Bank, IMF, Fed, NATO, EU, pick one because they are all authoritarian, and sometimes obsolete, organizations who are interested in money and power. Anyone who shills propaganda or policies for them be it these “economists”, media, or other political hacks, is as guilty as Goebbels. Funny how the REAL criminals always get away just as these will when it all comes down. Would I hang them? You betcha, but in reality who is going to do it? History is written by the victors, not the just.

            I agree with your second statement, sometimes things get out of hand. What is your dream car to drive?

          • 0 avatar
            Pch101

            Krugman is a magnet for the wrath of those who generally know nothing about Krugman specifically or economics generally. It’s kind of amusing.

          • 0 avatar
            Xeranar

            Honestly, don’t bother with them since Krugman’s modeling has been spot on for the past 20 years of his career compared to every Chicago school/Austrian who has been proven fraudulent or wrong in the past decade.

            For some reason the fiscal conservative crowd likes to believe in bad economics for no other reason than moral terpitude towards the poor…

          • 0 avatar
            VoGo

            Thanks for asking, DW,
            My dream car right now is an RWD coupe with a thoughtful tradeoff between ride and handling. Something that would be fun to drive for several hours, but wouldn’t beat up your back or eardrums. Manual transmission with a light clutch, like a Honda or Miata.

            I think what I am describing used to be called a GT, but I really don’t see those around these days. I guess the 6-series BMW is closest, but falls short in terms of engagement, reliability and value.

            I was really intrigued by that glimpse TTAC showed last week of what appeared to be a new Mazda coupe. In the mean time, suggestions are appreciated.

          • 0 avatar
            28-Cars-Later

            When I think of Grand Tourer I often think of the old Jag XJS for reasons of my own mental illness. The only Mazda which makes the Wiki list is the Mazda Cosmo, however BMW 2, 3, 4, 6, and 8 series also make the list suggesting vehicle size, powerplant, and even type could be irrelevant in being a Grand Tourer since the definition is so vague (2 series vs 8 series). What you describe seems to fall into the category of GT and I hope Mazda delivers one in the form of RX-9. I always thought a slightly extended MX-5 would make a great choice, target what the Prelude was and Mazdasize it. Then I myself might be smitten with the marque.

            https://en.wikipedia.org/wiki/Grand_tourer

    • 0 avatar
      TW5

      Krugman and his ilk will do anything to deflect from the impropriety of our own government. Sure, the Asian mercantilists are hurting themselves badly by hoarding American dollars and leaning on exports like a crutch, but they wouldn’t have to take a risky leap of faith, if Krugman et al would stop crushing the American economy with their awful defense anemic growth and status quo social policy.

      The assertions of unreformed Keynesians are at stake. They said it was okay to cut productivity/R&D spending in half by dismantling the military and turning it into Social Security, Medicare, Medicaid, SNAP, and Welfare. Obviously, the plight of the middle class has suffered in real terms, and they’ve suffered greatly in relative terms compared to the capitalist class, but this can never be known. The rest of the world must adjust to the inferior socioeconomic system of the American liberal.

      Japan must stop expecting American leadership, and they must try to shoot the moon. This seems to be Krugman’s world-view.

      • 0 avatar
        28-Cars-Later

        When the music stops playing the well heeled criminals will more than likely escape as they always do. If there is any justice, the military will abandon them and before they can board their private jets they will be mowed down by an angry populace.

        Plan your exit strategy people, I don’t think we have much more than a decade. Maybe less.

        “Japan must stop expecting American leadership”

        I agree because that’s not happening and may never again. IMO Japan’s future, if any, is predicated on how bad Fukushima really is/was and how much it can be mitigated.

  • avatar
    highdesertcat

    Not to worry. Congress will authorize those UAW retirees who turn 65 to enroll in Medicare in which case the UAW Retiree Medical Fund will become the secondary insurer thus paying only 20% of the bill, reducing the shortfall significantly.

