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Health Industry’s Pledge to Cut Costs Adds Urgency to Reform Bid

May 11, 2009 at 6:20 PM EDT
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President Barack Obama said Monday the health industry's new pledge to cut costs will aid his legislative goal of a broader health care overhaul. Health reporters size up the cost cutting promise and the road ahead for health reform.

KWAME HOLMAN: Representatives from half-a-dozen health industry groups met with President Obama. They delivered a proposal White House officials said would save $2 trillion over the next decade.

The president called the gathering a “watershed event.”

U.S. PRESIDENT BARACK OBAMA: The groups who are here today represent different constituencies with different sets of interests.

They’ve not always seen eye to eye with each other or with our government on what needs to be done to reform health care in this country. In fact, some of these groups were among the strongest critics of past plans for comprehensive reform.

But what’s brought us all together today is a recognition that we can’t continue down the same dangerous road we’ve been traveling for so many years, that costs are out of control, and that reform is not a luxury that can be postponed, but a necessity that cannot wait.

KWAME HOLMAN: It was all a marked change from when President Clinton tried to tackle health care reform in the early 1990s. Then, insurance industry leaders in particular put up fierce resistance.

Now insurers are joining drug-makers, hospitals, and doctors in a bid to slow the rate of growth in health care costs by 1.5 percent a year.

They say they’d do it by streamlining paperwork and changing the way hospitals bill patients, among other things. The groups estimated that, within five years, under the proposal, a family of four could save $2,500 a year.

At a briefing, White House spokesman Robert Gibbs acknowledged the pledge is voluntary, so there’s no hard and fast way to enforce it.

ROBERT GIBBS, White House press secretary: Well, the president, in meeting with the group this morning, before they went out, he said to this group, “You’ve made a commitment. We expect you to keep it.”

And we certainly believe that the players that are involved and the trade associations that they represent are genuinely serious about moving health care reform forward. But we will be, certainly, evaluating throughout this process how effective they’re being, how effective the government is being at curtailing costs for Medicare and Medicaid, in hopes of making sure that that savings is realized by American families.

KWAME HOLMAN: The overall goal is to free more money to fund the president’s plan for insuring nearly 50 million Americans who now go without health insurance. The costs of that plan could range to $1.5 trillion over 10 years.

The need for health care savings was underscored today when White House officials forecast an even larger budget deficit. The new estimate increased by $89 billion to surpass $1.8 trillion for this fiscal year. That’s about four times the record set last year.

That announcement gave new urgency to the president’s call for reform.

BARACK OBAMA: I’ve said repeatedly that getting health care costs under control is essential to reducing budget deficits, restoring fiscal discipline, and putting our economy on a path towards sustainable growth and shared prosperity.

So we as a nation are now spending a far larger share of our national wealth on health care than we were a generation ago. At the rate we’re going, we are expected to spend one-fifth of our economy on health care within a decade, and yet we’re getting less for our money.

KWAME HOLMAN: The president is pushing Congress to overhaul the health care system this year and control those costs. But even with today’s industry ideas, he still will face questions about whether the nation can afford his plan.

JIM LEHRER: And Gwen Ifill picks up the story from there.

Changing health care delivery

Susan Dentzer
Editor, Health Affairs
The White House reached out to these groups and said, "Send us your ideas," so it really was coming from the administration. "Send us your ideas for how you will lower the rate of growth of health spending over time."

GWEN IFILL: So what was really behind today's announcement? And what does it mean for the prospects of health care reform?

For that, we turn to Susan Dentzer, editor-in-chief of the journal Health Affairs and a NewsHour analyst, and Karen Tumulty, national political correspondent for Time magazine.

So, Susan, let's pick up where Kwame left off. Exactly what price tag are we talking about, costs as well as savings?

SUSAN DENTZER, editor, Health Affairs: Well, actually what the groups did -- first of all, the White House reached out to these groups and said, "Send us your ideas," so it really was coming from the administration. "Send us your ideas for how you will lower the rate of growth of health spending over time."

