Socialized medicine? From Republicans?

(FORTUNE Magazine) – WHAT DO GENERAL MOTORS' WOES, the Medicare prescription-drug law, the state and local health-care time bomb described in the previous story, and Congress's recent refusal to trim soaring state Medicaid subsidies have in common? They're all stones on the path toward the nationalization of health-care spending--an idea that's so easy to slam politically yet so sensible for business that only Republicans can sell it! Before everyone screams, please note that I said health-care spending, not delivery. There's a difference. GM's recent profit warning proves its business is reeling; one reason is the $5 billion--plus a year it spends on health care, or $1,500 a car. Automakers in countries where governments fund all health spending don't lug around that ball and chain. But the auto sector is just an extreme example of the stresses facing all U.S. employers after years of double-digit health-cost increases, with no end in sight.

To call GM's "answer" a Band-Aid, however, is an insult to half-measures everywhere. GM is begging the UAW to reopen its contract and end generous coverage that features virtually no premiums or deductibles. Yes, it's doubtless time for those in gold-plated plans to have some skin in the game. And yes, it may save GM $500 million a year. But let's be clear: GM simply wants to shift costs to workers. That does nothing to lower the trajectory of health costs over time.

Still, there's a potential common agenda lurking beneath today's health-cost angst. Think of it as a two-step: First, we'd move a chunk of private-sector health costs to government, something business and labor could embrace as a competitiveness booster. Then we'd find ways to guarantee coverage for all while reengineering health-care delivery to lower costs in the long term (without the price controls that stall innovation abroad). Easier said than done, you may say. But seen in this context, the prescription-drug bill last year was the first step in the Republican-led socialization of health spending. Companies have been clobbered funding retiree health plans. The GOP felt their pain, and presto, $750 billion over ten years moved from private to public budgets.

If, as CEOs argue, it's a historical anomaly that they're in the health-benefits business at all, what might the path look like from here to rationality? There would be 1,000 details, of course, and the usual Washington moans and groans, but consider the following conceptual roadmap. Start with a grand bargain that asks current employers to keep, say, 80% of their roughly $400 billion health spending in the game--and pledges to hold them harmless from increases in future health costs. In exchange, business would support the general tax increases needed to plug the $80 billion annual hole this "business health-cost relief" would create.

While most CFOs would jump at the deal, it's dicey to pull off. Why? If you keep business cash in the pot via, say, a payroll tax, firms that spend more than that today will "win," while those with chintzier benefits "lose." Still, today's system is so nuts that the level playing field and cost certainty such an arrangement would create should be appealing. An alternative is to get those costs off business budgets altogether and fund them via a VAT, a swap that perhaps only the GOP backed by business could sell as sound policy--and maybe you'd then enact universal coverage via a national health-care voucher, as Stanford's Victor Fuchs has suggested. (States and cities would also back such a plan, if it were tied to a federal takeover of their own health liabilities.)

The bigger hurdle may be stereotypes. Business's sensible drive to get Uncle Sam to take on more of the health burden will run into the nihilistic (but potent) "big government" rhetoric of the GOP--plus the party's delusion that we can keep federal taxes at 17% to 18% of GDP as the boomers retire. If Republican pols want to help Republican CEOs solve their biggest problems, this caricature of a political philosophy will have to give way to something more grown-up. Just as the Nixon-to-China theory of history says it will ultimately take a Democratic President to fix Social Security, it may take a Republican President to bless the socialization of health spending we need.

Getting there will take time, vigilance to ensure that more federal cash doesn't mean the dreaded "government-run health care," and probably golden parachutes for all the human resources senior VPs whose benefits empire this vision threatens. But something like it is doable. Ask yourself: When we're on the cusp of decades of wrenching challenges from places like China and India, doesn't American business have enough to do without managing health care too?

MATT MILLER is the author of The Two Percent Solution: Fixing America's Problems in Ways Liberals and Conservatives Can Love, out in paperback. Read the new afterword and more at