  • avatar
    CliffG

    Compared to the $100 trillion of unfunded liabilities of the US government, that is chump change. As the late Sen.Everett Dirksen used to say “A billion here, a billion there, pretty soon you are talking real money”.

    • 0 avatar
      thelaine

      True Cliffg, some state governments are in similar straits. (At least the feds can print money.) The prevailing view is that government is the problem solver and more government means more problems solved.

      • 0 avatar
        thornmark

        It’s not just the state governments. It’s towns and cities too. Virtually all over promised. It’s not just Detroit, Chicago and San Jose.

        For decades politicians bought the votes of unionized workers w/ the publics’ money.

        Jerry Brown flipped CA w/ collective bargaining and the unions defeated Arnold’s reforms.

        FDR stated government unions were wrong because they organized against the interests of the people. JFK ended that w/ an executive order.

        As for Jewish economists, I would have gladly voted for Milton Friedman for Prez. He’s the one who said a welfare state cannot have open borders w/o swamping the system. I guess Europe is discovering that too.

    • 0 avatar
      DeadWeight

      Illinois is delaying pension payments (after paying lottery winners with IOUs) – Illinois is a liberal bastion with all the Very Serious Liberal Economists guiding its economy & fiscal policies for many decades:

      Illinois Will Delay Pension Payment Because of Cash Shortage

      “Illinois will delay payments to its pension fund as a prolonged budget impasse causes a cash shortage, Comptroller Leslie Geissler Munger said.”

      “Investors have long penalized the state for its fiscal woes. Illinois holds the lowest credit rating among U.S. states with an A3 from Moody’s Investors Service, four steps above junk, and an equivalent A- from Standard & Poor’s. Municipal investors demand an extra 1.9 percentage points to buy 10-year Illinois bonds instead of benchmark munis, according to data compiled by Bloomberg.

      “We’re looking for signs that the we’re going to hit a level patch,” said Paul Mansour, head of municipal research in Hartford, Connecticut, at Conning, which holds Illinois debt among its $11 billion of municipal securities. “But this is an indication we’re still going down the hill.””

      http://www.bloomberg.com/news/articles/2015-10-14/illinois-will-delay-pension-payment-because-of-cash-shortage

  • avatar
    28-Cars-Later

    Where is the hot rivet girl?

  • avatar
    Big Al from Oz

    It appears to be a simple problem with a simple fix.

    Increase the union tax on each UAW member to cover costs, like any business would do.

    If the members then consider the service of poor value, remove the service and let the members “user pay” for their own insurance or negotiate medical coverage with the vehicle manufacturers.

    I don’t know what happened to my original posted comment.

  • avatar
    johnhowington

    2009 proved that pensions are just empty promises. What were all those dues for you ask? They are needed to help the ever expanding need for the Bureaucracy to support the needs of the Bureaucracy.

    • 0 avatar
      Xeranar

      Actually, in 2009 most pensions covered their costs. The issue was that during the rich years many corporations got out of paying union dues by promising bigger cuts of the pie if they could forgo paying this year. Those pensions that refused that plan remained solvent through the crisis with little issue, those that had agreed to those deals struggled.

      All it proved was that if pensions are to exist they need to be funded normally.

  • avatar
    gasser

    There is only one solution to all of these problems. We need a one payer health care system, financed by general tax revenues. This will eliminate the 15-20% profit that insurance companies tack on to the bill. This would entail a national list of covered medications requiring drug companies to bid for the listing of their products. No more absurdly priced drugs. This would eliminate worker’s compensation, and the “medical payments” part of your auto and home insurance premiums. It would entail salaried physicians with no incentive to over operate, over test for malpractice CYA, over prescribe heavily advertised medications. In case you think that all of this is ill conceived and ill advised, I have practiced medicine for almost 40 years at this point and I can’t think of another way that the government can promise health care to all (and it has) and afford to keep that promise.

