04/04/2009 05:12 am ET Updated May 25, 2011

Will The VA Take On Big Insurance?

The Department of Veterans Affairs faces a crucial decision: Will it take on the private insurance companies that have long enjoyed a free ride at the VA's - and taxpayers' - expense? The drive by the Obama administration to move the nation toward universal coverage while reining in health care costs could compel the agency to do just that.

The casus belli is something called "coordination of benefits," or COB.

Some 2.2 million veterans enrolled in VA health care also have private health insurance. (These are typically policies from an employer that cover the veteran as well as his or her family.) Private insurers routinely coordinate - meaning share - benefit payments for patients who have multiple care plans - unless, that is, the patient is a veteran treated at the VA. If the veteran receives private care, the insurers coordinate. When it's provided by the VA, they abdicate.

If VA Secretary Eric Shinseki decides to take on the insurers over COB, it could prove the first shot in a broader war against Big Insurance, the most obdurate opponent of universal health care.

In his State of the Union address before Congress last Tuesday, President Obama warned that we can no longer put off addressing "the crushing cost of health care":

"This is a cost that now causes a bankruptcy in America every thirty seconds. By the end of the year, it could cause 1.5 million Americans to lose their homes. In the last eight years, premiums have grown four times faster than wages. And in each of these years, one million more Americans have lost their health insurance. It is one of the major reasons why small businesses close their doors and corporations ship jobs overseas. And it's one of the largest and fastest-growing parts of our budget."

An estimated 47 million Americans currently have no health care coverage. Yet, millions of others have multiple plans with overlapping coverage. That's just one of the many reasons Americans spend more on "health" but enjoy less of it than many other countries.

The U.S. annually spends $6,102 per capita (2004 data) on health care - more than twice the average of the world's 30 advanced democracies. Yet, in terms of that bellwether of health measurements, life expectancy, we ranked 37th, just behind Cuba (78.3 years,) and well below Japan, which is in first place (82.6 years.)

In years past, organizations representing doctors, hospitals and businesses militantly opposed universal health care. In the Sixties, for instance, the American Medical Association (AMA) led the charge against Medicare and hired Ronald Reagan to tour the country on its behalf. He even made a long-playing record for the AMA in 1961 entitled: "RONALD REAGAN speaks out against SOCIALIZED MEDICINE." (The capitalization and italics were in the original.)

How times have changed. In 2007, the AMA launched a web site,, and began spending money on TV and print ads to raise public awareness of the plight of the uninsured and build support for universal coverage.

Labor unions - long among the leading advocates of universal health care - are now teaming up with corporations to present a unified front. A recent blog entry in Huffington Post, "Why Healthcare Can't Wait," is symbolic of the new alliance. Written jointly by Andy Stern, the president of the two-million-member Service Employees International Union, and Jeff Kindler, the chairman and CEO of the pharmaceutical giant, Pfizer, Inc. ($48.3 billion in 2008 revenue), this unlikely duo spoke with one voice:

"America loses an estimated $207 billion every year due to the poorer health and shorter lifespans of those lacking good coverage. Another $1.3 trillion is lost through easily preventable and treatable chronic conditions, such as hypertension, asthma and heart disease."

Though the insurance companies remain a powerful force with deep pockets, many of their onetime allies have defected to the other side. The details of universal care still need to be hammered out in Congress, but this labor-business-medical-pharmaceutical alliance appears united in its opposition to business as usual. Apart from the hard right of the Republican Party - ever at the ready with recycled talking points and many-splendored tax cuts - Big Insurance stands alone.

Health care costs have tripled since 1960 and now consume more than 15 percent of the U.S. Gross Domestic Product. They can't keep going up. That means the go-go years of ever-soaring insurance profits are gone-gone. If the insurance companies are willing to take the long view and work with, rather than against, "Obama Care," they could contribute to the solution.

In his speech before Congress, President Obama put it this way:

"I suffer no illusions that this will be an easy process. It will be hard. But I also know that nearly a century after Teddy Roosevelt first called for reform, the cost of our health care has weighed down our economy and the conscience of our nation long enough. So let there be no doubt: health care reform cannot wait, it must not wait, and it will not wait another year."

Coordination of benefits is important for the VA to offset the rising costs of veterans' medical care. But the issue could also prove a diagnostic test for Big Insurance. Will the insurance carriers remain an obstacle to be overcome, or will they choose to become a partner in designing and achieving universal health coverage? How they respond on this issue may well prefigure where they will stand when the battle begins.