A Premium from Medicare

The insurance industry was second only to the medical profession in battling the advent of medicare. For years, insurance lobbyists in Washington opposed any Government-sponsored health-insurance program. Last week the insurance industry's representatives were still active, but this time it was at the huge social-security complex on the outskirts of Baltimore, where they are negotiating with the Government to get their share of medicare. Most insurance companies now realize that medicare, far from being the disaster they once predicted, may prove to be a welcome pep pill for their industry.

Under the medicare law, the new services for people over 65 must be administered by state agencies and private "carriers"--including insurance companies, voluntary associations and group health plans. Such organizations will determine the amount of money owed by the beneficiaries to hospitals, doctors and nursing homes, will actually make the payments, audit the records and set up review groups. After the program goes into effect next July, these private carriers will handle $3.5 billion in medicare funds during the first year.

Most insurance companies are waiting to get all the details about how medicare will function before endorsing it, and some will probably decline to participate. Dozens of companies, however, are busy competing for the Government's one-year renewable contracts to handle medicare, the first of which will be granted early next year. The contracts provide for fees to cover "necessary and proper" administrative costs, but there will be no big profits involved. Why, then, are the insurance companies so anxious to help the once-despised program? Some reasons:

> The fees paid by the Government will take care of at least a part of an insurance company's total overhead, and thus represent a saving.

> The least profitable segment of the population--the estimated 10 million to 11 million people aged 65 and over who are insured by the companies--will be taken off the industry's hands. Health insurance for this group is twice as expensive to write as for the rest of the population, and many insurance companies just about break even on it.

>Once they are administering medicare benefits, the insurance companies will be in an excellent foot-in-the-door position to sell both the oldsters and others certain forms of supplemental insurance, both medical and nonmedical. Medicare, for example, does not provide for private rooms, drugs after release from the hospital, hearing aids.

> Medicare will free an entire age group from paying insurance premiums, thus moving an extra $1 billion a year into the economy. Not only will much of this go for other policies to cover the cost of old age, but the insurance industry naturally stands to benefit by any boost to the economy.

> Medicare will relieve younger family members of much of the cost of providing for older relatives, again freeing money for other expenses--including insurance. Industry officials believe that medicare, though it affects only those over 65, has made other age groups far more conscious of health insurance than they have ever been.

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