    • 0 avatar
      28-Cars-Later

      I should just scan this instead of talking about it, but I had bloodwork done in July at Quest Diagnostics.

      Billed/Cash price: $940
      Cigna price: $71 (-869 [!])
      Cigna paid after 500 deductible: $68
      My cost: $12

      That is whats wrong with healthcare.

      • 0 avatar

        Exactly. I have identical bills. You have no insurance ? They’ll come off 10% for cash now. Thanks guys. I once lost my insurer’s negotiated price on a service because I was marginally under my deductible. My kid had a fall at summer camp which resulted in a $2500 ER bill…five stitches.

        The lack of any price transparency or reasonableness makes you buy insurance out of fear. You either have insurance and hopefully don’t go broke, don’t have insurance and file bankruptcy on the way out of surgery, or if poor, go to the ER and not care about the bills. One hell of a system.

        • 0 avatar
          28-Cars-Later

          Xer adds a great point below about the 14%, but I find the “insurance discount” insane, I get it even before the deductible is met.

          Oh so we make at least $5K a year on your single premium and even though we haven’t yet sucked $500 more out of you, here’s 50-90% off your bill bc you have proven you’re covered. Its a system that seems to be designed to do two things: 1. make gigantic margin on cash payment and 2. make it impossible for you not to join their pool of premiums by making cash prices un-affordable.

      • 0 avatar
        dal20402

        I typed a detailed reply which the system ate, and continues to eat if I try to paste it. In short, experience in other industrialized countries shows a single and comprehensive risk pool is more important than a single payer. Doesn’t matter whether the insurer(s) are public or private, just that they cover everyone and rate based on everyone’s combined risk.

    • 0 avatar
      Xeranar

      Currently O-care capped insurance profits, the issue was that before it went into effect a large number of insurers bought out hospitals and became holding companies, so the insurance arm makes the capped 14% but the hospitals reap in profits without a second thought. It’s still broken and I agree with you on Single Payer because it basically turns HC into a common carrier type service rather than a commodity where it can be bid up or down.

      • 0 avatar
        28-Cars-Later

        Thanks for the info Xer. My main point of reference is UPMC who did the opposite by forming a health plan while the already owned all of the hospitals. Although what you describe is exactly what Highmark did. Did I tell you to avoid West Penn yet?

        • 0 avatar
          Xeranar

          :( I was born in West Penn….But I grew up going to Central Medical (since closed and torn down to make way for parking for Consol Energy Center).

          It was pretty obvious that was the smartest move for the very rich insurance companies. They became vertically integrated to avoid the limitations placed on the insurance. Which is why I really believe Single Payer is coming, because once we limit how much we pay as a society there will be no incentive to own medical facilities for profit. That’s not to say we shouldn’t pay good and great wages to the workers but we shouldn’t be lining the pockets of executives in the UPMC system which is only tenuously tied to the actual University. :S

          • 0 avatar
            28-Cars-Later

            2014+ West Penn, not West Penn back in the day to which I have no beef or point of reference.

            Not to say you are wrong, but if they put a similar 14% profit limit on medical facilities, the money will move into something else (say owning doctor’s offices or treatment centers) and the medical institutions which are actually owned by universities, religious, or non-profit (if any are left) will suffer unless they are exempted somehow.

            I briefly worked for UPMC and they explained to me UPMC broke legal ties with the university around the time they stopped referring to themselves as University of Pittsburgh Medical Center (whatever year that was). Their legal entity is known simply as “UPMC”. Now corporate directors and doctors themselves might have ties to both I don’t know.

    • 0 avatar
      jpolicke

      Because a system like the UK has that performs poorly with 64 million people will be terrific when it scales up times 6. Like a universal VA system.

      Because everyone likes dealing with civil servants so much everywhere else, they’ll love it when everyone from the orderly to the surgeon are government employees, with the same cooperative mentality as the folks at DMV.

