Okay, the following story may seem a little dry at first, but bear with me. Last week, U.S. grain giant
Cargill corporation announced it was
beginning a novel program to help small farmers in 18 Western and Midwestern states pay for health insurance. Now, I want to get this out of the way at the outset: small farmers are suffering financially, their incomes are often unpredictable and/or simply insufficient to cover farm costs, and the cost of health insurance premiums for this population has skyrocketed, perhaps up to +60% since 2000 (note this last number comes from a Cargill press release, but it is probably not
too exaggerated). It
is important to find some way for small farmers to control health costs. So let's take a look at Cargill's plan-- and some of its larger implications-- below the fold.
As far as I can ascertain, Cargill's program (called "HarvestHealth") will follow a pattern much beloved currently by the Bush Administration: a combination of high-deductible health plans (HDHPs) and special medical savings accounts (MSAs). Participants will first locate a high-deductible plan of their choice, either through a local agent or online. A typical HDHP might have a family deductible of $2500, for instance, but have lower premiums than the low-deductible plans many of us receive through an employer. $2500, of course, is a lot of money to potentially pay out-of-pocket, on top of your premiums. So the second step of the Cargill insurance plan is for participants to open a health savings account with Wells Fargo Bank (and, yes, it
has to be Wells Fargo). Here's the deal: Cargill will contribute money to this MSA
if you, the farmer,
contract to sell Cargill a certain percentage of your grain.
So are the details of this plan beneficial for farmers in the short term? An MSA is tax-exempt; and, unlike in many of the health savings accounts offered by employers, farmers would not lose all unused health savings at the end of the fiscal year. All savings would roll over and be usable for future health crises, a real plus. Cargill will contribute "up to" the legal maximum (I assume depending on how much grain you are selling them), which is $5450 for a family and $2700 for individuals; they will not contribute more than the amount of the deductible nor can you use the money to pay insurance premiums, but you can use it for any other incurred health costs. The minimum grain "contribution" to participate is 3000 bushels. Cargill will not contract for more than 25% of a farmer's total crop (I am unclear as to why this is; if anyone has insight into it, please tell me).
Here's the way Cargill explains their plan:
A farm family of 5 decides to take advantage of Harvest HealthTM by first signing up for an HSA-eligible high deductible health plan and a Wells Fargo HSA. The family chooses a health plan with a $2,500 deductible, resulting in a lower monthly insurance premium than an insurance plan with a lower deductible. Once their Wells Fargo HSA has been established, the family decides to fund their account for the entire amount of their deductible. In exchange for committing 25,000 bushels of corn to Cargill at a maximum price of $2.50/bushel, Cargill deposits $2,500 into the family's HSA account.
You know, if I were a struggling farmer, I might go for it. The plan fills an immediate need. It doesn't sound as though I would be secretly burned by the fine print. On a purely individual, short-term basis, it's not a bad offer.
But it's not the fine print we need to look at here. It's the big picture. What happens if we widen our focus beyond immediate individual survival?
First of all, to whom am I promising a significant proportion of my harvest?
Three companies (Cargill, Archer Daniels Midland, and Bunge) control about 90% of the global grain trade. In 1999, Cargill, which was the #1 U.S. grain supplier, acquired Continental Grain Co., which was the #2 U.S. grain supplier, and became humongous. Says Robert Schubert of CropChoice.com:
Cargill is big. It's the nation's largest private corporation. With 82,000 employees in more than 60 countries, the company markets, processes, and distributes agricultural, food, financial and industrial products. It's the third largest beef packer, fourth largest pork packer, number three turkey processor and number two owner of animal feed.
A 1999 Baltimore Chronicle article calls Cargill a "commodities king-maker," and notes that it owns "29 subsidiaries spanning the manufacturing, financing, wholesaling and transportation of dozens of food crops, livestock and commodity futures. Its scope captures nearly every aspect of food production, including seeds, fertilizer, feed grain, cattle feed lots and contract hog production."
Guaranteeing Cargill a predictable portion of many desperate farmers' grain will only strengthen their consolidation of power in the agribusiness sector. Certain large disadvantages to small farmers will intensify as a result. For instance, the reduction in the number of buyers for farmers' grain has led, unsurprisingly, to a depression in the prices they receive for that grain. Between 1984 and 1997, the price (adjusted for inflation) of a market basket of food rose slightly (2.8%). However, during the same time period, the amount the farmer received for that same food dropped by at least 35%. Over the 1990s, the rate of return on equity has been 18% for retail food chains and 17% for food processors. For farmers, it has been merely 4.5%. Obviously the profits from stable/increasing food prices are not being passed on to small farmers.
The same Baltimore Chronicle article cited above also points out the trade-offs between scale and diversification:
As Cargill and its corporate colleagues conquer market after market, they eliminate the farmer survival strategies like diversified agriculture. "There are many producers throughout the Midwest who have depended on diversifying their crop and livestock operations, which included hogs, to round out their production to make it more profitable," Crabtree [of the Center for Rural Affairs] explains. "[The corporations have] taken one big important piece of that and made it less competitive and a less profitable market for small producers. Farming in the Midwest has always been reliant on the family farming unit of production....Diversification has been the key to survival. But as we have driven more and more of the small producers out of particular sectors like hogs, they become less and less diversified and less and less able to survive those economic downturns."
The question of diversification may also arise in connection with Cargill's requirement that farmers contract at least 3000 bushels of grain in order to participate in HarvestHealth. For the sake of argument, suppose you are getting 125 bushels of grain per acre; in order for 25% of your harvest to amount to 3000 bushels, you would have to have about 100 acres in grain. That's not a vast area, certainly, but it might be enough to prevent some farmers from parceling their land into diverse uses.
Finally, Cargill already has immense political influence over national and even international agricultural policy (it was a former Cargill vice president, Dan Amstutz, who was appointed in 2003 to lead the notorious agricultural "reconstruction" in Iraq). If small farmers give up some of their independence in order to become, in a sense, partial "employees" of Cargill, enormous agribusiness corporations will derive even more economic and political power to rig the game in their own favor. In the long run, more power to Cargill and its ilk means the accelerated decline of family farming as a financially-viable way of life, accessible health insurance or no. For this reason I cannot see Cargill's plan as altruistic or generous, or really anything but sinister.
A final warning that is not limited to farmers: according to the Center on Budget and Policy Priorities, widespread use of the medical savings account/high-deductible policy combination could cause the cost of low-deductible, comprehensive health insurance to skyrocket. As a result, many employers might no longer be able to afford to offer such plans as they do now, forcing currently-covered employees to also sign on to HDHPs and MSAs. Are we surprised that the Bush administration likes this idea? Can you say "personal accounts"?
Let's work towards universal coverage instead.