And specifically what the groups agreed to do was, 10 years from now -- or put in place a series of measures where 10 years from now the rate of growth of spending, rather than being roughly 6.2 percent a year, spending increase -- this is an annual rate of increase at which health spending goes up -- rather than it being that, have it be 1.5 percentage points below that at the end of the 10th year, so that, in effect, lots of things would be done across the board, not just the streamlining paperwork and so forth and so on.

Lots of measures would be taken voluntarily by these groups to slow this rate of health spending growth.

GWEN IFILL: But how do you pay for that, is the question?

SUSAN DENTZER: Well, no -- well, it's not a question of paying for it. It's really a question of changing health care delivery in such a way.

For example, the American Hospital Association has pointed to some of the things that hospitals around the country are doing. There's something called the Keystone Initiative in Michigan where just by minimizing hospital-acquired infections you cannot only save people's lives, you can keep them out of the hospital and save money. In that case, $245 million over four years was saved by avoiding so-called central line infections.

So it's lots and lots of little different measures that could be put together so that spending growth is lower over time than it would be otherwise.


SUSAN DENTZER: And the reason this is so important is really to avoid fiscal Armageddon. Tomorrow, the Medicare Trustees Report will come out and show that the Medicare Hospital Trust Fund has deteriorated sharply because of the economic debacle. As a consequence of that, we are really in deep soup over the long term fiscally, and that's what this is aiming at.

Industry ready for reform

Karen Tumulty
Time Magazine
This time, what is driving it and what has brought business to the table is costs and bringing those costs under control, because they are not only eating the federal budget, they are basically eating the economy.

GWEN IFILL: And is that the difference? It feels like we've been to this rodeo before, Karen, which is to say, 1993 everybody seemed to agree there was no option but to fix health care because we were headed toward a fiscal Armageddon. What's different this time?

KAREN TUMULTY, Time Magazine: Well, I think one thing that's really different -- the real reason that they put this forward is I think that these industry groups think health reform is going to happen this year and they want to be at the table.

GWEN IFILL: The train is leaving the station?

KAREN TUMULTY: And rather than fighting this, they want to be part of shaping the final product. I also think a big difference this time around that was underscored today is that, when we were covering this in 1994, what was really driving the debate was the question of universal coverage, covering the 37 million people who then lacked health care.

This time, what is driving it and what has brought business to the table is costs and bringing those costs under control, because they are not only eating the federal budget, they are basically eating the economy.

If these guys can succeed in reining in health care costs, they will be able -- the estimate is that they will be able to -- they will be able to bring it down to the point where, in 2019, it's 18 percent of GDP, which is basically pretty close to what it is now, as opposed to being up to 21 percent of GDP.

GWEN IFILL: But if everyone has agreed for 16 years now that health care costs are out of control, what's different now that -- and how you track whether these companies and how these companies cut the costs?

SUSAN DENTZER: There's really no way to track it, except to hold them to their promises that they'll continue to do this. And, we should say, this is separate and apart from any measures that Congress will put in place in the context of health care reform to pay for expanded coverage, the kinds of things that will be scored, as they say, by the Congressional Budget Office, "You'll save this." This is over and above and beyond that.

And, really, it's a question of redoing the way health care is to a large degree delivered. It's avoiding things like unnecessary re-hospitalizations of chronically ill people. Once they're in their hospital once, get them back home and keep them home. Don't let them deteriorate so they have to come back into the hospital.

The AMA, the American Medical Association, is putting a lot of emphasis on medication reconciliation, which means making sure that everybody understands when a patient's in the hospital how many drugs they're on so that you don't give them drugs that interact with the drugs they're already on in an adverse way.

Concerns for insurance industry

Susan Dentzer
Editor, Health Affairs
The old line is that last time around, in the '90s, the sense was that everybody's second-best option was the status quo. Now nobody's best option is the status quo.

GWEN IFILL: I guess what -- this all makes perfect sense, except I'm wondering, how does it happen? How does the government or how does the president merely by standing at a podium with people behind him make something different happen this time?