      Because since you need the permission of the government to sue the government, the malpractice rate would drop to zero. No tort claims, no reporting. If it isn’t reported it never happened.

      Because if the medicine you need isn’t on the national “approved registry”, that old cheap stuff often works well enough, and if it doesn’t in your case there’s always that $255 SS death benefit.

  • avatar
    Xeranar

    So much of this discussion is future projections are being kept ultra-conservative for fiscal reasons. I’m pegging it at another 10-15 years and we’ll switch to Single Payer Healthcare like the rest of the first and second world. We basically overpay for everything in health care and make no effort to curtail it because of some uneven love affair with capitalism that dictates this is somehow a productive model of approach.

    The research costs of new medicine can and should be footed by the government rather than private individuals because we’ve already seen what the private market will do if given access to life saving drugs…

    • 0 avatar
      28-Cars-Later

      I’m with you on what I think you are referring to on the guy who bought a company and raised the drug from 11 bucks to 750 a pill, but gov’t has no incentive to actually do good research. The simple but not best solution is to single out such people as that man and make a public example of him. I’m thinking more a long the lines of two in the head, but if we want to take a better approach there are thousands of laws on the books, an able prosecutor could find enough to charge him with some sort of BS. Gov’t has unlimited resources and even without a conviction can drag this man through court, waste his money, and paint him as the bad guy on television.

      • 0 avatar
        Xeranar

        Sad but true. I’m not a fan of capitalism but I’m accepting of a market system, I just promote a Social Democratic market system (that mimics capitalism in competition but puts hard caps on actions like this). I recognize the NEED for patents if we’re going to maintain private ownership of resources like this but I dislike not just this but the fact that routinely these companies pay for pharma labs on great university’s campuses (Pitt, Duquesne, and WVU both have co-op labs currently) where they pay upfront for research costs but the university recruits the talent and keeps pay lower than if they were in a private lab and reap only a small percentage of the profit off of a given cure/treatment.

        It’s a mess and too many people are too happy to keep it that way. :(

        • 0 avatar
          28-Cars-Later

          I agree on the need for patents but any judge who hears such a case is going to recognize whatever they rule will set a precedent. I would think they probably recognize such insane profiteering for something critical to life is not in the best interest of the United States and rule against that man.

          I wasn’t aware of of the research structure as you describe it. Why would a university only reap a small percentage of reward if they are the ones providing the staff and resources?

          • 0 avatar
            Xeranar

            The Uni’s are providing the human resources, the labs are heavily funded by the companies. They invest multiple millions in these labs and reap billions when they hit a treatment jackpot. It keeps the Uni’s bottom line prettier year-to-year but the research I’ve seen turns out to be a HUGE loss in terms of possible value because they get paid only a fraction of the value upfront through the lab itself.

            Duquesne had a fight with Bayer that they won a few years ago because they never actually signed a deal for the patents and were able to negotiate a much better deal by exchanging a bigger cut of the profits for keeping the cost of actual pills down instead of huge profit margins.

          • 0 avatar
            28-Cars-Later

            If universities are providing the lab and human resources, even if the pharma companies are paying for it, I fail to see why the university does’t have at least a 50% stake in any success.

            Just so I understand, you’re saying Duquesne exchanged part of their cut for Bayer in Robinson to lower pricing?

  • avatar
    Mathias

    I am humbled when I realize that while we gather to discuss cars, many of us are actually world experts on macroeconomics, politics, labor and constitutional law… I am in awe.

    But seriously, guys. I’m all for a little skepticism, but a lot of all-y-all’s are just a touch too cocksure of yourselves.

  • avatar
    thegamper

    The UAW will have their hand in the taxpayer coffers yet again on this issue. They have already tried to get taxpayer money to shore up their VEBA. When it runs out, and it will, they will be asking the taxpayer to fill the void for their private health care costs.

    The bailout isn’t over yet.

  • avatar
    CoreyDL

    That man was asked to demonstrate what rear visibility is like in the Camaro.

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