Antidote Logo

How healthcare played a role in Detroit’s auto-industry downturn

Aug 23, 2021
By
Cardiologist, Gracie Square Hospital

Was Healthcare The Unseen Casualty Of Detroit’s Downturn?

Reckless driving, that is the only way to describe the way the auto industry was operating before the 2008-09 crash. As the debt crisis sent ripples throughout the global economy, Detroit and its auto industry had to face the consequences of their financial behavior.

Nevertheless, the auto industry got the government to intervene on its behalf, avoiding the fatal blow. It was Detroit and mainly those who worked in this industry who bore the brunt of the crash. Healthcare played an important and often overlooked role in the aftermath of this crash.

Government Saves the Day?

Private sector healthcare is dominated by employer benefits. Employees tend to get coverage through the health insurance as part of their compensation package. After the crash, the Affordable Care Act came in and saved many of the people who lost their insurance in Detroit and elsewhere in Michigan.

But that is just part of the narrative. The events of 2008-09 had a profound effect and could have set a precedent for healthcare coverage in the US, albeit not necessarily for the standard of care.

The Players & the Game

Believe it or not, it was not the Obama administration the first to have the government step in given the healthcare coverage void that the auto industry left:

·      Obama signed the Affordable Care Act – Obamacare – into law on March 23rd, 2010

·      Auto industry bailouts started about a year and 4 months before Obamacare

·      GM and Chrysler got a bailout from President Bush on December 19, 2008

·      Just about a month earlier, in November 2008, GM had asked for a bailout to cover healthcare costs among other reasons [1]

GM used the idea of government funded healthcare through the bailout to justify the $5 billion USD that it got from the Bush administration. When Obama came in, his administration gave GM an additional $17 billion USD in bailout money.

Detroit’s Problems Deepened

We now know that the Big Three, Detroit’s auto manufacturers– Ford, GM, and Chrysler – managed to come back from the brink of bankruptcy. Thanks to the generosity of the government:

·      GM managed to recover

·      This company finally turned a profit in the third quarter of 2015 [2]

·      That was after the bailout, a chapter 11 bankruptcy, layoffs, and plant closures

·      Chrysler also went through bankruptcy, including a 42-day long shut down

·      The government extended a$4 billion USD loan to Chrysler

·      And Fiat took advantage of this, buying the company out 2009

·      A new look Fiat-Chrysler –FCA – launched a successful IPO in 2014

Only Ford managed to stay afloat on its own. It sold some of its brands and subsidiaries to other auto manufacturers to raise money. The city of Detroit was left reeling after some of its biggest employers cut jobs to remain above water. Detroit did not get a bailout in 2008-09.

chrysler goes bankrupt
Chrysler was one of the companies that failed.

Detroit Declares Bankruptcy

It is important to understand the 2008-09 economic downturn within the context of a decades old process of decline in Detroit:

·      1.8 million people called Detroit their home in 1950

·      That number declined since to 700,000 in 2010, according to the census [3]

·      Many people relocated to the suburbs thanks to the highway system

·      Nevertheless, the economic downturn took a toll on a city that had already lost 60% of its population since 1950

·      This led to an inevitable bankruptcy in 2013

·      The Obama administration did not bail Detroit out

Suddenly, the rate of uninsured people surged, as the municipal government looked for efficiencies and laid off employees. Many of those employees lost their health insurance as a result of the layoffs. Detroit became the city with the highest rate of uninsured people in the State of Michigan.

Rate of Uninsured People

Detroit set a record for the biggest municipality ever to declare bankruptcy. The rate of uninsured people jumped to 11.3% in 2013according to the United States Census Bureau.[4]Looking at the adult population, the rate of uninsured people among adults increased to 18% according to state data. [5]

Even though the rate of uninsured people declined in Detroit since, it is still high:

·      Detroit had the highest rate of uninsured people in the State of Michigan at one point

·      The rate of insured people has been rising, and is now around the same as the average for the US

·      Nevertheless, the highest rate of uninsured people in Detroit are working age adults – aged 18 to 64

