Medicare Expansion Raises Concerns

The public option component of President Obama's health reform plan is dead (again) in the U.S. Senate but the alternative is already getting a thumbs down from some industry groups.

A group of Democratic senators reached agreement last night to drop plans for a new government-run insurance program. The controversial plan was to compete with private insurers like UnitedHealth Group Inc. and WellPoint Inc. The program would cover tens of millions of uninsured Americans but critics said it would expand the feds' already large oversight of health care and cost taxpayers.

In it's place: an expansion of Medicare and a non-profit insurance plan set up by private companies. The non-profit program is modeled on the insurance system for U.S. government employees. Private insurers provide coverage under the feds' watch.

The Medicare plan would allow some people 55 to 64 to buy into the government program. Currently, the government's health plan for seniors isn't offered to anyone under 65. The plan would cover up to 3 million people who have trouble getting insurance now. The Congressional Budget Office will have to analyze how much this idea will cost.

One problem with the Medicare proposal is that it's still an expansion of government coverage opposed by some industry and business groups. Doctors and hospitals don't like Medicare because reimbursements sometimes don't cover the cost of treatment. Employers say they end up paying higher insurance rates because Medicare health care providers have to make up for losses somewhere.

Charles "Chip" Kahn, president of the Federation of American Hospitals, told the Wall Street Journal the plan was "problematic." Kahn's group represents for-profit hospitals like Tenet Healthcare Corp. and HCA Inc.

The country's largest doctors' group, the American Medical Association, also opposes expanding Medicare.

The insurance industry, which dodges a bullet with the demise of the public option, doesn't like it either.

"It will exacerbate the underfunding of hospitals and physicians, and those costs will be shifted to families and employers with private coverage," says Robert Zirkelbach, a spokesman for the lobbying group America's Health Insurance Plans.