KAREN TUMULTY: Well, they need some help from health care reform and things that would be built into it.

For instance, one thing that the drug-makers and the device-makers talked about, the medical device-makers talked about today at the White House that surprised White House officials was their willingness to accept something called comparative effectiveness.

This is where you would study, say, a new drug and see if it was any more effective than the old drug that was only a fraction of the cost.

Now, the drug-makers have been fighting this. Now they say they're willing to accept these kinds of studies that already the Obama administration is moving toward. And that, at least, is where White House officials are saying they're hearing a big change.

GWEN IFILL: Now, how much of this new Kumbaya moment came about because a lot of these companies saw single-payer government health care, as opponents call it, coming down the track and they decided that this with a better option?

SUSAN DENTZER: I don't think anybody thinks -- in those groups thinks that single-payer is coming down the track. I think people do understand health reform is coming, and they also want health reform.

The old line is that last time around, in the '90s, the sense was that everybody's second-best option was the status quo. Now nobody's best option is the status quo. Everybody wants the system to change; everybody recognizes that it has to change for the good of the country, for the good of patients. And that's really what is behind this willingness even to engage, as Karen says.

KAREN TUMULTY: Although, on that score, one thing that the industry is very much afraid of is what's being called the public plan. It would be an option that would be built into health care reform under some proposals where people would have an option of buying into a Medicare-like government plan.

The insurance industry has, as we all, seen studies that suggest, given that option, 130 million people would take it, which would essentially break the business model for the insurance industry. So they are offering these concessions, at least implicitly, in hopes that they can knock this idea of a public plan option out of the playing field.

Heavy lifting falls to Congress

Karen Tumulty
Time Magazine
[Republicans have] been practically silent as to -- they've been critical of some aspects of the plan, but they have been practically silent in putting forward any alternatives of their own.

GWEN IFILL: How much of this now becomes the Obama plan as a brand? Or how much of this in the heavy lifting falls to Congress?

SUSAN DENTZER: Most of the heavy lifting will be Congress's. And the White House's strategy, I think, is to see the bills come forward.

For example, the Senate Health Committee -- Health, Education, Labor and Pensions has said they'll have a bill out on May 23rd. So I think the strategy is to sit back, wait and see what comes forward from Congress, wait and see what comes forward differently in the Senate versus the House, and negotiate, and have it fit within the principles that the president has already enunciated, including that anything that's done has to pay its own way.

We can't continue to add to the federal budget deficit or drive up health care spending overall. The savings have to be found within the system.

GWEN IFILL: It's a lot of "ifs," Karen.

KAREN TUMULTY: It is. It is. And, you know, today was essentially -- you know, they signed a pledge. But it's going to be very hard to figure out whether they're living up to it.

And I do think it also, however, does suggest that the White House is stepping up its game a bit in health care reform. And I've talked to a lot of Democrats, in particular, who say, it's all well and good that the president decided this time around to let Congress write the bill, but at some point the White House really does have to step in and be a little bit clearer about what is and isn't acceptable in health care reform.

GWEN IFILL: And are Republicans on board?

KAREN TUMULTY: That's the big question. They've been practically silent as to -- they've been critical of some aspects of the plan, but they have been practically silent in putting forward any alternatives of their own.

GWEN IFILL: And does that matter?

SUSAN DENTZER: It's going to leave them out of the negotiating if they don't come forward quickly. We should distinguish, though, because there are a number of Republican moderate senators, particularly in the Senate -- Chuck Grassley, who's the ranking member of the Senate Finance Committee is working very closely with the chair, Max Baucus, on the bill that will come out of the Finance Committee.

So some Republicans are very, very much engaged. House Republicans are a different story and are trying to figure out whether they're better off just going whole hog against what comes out of the Senate. It's really a mixed picture at this point.

GWEN IFILL: Another wait-and-see moment. Susan Dentzer, Karen Tumulty, thank you both very much.

SUSAN DENTZER: Thanks, Gwen.

KAREN TUMULTY: Thank you, Gwen.