Sick About Health Care

With the population aging, insurance companies consolidating and managed-care cost containment out of favor, these trends seem likely to continue, said Paul Fronstin, director of health research at the Employee Benefit Research Institute.

"It's sort of the makings of a perfect storm," he said.

In such numbers, Sen. John F. Kerry (Mass.), the presumptive Democratic nominee for president, sees an opportunity to peel business support away from President Bush. He devoted an entire week this month to discussing his $650 billion health care plan. And last week, campaign aides, led by investment banker Roger C. Altman, began formulating a program to woo chief executives to talk up aspects of the plan, if not endorse the Democrat.

Both Kerry and Bush have health care proposals. Bush would offer lower- and middle-income families a tax credit worth roughly $1,000 to purchase health insurance on their own. Costs would be held down by controlling medical malpractice lawsuits. Small businesses would be allowed to pool together to bargain for better private insurance deals, and tax-favored medical savings accounts would be expanded to defray out-of-pocket expenses, all at a 10-year cost of about $120 billion.

Kerry would offer a considerably larger -- and, at $177 billion, more costly -- tax credit. Unlike Bush, he would give individuals the option of purchasing insurance from the same federal employees' health care plan that members of Congress use, an option that he says would bring down premiums significantly. He would also expand children's eligibility for Medicaid and allow more parents to obtain coverage through the federal children's health insurance plan.

Under the plan, small businesses could buy into the federal employees health care plan with a tax credit to cover up to half the cost of employee premiums. Because one serious illness can send a small business's insurance costs skyrocketing, the government would cover up to three-quarters of "catastrophic" medical costs over roughly $50,000 for any business, large or small, that covers its employees and adopts "disease management" to hold down costs for the chronically ill. The disease management provision and a tax incentive for medical technology adoption should hold down health care costs by $250 billion to $300 billion over 10 years, Kerry advisers say.

Kerry's idea of a national insurance pool to cover catastrophic costs may be a seed for bipartisan reform, said Bruce Josten, chief lobbyist for the generally Republican U.S. Chamber of Commerce. Earlier this month, three conservative economists -- including the first chairman of Bush's Council of Economic Advisers -- published a lengthy opinion piece embracing a similar proposal.

But have business groups embraced Kerry's efforts?

"The Kerry plan doesn't solve the cost problem," answered Helen Darling, president of the National Business Group on Health, which includes 46 of the 100 largest U.S. companies. "It shifts private sector costs to the government, but in so doing, it creates a blank check. . . . Bush is at least less likely to drive up costs because he's doing so much less."

Klein said businesses are increasingly frustrated and looking for a dramatic shift in health care policy. But they have an engrained fear of government solutions, which they believe will exchange their insurance costs with an ever-escalating tax bill.