White House unveils $155B deal with hospitals

The White House on Wednesday formally announced an agreement with the nation’s hospitals that would save the government $155 billion over 10 years.

The hospital deal, brokered by the White House and Senate Finance Committee Chairman Max Baucus (D-Mont.), is the latest in a series of such high-profile announcements by the Obama administration.

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The basic framework for the $155 billion agreement has been known  for weeks but Vice President Biden, filling in while President Obama is overseas, made it official Wednesday, flanked by executives from hospital corporations and lobbying groups.

As Obama did at previous events promoting White House agreements with pharmaceutical companies and other healthcare interest groups, Biden presented the deal as a positive bellwether for healthcare reform, which is Obama’s foremost domestic policy initiative.

“Folks, reform is coming. It is on track and it is coming,” Biden said. “A strong commitment from these hospitals represented here and others will be a big part of making that happen.”

Democrats including Obama and Baucus contend that healthcare interests will benefit financially when more people have health insurance under reform and thus have an obligation to offer up federal budgetary savings to help pay for it.

House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) earlier on Wednesday articulated that argument and predicted support from healthcare interests for reform efforts.

“Each group is not going to get everything they want but they’re going to see that after all is said and done, if they get a reduction in Medicare payments, they’re going to still make more money because they’re going to have more people that are going to be covered,” Waxman said.

Biden underscored that argument by noting that hospitals currently provide billions of dollars in medical care every year for people who cannot pay. “Our hospitals are cracking under the weight of providing quality healthcare for Americans who lack insurance," he said.

In substance, the hospitals essentially agreed not to fight cuts in their Medicare and Medicaid payments as part of healthcare reform. Biden noted that the Medicare and Medicaid spending cuts at hand were part of the administration’s budget proposal.

The American Hospital Association, the Federation of American Hospitals and the Catholic Health Association of America were the key participants. Each group’s chief executives were present at the White House, along with Hospital Corporation of America President and CEO Richard Bracken and Wayne Smith, president and CEO of Community Health Systems.

"We have these hospitals working with us, and we have the pharmaceutical industry working with us; we have doctors and nurses and healthcare providers with us; we have the American public behind us," Biden said.

Though the White House has not made it explicit, the hospitals are understood to have been given assurances in return that some of the cuts would not take effect until any enacted reforms extend coverage to a significant number of people.

Last month, Obama announced that the pharmaceutical industry had agreed to find $80 billion in savings.

Of that, about $30 billion supposedly would go to selling half-price drugs to Medicare beneficiaries who fall into the so-called “doughnut hole” gap during which the program does not cover medicines. Under the parameters of that deal, the drug companies and Baucus are to work out how to directly  save the federal government $50 billion over 10 years.

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In May, Obama and representatives for an array of healthcare interests announced an agreement under which the groups would identify ways to reduce total national healthcare spending by $2 trillion over 10 years. The Congressional Budget Office subsequently said those proposals would not produce substantial reductions in spending by the federal government.

These industry agreements have provoked skepticism among some lawmakers.

“The administration and congressional Democrats are literally bullying healthcare groups into cutting backroom deals to fund a government takeover of healthcare,” House Minority Leader John Boehner (R-Ohio) said in a statement.

Prior to the White House event, Waxman asserted that deals between the White House, the Finance Committee and interest groups have no bearing on his healthcare reform efforts.

Referring to the agreement with the drug companies, Waxman said: “Why that should be anything that should bind us is unclear. The White House is not bound, they tell us they’re not bound by that agreement. We’re certainly not bound by that agreement. The White House was involved and we were not.”