·      12% of this population segment has no insurance

·      Public insurance is now the biggest source of health insurance in Detroit

·      49.7% of people have public insurance

·      96.5% of people who are 65and older rely on Medicare [6]

Looking at Healthcare Data in Light of Employment Statistics

It is important to consider health insurance numbers within the context of employment statistics. Keeping in mind that the majority of the people in the US still prefer private insurance to public insurance – According to a Gallup poll, 54% still prefer private insurance [7]- public health insurance coverage should not be as high as it is in Detroit:

·      Unemployment in the city peaked at 17.2% in July 2019 – after the auto industry restructuring[8]

·      Ever since, it trended down despite Detroit’s bankruptcy

·      In November 2019,unemployment bottomed out at 3.5% in the Detroit area [9]

·      Due to the pandemic, a weak but recovering Detroit labor market suffered

·      Unemployment in the Detroit area was at around 6.3% in October 2020

·      Wages in the auto industry are generally higher than the average in the US

·      Detroit wages continue to be above the national average

·      Wage growth has also kept up with the national average

Given this information, it is strange to see that the majority of working age people in Detroit have public insurance. The data suggests that employer benefits are not as good. Probably employer insurance plans are not as attractive.

Employers might be taking a page out of the auto industry playbook, allowing the government to step in. This might affect the quality of healthcare that people in Detroit have access to

Detroit’s Health

Life expectancy statistics in Detroit paint a grim picture. The numbers speak for themselves:

·      People in Detroit live 16years less than their peers in the suburbs [10]

·      Poor people in Wayne County– which includes Detroit – rank 95 out of 100 in terms of life expectancy within the most populous counties in the US [11]

·      As of 2016, life expectancy in Detroit’s Cass Corridor was 69 [12]

At least some of these issues are preventable. Proactive healthcare with regular check-ups, better eating habits, more physical activity, and more education at the level of the patient, could help people in Detroit live longer.

Of course, if you have the right health plan then it is even more attainable. It is difficult to take care of your health proactively if:

·      High fees to pay to visit the doctor each time

·      Low coverage levels

·      High deductibles

·      A system in which there are just not enough resources to give you timely

·      Not enough high-quality advice  

Proactive Healthcare Failing

healthcare failures

Besides the people who are not insured, those who have access to public insurance are clearly not getting everything they should out of the system. Proactive measures to raise the level of those who live a healthy life in Detroit, is clearly failing. The numbers do not lie:

·      The urban landscape in Detroit is noticeably car friendly

·      There is a deficit of green areas for people to walk and lead healthier lifestyles

·      Detroit has three times the rate of childhood asthma than the national average [13]

·      Healthcare coverage is also failing at some point

·      Citizens of Detroit have an incidence of heart disease that is 50% higher than the national average[14]

Is the Auto Industry Responsible?

There is a clear correlation between the pulse of the auto industry and the health of the people who live in Detroit. Those who could, left the city. Those who stayed, had to endure the economic meltdown of2008-09.

Detroit is clearly still reeling from that downturn. The city declared bankruptcy in 2013. But it is impossible to blame the auto industry or the Federal or State governments entirely for this failure.

Detroit: Another Kind of Dutch Disease

In a way, Detroit suffered from Dutch Disease tied to the auto industry. When the Detroit Three were booming, the city grew. Its population enjoyed a good job market and employers provided health insurance.

Nevertheless, the city declined when the auto industry in the US started suffering. Japanese, Korean, and even European auto makers took a slice of the market. Auto manufacturers relocated to cheaper, more favorable jurisdictions. Then whatever was left in Detroit suffered during the 2008-09 meltdown.

Detroit was highly dependent on the auto industry. It failed to diversify, just as much as oil-dependent nations have failed to do so. Moreover, labor became specialized: skilled in the auto industry sector and less so in other industries.

The result is a city that not only depended on GM, Ford, and Chrysler, but was also built for cars at every level:

·      Physically, with highways going through the city and less green areas

·      Economically, with people specializing in everything that could land them a job within the auto industry

·      Health-wise, with a lack of focus on how everything else would affect the health of Detroit’s citizens

Healthcare: The Unseen Casualty in Detroit

A more granular approach shows us that the 2008-09 downturn just pushed an already stressed city over a cliff. The COVID-19 pandemic struck just as the city was recovering, after a nasty bankruptcy process in 2013.

