Healthcare Business Looking Bleak With Possible Government Intervention

(MoneyWatch)  There are very few businesses and industries in the United States that the Federal Government is the major customer. Granted its spends a great deal of money on many things but other then defense spending it hardly makes up the bulk of customers. Now with the Obama administration moving to prop up various parts of the economy the government is not only a customer but even an owner at least temporarily.

Now of course there is a big push for reform of the medical industry in the United States. The plan being discussed in Congress will provide for much greater involvement in that business with, if some are to be believed, ultimate ownership by the government. Now the plan does not call for total socialized medicine but it provides for state and Federal plans to compete with all private insurance. These may end up due to cost reasons and other parts of the proposal being the choice for a majority of Americans. This is especially true if like when states like Hawaii, Tennessee and Massachusetts have tried providing basic health insurance employers stop providing health care relying on the government plan to cover their employees.

The very fact that this type of plan is being discussed in Congress has started to weigh on the health insurance industry. As BNET Healthcare blogger, Ken Terry, writes "Standard & Poor's is maintaining its negative outlook on the health insurance industry, according to an article by two S&P analysts in Business Week. The two main reasons are the continuing deterioration of the economy, which is increasing unemployment and the associated loss of insurance, and the uncertainties engendered by health-care reform efforts in Washington."

The concern about the government plan is that all insurance will move to a level cost and benefit. This will make it hard for any company to differentiate itself and provide a good product for a price that will allow it to remain profitable. The companies are also losing paid customers due to the growing unemployment. Less people working mean less are getting their health care through their employer and it is affecting the insurance companies bottom line.

The American Medical Association (AMA) has entered the debate by saying they don't see a need for a government sponsored insurance plan. They believe, like the S&P analysts above, that the public plan will just reduce private insurers and move people to government plans. These plans will have to be like Medicare where the government restricts payment amounts and this combined with the hassle of dealing with the bureaucracy means many doctors refuse Medicare or Medicaid patients. A component of the current legislation that the AMA objects to is a requirement that doctors accept the public plan patients.

The Obama administration has already reordered the financial industry and the car industry. There is no denying some reform or restructuring of the medical business is needed just to try and reduce costs. Of course the corollary to that is if costs are controlled some people may not get all of the care that is necessary. If the government does move into the medical insurance business in a big way beyond Medicare and Medicaid which cover the elderly, disabled and very poor there may be a disappearance of successful health insurance providers.