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America’s health care cost problem might shut down Hollywood

Nobody is safe.

Writers Guild of America members on strike in 2008.
David McNew/Getty Images
Dylan Scott covers health care for Vox. He has reported on health policy for more than 10 years, writing for Governing magazine, Talking Points Memo and STAT before joining Vox in 2017.

If you miss out on the last few episodes of Saturday Night Live this summer, blame America’s decades-long struggle to bring its health care costs under control.

The Writers Guild of America, the union that represents television and film writers, could go on strike as early as May 2 — and a big reason why is the cost of health care.

The union and the Hollywood studios it contracts with are at an impasse. The workers will likely vote Monday to authorize a strike. If the union and studios fail to reach a new agreement, the writers say they would then walk off the job on May 2.

A strike would have big consequences for the entertainment industry. When the writers walked off in 2007 over a labor dispute, television shows had their seasons shortened, movies went into production without a finished script, and shows like The Tonight Show and Saturday Night Live that depend on writers churning out new scripts every day or week went dark.

Why is this happening? The writers have a few demands, including better pay as movie and TV studio profits continue to increase. But one big underlying cause is the cost of health care. Overall, health spending among Americans increased 19 percent between 2011 and 2015. The consequences of those increases are now hitting the writers’ guild, plagued by the same problem vexing the rest of the US health care system: It’s hard to keep costs under control.

The WGA has its own health insurance plan

One reason rising health costs have hit the writers’ union hard is the structure of their health insurance. The union provides its own health coverage, rather than contracting with a private health insurer like Aetna or Blue Cross Blue Shield. Money goes into the fund on the writers’ behalf, and it’s paid out to cover medical bills. This means the risk of high health care costs is relatively concentrated, and the union sinks or swims on the strength of its own finances.

The health fund is filled mostly by the studios, which are supposed to contribute 9.5 percent of a writer’s salary or pay to the fund. So the writers generally don’t have to pay a monthly premium or contribute money out of their paychecks for their own health coverage, though they do pay for any dependents who are covered. (That means they’re pretty fortunate: About 12 percent of all workers who get insurance through their company don’t have to pay a premium for single coverage, according to the Kaiser Family Foundation.)

The plan is also pretty good insurance. The standard plan has a deductible — the amount you pay out of your pocket before your benefits kick in — of $300 for an individual and $900 for a family. (According to Kaiser, the average deductible among all workers with the kind of plan WGA offers is $1,028 for an individual and $3,769 for a family.)

So the writers’ union health plan is a better deal than most workers get. But this is basically why unions exist: to negotiate better benefits for workers, rather than depend, as many of non-unionized folks must, on whatever plan a company happens to offer.

But that plan now has serious financial problems

Because the WGA administers and funds its own health plan, though, it either has enough money to pay for the medical expenses its members incur — or it doesn’t.

And the fund is running out of money.

Over the past few years, the union’s health plan has been spending more money on health care than it’s been bringing in, as this chart from the union’s own summary of the state of its finances shows. Pay attention to the middle column:


This year, the WGA health plan is projected to spend $163.2 million on health benefits while receiving $150 million in contributions from the studios (along with some other sources of income). So it’ll lose $13.2 million in 2017. It’ll pay the difference through a reserve fund that’s been built up over the years.

But the plan is expected to continue paying more in benefits than it receives in contributions. Which means that reserve fund will keep drying up. By 2020, it’ll be spending upwards of $60 million more on health care than it brings in — and the reserve fund will be almost gone.

“In this negotiation, we don’t seek a better health plan, only a solvent one,” the union says in its overview.

It then connects the health care problem to its most fundamental gripe: Studios are making more money than ever, and the writers aren’t benefitting.

For both the health fund and the pension plan, additional contributions are important goals. And in the context of industry profitability, these contributions are affordable.

The WGA’s problem is health care costs are increasing too fast

The problem, though, isn’t just that the health fund is spending more than it’s taking in. It’s that medical costs are expected to increase much faster than the contributions that studios are making to the WGA’s health fund. Here’s another chart for you:


This issue isn’t unique to the writers: While the WGA’s health care spending increased 51 percent, from $94.3 million to $142.8 million between 2011 to 2015, overall US health care spending increased 19 percent, from $2.7 trillion to $3.2 trillion over the same period. So the cost problem is worse for the WGA, but it’s not totally out of step with what the rest of America is seeing.

Why might costs be worse for writers? The union declined to talk with me about this issue. It could be something unique to their population — maybe they happen to be sicker overall, or cover more people with expensive conditions who are driving up costs. Plus, as the union points out, the contributions studios are required to make simply aren’t keeping up with medical cost inflation.

But something else might be contributing: It could be a byproduct of their generous benefits. If you have really good health coverage, you’re more likely to use it, and you might be less sensitive to how much it ultimately costs, as long as you’re not paying too much out of your own pocket.

This is a big part of the health care debate right now

There is an ongoing debate in American health care about this: Does asking people to pay more for their own health care turn them into better customers, who spend smarter and thereby help bring down costs? At the same time, the American people have made pretty clear that the costs they already have to pay for their health care are weighing them down. They want plans with cheaper premiums and lower out-of-pocket costs.

Some economists, and many Republican politicians, argue that people should have plans with higher deductibles (and tax-preferred bank accounts to pay them) — so that they have more “skin in the game” with their health care. The thinking is that if you have to pay more of your own money for your health care, you’ll be a smarter consumer. Obamacare got at this idea by introducing a “Cadillac tax” levied on the most generous tax plan. It was expected that many plans, like the WGA’s, would then tighten their benefits and that would drive down costs by forcing people to be more discerning in their health care choices.

The union, as might many Democrats, would counter that this doesn’t actually work in health care. There’s a big difference between comparing the price of different refrigerators and the price of different surgeries. (My colleague Sarah Kliff detailed her own experience trying to shop for an MRI and how difficult this can be.)

That’s the same argument the Writers Guild makes against the Cadillac tax itself:

The supposed motivation of the tax is to force patients to think as consumers, which is both misguided and ill-founded. It is misguided because price comparison shopping is neither practical nor desirable for a sick and worried patient. It is ill-founded because the price information is not available to a patient seeking care. Cost management can be done by plans, but it won’t be achieved by forcing them to cut benefits to avoid a bankrupting tax.

There’s also pretty good research indicating that high-deductible health insurance doesn’t actually encourage people to shop around. If anything, they just decide to skip out on care.

The writers’ union also says it is already taking steps to reduce health care costs. Its plan encourages writers to utilize a special network of doctors and specialists with which it contracts, a common practice for plans to lower costs. It has rejiggered its prescription drug benefits to prioritize lower-cost medications first and moving to more expensive drugs only if the cheaper alternatives don’t work.

It’s put what it calls “reasonable” caps on how much it will pay for mental health treatments — which, as you can see in the chart above, is a fast-growing part of its medical bills. A federal law, passed in 2008, required health plans to cover behavioral health services as robustly as they cover ordinary medical care.

Yet, even after taking those steps, the cost problem clearly hasn’t been solved.

The same thing happens on a national level. We don’t yet have a systematic solution to lowering costs for the whole country. We’re trying a lot of things — shifting away from paying for each individual service to paying a group of doctors for treating one patient or paying based on the quality of care provided. Encouraging people to try lower-cost treatments first. Trying to keep people healthy rather than treating them only once they get sick.

These are a lot of the same things the WGA is trying. But there isn’t a silver bullet — even with this year’s Saturday Night Live finale at risk.

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