Along the way, the statistics show a clear story. Ordinary people suffer, and the focus is almost always on the economy, while the effect of all this process on healthcare, is understated.

The good news is that Detroit can rebuild better if it focuses on the low hanging fruit first. Yes, better health insurance, with more insured people and more private healthcare alternatives, are all part of the solution.

But that is just one part of the problem. Keep in mind that Detroit’s numbers in terms of people who have health insurance coverage, is close to the national average. The rate of change in terms of people who are getting coverage is above the national average.

Yet heart disease and asthma are much higher than the national average. Life expectancy is staggeringly low for a developed nation and very low compared to people who live in other counties in the vicinity of Detroit.

Unfortunately, public healthcare is not filling the gap there with proper medical advice, encouraging people to do their annual screenings, and providing advice for a healthier life. On the other hand, the municipal government has not dealt with urban design to give poorer people more options to lead a healthier life.

The Auto Industry is Gone!

The auto industry suffered a blow, and it is not likely to grow back to its glory days. Detroit cannot count on a renaissance of that sector to bridge the gap. Just take a look at Tesla, the newest car maker in the US that grew by leaps and bounds to overshadow every other US car maker in terms of valuation.

Tesla has nothing to do with Detroit. Its headquarters as well as its manufacturing are in California. Only Toyota has a higher valuation than Tesla within the car industry, and it is, of course, headquartered in Japan.

Manufacturing has also moved elsewhere within the US and to Mexico. Even foreign brands like Honda and Toyota have manufacturing plants in other states and not in Michigan, let alone the Detroit area.

Taking Care of Healthcare in Detroit

It is time for Detroit to get past its auto industry Dutch Disease and take care of healthcare. The trend is clear and has been for decades, with or without economic downturns and pandemics. The health of the city no longer has anything to do with the Detroit Three, but rather with the municipality.

Detroit must take care of its urban planning, taking advantage of abandoned buildings to create green spaces.[15] Its municipal government must also make sure that those who live in Detroit are well educated in how they can improve their own health.

Beyond the pandemic, it is time to think about healthcare differently at every level. It is imperative to internalize that the unseen casualty of the auto industry downturn in Detroit, is healthcare, which created a boomerang effect that is hitting the economy of this once vibrant city, harming its recovery prospects.

 

 

 


[1] GM, Ford, and Chrysler almost died a decade ago during the financial crisis — here is how the auto giants have changed since, Business Insider, September 16,2018. Retrieved on December 30, 2020.

[2] Ibid.

[3] Detroit Census Confirms a Desertion Like No Other, New York Times, March 22, 2011. Retrieved on December 30, 2020.

[4] Detroit Metro Area Uninsured Rate Down from 2013, United States Census Bureau, September 17, 2015. Retrieved on December 30, 2020.

[5] Who Are the Uninsured in Michigan, Household Survey on Health Insurance, Government of the State of Michigan. Retrieved on December 30, 2020.

[6] Detroit Michigan Healthcare Data, Town Charts, 2019 figures. Retrieved on December30, 2020.

[7] Americans Still Favor Private Healthcare System, December 4, 2019. Retrieved on December 31, 2020.

[8] Unemployment Rate in Detroit-Warren-Dearborn, MI (MSA), Fred Economic Data, Data form US Bureau of Labor Statistics, Retrieved on December 31, 2020.

[9] Ibid

[10] Lifespan for Detroit’s poor among shortest in nation, The Detroit News, June 2,2016. Retrieved on December 31, 2020.

[11] Ibid

[12] Ibid

[13] Rebuilding Efforts in Detroit, Michigan, National Center for Biotechnology Information. Retrieved on December 31, 2020

[14] Ibid

[15] Ibid

Back
Next post

$49 only

Install our app now and see doctor in minutes.

No hidden costs.

Get Started
$49 only