How GM's labor pact affects us all

The future of healthcare coverage could one day depend on the ups and downs of Wall Street, writes Fortune's Geoff Colvin.

By Geoff Colvin, Fortune senior editor-at-large

(Fortune Magazine) -- The historic deal between GM and the UAW on health benefits is the latest and loudest signal that healthcare will be the largest domestic issue facing the next President. That news, combined with Hillary Clinton's announcement of her plan and the Mayo Clinic's release of its proposal, starts to set the firm outlines of the coming debate.

It will be big and messy, taking us places we haven't imagined, but here's one probable - and surprising - consequence: Americans will increasingly realize that their own health depends on business's health.

The reasoning goes like this. Clinton's proposal defines the left-most boundary of the mainstream debate. Her main Democratic rival, Barack Obama, has a position slightly less liberal than Clinton's. (John Edwards has a more liberal position but seems stuck in third place.)

The most significant feature of Clinton's proposal is that it relies mainly on private health insurance, not a single-payer structure. It's hardly a free-market plan. It would force every American to get health insurance and would subsidize those who might have trouble affording it. But it would be built largely around private insurance companies.

The right edge is imprecise because Republican proposals are sketchier, but none of them would require anyone to buy health insurance. They would alter the tax code to make insurance and direct healthcare costs more affordable, then let people buy what they liked.

For example, Mitt Romney would make individuals' health-insurance premiums and direct expenditures fully tax deductible.

So we've roughly defined the terms of the discussion, which is a major development.

Now consider the GM-UAW deal, which offloads the company's retiree health benefit obligations onto a trust that GM (Charts, Fortune 500) will fund with tens of billions of dollars, assuming union members approve the overall contract.

Similar trusts would presumably be set up at Ford (Charts, Fortune 500) and Chrysler. When that happens, hundreds of thousands of retirees will depend for their benefits not on negotiations with employers and not on government, but on the performance of the investments in those trusts - the stocks and bonds of thousands of corporations.

The emerging big picture is that no matter what happens, most of us will bear more responsibility for our healthcare expenses than we do now.

Clinton's plan would make America's 47 million uninsured get coverage, throwing them into the world of premiums, deductibles, and tax credits - a long way from the current system of just going to the emergency room and letting someone else pay.

Republican proposals to level the tax treatment of health spending would lead people to choose plans with lower premiums and higher co-payments; as Romney advisors John Cogan and Glenn Hubbard point out, consumers would thus have more skin in the game.

That's all to the good. A major reason American healthcare is the world's most expensive by a mile is that it lets consumers make choices about how to spend someone else's money, and no one makes economical choices that way. As consumers face the reality that there is no free hip replacement, they may begin to reflect on how their care actually gets paid for. Specifically, it may occur to them that only a few options exist.

Private insurance companies can't pay out more than they take in; they're businesses. They invest premiums, so the success of their investments - of business - benefits everyone.

Similarly, labor union funds like the UAW's would need high-performing investments. As Americans pay more of their health expenses out of pocket, especially in retirement, they'll have to rely more on their pension funds, mutual funds, and life insurance - all of which depend on the success of investments.

People in the workforce will need a good job more than ever. Combine all those factors, and more people may realize that their own health requires healthy companies.

Am I being insanely Pollyanna-ish? It's possible. Americans have a long tradition of hating medical insurance companies. Clinton continues to demonize them, which is not a dumb tactic if you want to win an election. So as Americans face the reality of what healthcare really costs, they may despise insurance companies even more and by extension companies in general.

In any case, the reckoning is coming, probably in the next President's first term. I'm guessing that as Americans face the tough tradeoffs on life-and-death issues, they just might realize that business is not their enemy but their essential partner. Top of page