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OKLAHOMA CITY -- Health insurance companies such as


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always seem to pay a price for "gifts" from the federal government.

Over the past several years, they have pocketed billions of dollars in government subsidies selling private Medicare plans. They know that Democrats aim to cut those bonus payments, however, so they're searching for new ways to grow. They see universal health care, which could turn 46 million uninsured Americans into potential customers, as their next big opportunity.

President-elect Barack Obama has regularly listed universal health care among his top priorities. Even so, some experts believe, the new president must address his prime concern -- the economic crisis -- before he can think about launching an expensive health care program. As a result, they say, private insurers will likely endure the looming Medicare cuts with little opportunity to offset those losses.

"There isn't going to be a growth driver in the health insurance business for the next few years," predicts Robert Laszewski, an industry consultant who serves as president of Health Policy and Strategy Associates. "It's going to be very bad times relative to the very good times" health insurance companies have enjoyed.

Others still see a real chance for meaningful reform. They believe that the economic crisis has been caused in part by skyrocketing health care costs, which have been blamed for half of all personal bankruptcies and the decline of giant corporations such as

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. As a result, they feel that the country's leaders must address both issues at the same time.

Sheryl Skolnick, senior vice president of CRT Capital Group, belongs to that camp. The veteran health care analyst predicts that Democrats will pounce on the "irresistible opportunity" to pass a comprehensive health insurance bill now that they have the power to do so.

Last time, she reminds, they waited so long for Hillary Clinton to deliver her doomed health plan that they lacked the votes -- and the public support -- necessary to pass it.

"The moral of the story is 'Don't waste time,' " she says. "I think they're going to be very, very swift this time around."

Private health insurers know the stakes are high. Less than 12 hours after Obama gave his victory speech,


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rushed out a press release congratulating the new president and offering to help him with health care reform. The company repeatedly stressed the importance of "individual choice" and insisted that, to create a successful program, "neither the private sector nor the government can do it all alone."

Obviously, companies like Cigna stand to gain a lot. They can win back some of the big accounts they've lost in recent years, as cash-strapped employers dropped their expensive health plans, while adding millions of new customers who never had the money for their high-priced policies in the first place. They face potential disaster, however, if the government decides to replace -- or even compete with -- them instead.

Notably, experts say, the federal government runs the most efficient health insurance outfit in the country. It's called Medicare, they say, and it costs far less than any comprehensive health insurance plan sold in the private sector.

Many Democrats, including Sen. Ted Kennedy (D., Mass.), would like to scrap the current health insurance system and adopt a brand-new program called "Medicare for All." So far, more than 90 members of Congress have already signed on as sponsors of a pending bill that would create a single-payer health insurance system. Several large organizations -- representing doctors, nurses, mayors and even all-American plumbers -- have endorsed the proposal as well.

Democrats know that market-oriented Republicans will soundly reject a government-run system, however, and seem resigned to compromise on a public-private partnership instead. They have pointed to the current program in Massachusetts, which adopted universal health coverage two years ago, as a possible model.

To some, however, that looks like a mistake. While most people in Massachusetts now carry health insurance, they say, many of them still ration their care because they cannot afford the expensive deductibles and copayments in their private plans.

In fact, during the recent election, Massachusetts residents voted overwhelmingly in favor of a nonbinding resolution to replace their current program --which faces huge cost overruns -- with a single-payer health insurance system.

Right now, Obama's own proposal looks a lot like the Massachusetts plan. It differs in one major respect, however. Although it clearly encourages private insurers to participate, it also allows the federal government a chance to do the same.

As a result, many Americans who lack health insurance -- and even some who do not -- could flock to the government-sponsored program.

"Government expansions of health insurance tend to spark debates about crowd-out, which speaks to insured Americans who would drop private coverage to get subsidized government coverage," PricewaterhouseCoopers noted in a detailed report this month. "While the Obama plan would lead to a significant portion of uninsured getting coverage, some of the new money spent would fund those who had insurance before the reform."

All told, the firm concluded, "about a third of the spending -- or $27 billion -- would replace spending on those who currently have insurance."

On the same day that PricewaterhouseCoopers published its report, Sen. Finance Chairman Max Baucus (D., Mont.) issued a comprehensive proposal that could further expand the government's role. Initially, at least, it extends Medicare coverage to aging baby boomers who would otherwise be too young to qualify.

"Medicare would pick up many uninsured people for whom insurance tends to be extremely expensive," Skolnick observes. "But if you lower the age of eligibility to 55, given all the Baby Boomers that includes, you have just made a big leap toward a single-payer system."

Through various programs -- such as Medicare, Medicaid and the federal employee health benefits plan -- the federal government already covers more than half of the nation's health care costs.

To be fair, Baucus has portrayed Medicare as a temporary carrier for older baby boomers who need immediate coverage. Within a few years, he predicts, they will find private insurance companies to cover them instead.

Current Medicare beneficiaries have certainly made that switch. Of the 45 million Americans who now qualify for Medicare, experts estimate, 10 million have opted for private Medicare Advantage plans. Once they make the change, experts add, they tend to like it.

"Our true competition is not the old Medicare," Humana CEO Michael McCallister recently bragged, "because no one ever goes back there."

Customers might choose Medicare if it's a whole lot cheaper, though. Right now, private companies enjoy generous subsidies that allow them to offer attractive benefits and cover their high overhead expenses at a healthy profit. Their private fee-for-service plans, which cost about 17% more than basic Medicare, have proven to be especially popular.

Democrats have long viewed those bonus payments as wasteful handouts, however, and believe that the money should be put to better use. By simply cutting overpayments to private fee-for-service plans, experts estimate, the government could save $10 billion a year. Baucus has already pointed to those savings as a key source of funding for his universal health care plan.

Meanwhile, without help from the government, private health insurers could lose their competitive edge. Because Medicare spends just 3% of its budget on overhead -- and faces no profit demands -- it could offer cheaper prices for the same level of care.

In fact, private insurers have faced a similar challenge already. When Medicare invited them to sell competing coverage about a decade ago, many of them jumped at the chance. They soon found the government payments too small to cover their costs, however, and wound up fleeing from the program.

"When private insurers have gone head to head against Medicare and they didn't have extra payments," Laszewski notes, "Medicare has dominated."

For now, at least, Laszewski sees no chance for a single-payer health insurance system and little chance for any major reforms at all. He fully expects a repeat of 1992, when universal health care seemed like a great idea until it turned into a 14,000-page proposal that Congress couldn't pass and voters decided they didn't really want. He feels pretty confident that lawmakers can't find the money for the massive project, either.

When others look at that same picture, however, they see a full-blown catastrophe that government leaders cannot afford to ignore. They expect Congress to pass a comprehensive health care package but, at the same time, worry about what it will look like in the end.

"Obama made health care reform a central component of his campaign, and he clearly has a mandate to fix our health care system," insists Chuck Idelson, a spokesman for the 80,000-member California Nurses Association. "The issue is whether we're going to tinker with the system and reinforce the very substantial problems that exist or whether we're going to achieve genuine reform."