GMAT Reading Comprehension
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Source: PREP
Level: 3
Many United States companies believe that the rising cost of employees' health care benefits has hurt the country's competitive position in the global market by raising production costs and thus increasing the prices of exported and domestically sold goods. As a result, these companies have shifted health care costs to employees in the form of wage deductions or high deductibles. This strategy, however, has actually hindered companies' competitiveness. For example, cost shifting threatens employees' health because many do not seek preventive screening. Also, labor relations have been damaged: the percentage of strikes in which health benefits were a major issue rose from 18 percent in 1986 to 78 percent in 1989.
Health care costs can be managed more effectively if companies intervene in the supply side of health care delivery just as they do with other key suppliers: strategies used to procure components necessary for production would work in procuring health care. For example, the make/buy decision--the decision whether to produce or purchase parts used in making a product--can be applied to health care. At one company, for example, employees receive health care at an on-site clinic maintained by the company. The clinic fosters morale, resulting in a low rate of employees leaving the company. Additionally, the company has constrained the growth of health care costs while expanding medical services.
The author of the passage asserts which of the following about managing health care costs in an effective manner?
- A Educating employees to use health care wisely is the best way to reduce health care costs.
- B Allowing employees to select health care programs is the most effective means of controlling health care costs.
- C Companies should pass rising health care costs on to employees rather than to consumers of the companies' products.
- D Companies should use strategies in procuring health care similar to those used in procuring components necessary for production.
- E Companies should control health care costs by reducing the extent of medical coverage rather than by shifting costs to employees.