Healthcare groups detail cost-containment

The six interest groups that promised President Obama last month they would vastly reduce national healthcare spending put some meat on the skeleton of their plan Monday.

In a three-page follow-up letter to Obama and 25 pages of proposals, health insurers, physicians, hospitals, pharmaceutical companies, medical device manufacturers and a labor union say their recommendations could save the United States between $1 trillion and $1.73 trillion over 10 years.

Quoting from their original May 11 letter to the president, the interest group leaders vow, “As restructuring takes hold and the population’s health improves over the coming decade, we will do our part to achieve your administration’s goal of decreasing by 1.5 percentage points the annual health care spending growth rate — saving $2 trillion or more.”

Obama sought to make political hay with the interest groups’ original announcement, describing his administration’s engagement with some of the historical foes of healthcare reform as a sign that momentum was building for his foremost domestic policy initiative.

“This is a historic day, a watershed event in the long and elusive quest for healthcare reform,” Obama said after meeting with the groups’ leaders last months. “It’s a meeting that might not have been held just a few years ago,” he said. “Some of these groups were among the strongest critics of past plans for comprehensive reform.”

Obama’s speech and the healthcare groups’ letter display some significant rhetorical differences, however.

Whereas the healthcare groups suggest policies that could reduce spending by more than $1 trillion — their “part to achieve your administration’s goal” — Obama described the deal differently. “Over the next 10 years — from 2010 to 2019 — they are pledging to cut the rate of growth of national healthcare spending by 1.5 percentage points each year, an amount that’s equal to over $2 trillion,” Obama said.

Skeptics also noted that previous voluntary efforts by the healthcare sector to cut spending, such as an agreement reached between hospitals and the Carter administration, proved unsuccessful. The 28 pages sent to the White House on Monday represent a response of sorts to such doubts.

The healthcare groups also note that they cannot generate savings on such a large scale on their own. “Some of these proposals can be achieved under current law. The success of others will depend on good public policy,” the letter says. “[W]e will work very hard to see [our initiatives] implemented. We can and will work together, and with other key sectors of the health care community, to identify further reform opportunities."

The chief executives of the Advanced Medical Technology Association, the American Hospital Association, the American Medical Association, America’s Health Insurance Plans, the Pharmaceutical Research and Manufacturers of America and the Service Employees International Union’s healthcare division are leading the effort.

Reining in the rising cost of healthcare is crucial to a victory for Obama on reform.

Although Obama campaigned for the presidency on a promise to achieve universal coverage, his plans for the healthcare system depend heavily on their success for dramatic, long-term reductions in the skyrocketing rate of growth of spending.

Costs are also vital to the political prospects for healthcare reform. Congress must find ways to reduce spending within the healthcare system to mitigate the need to raise taxes in order to cover the expected $1 trillion-plus of healthcare reform, which must be budget-neutral in the short term.

Moreover, middle-class voters who have health insurance must be persuaded that growth in healthcare costs, which makes their insurance and medical care less and less affordable, can be resolved in a way that positively affects them, not just the uninsured.

The groups offer three broad categories of targets for spending reductions and possible savings for each over a decade. The figures are impressive, but the wide ranges of the effects on savings underscore the challenges facing those who would take on healthcare reform.

According to the groups: Reducing — or at least changing — utilization of care could save $150 billion to $160 billion; better treatment of people with chronic disease could save $350 billion to $850 billion; and administrative simplification and trimming the “cost of doing business” could save $500 billion to $700 billion.