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Hospitals Vow Cost Cuts Amid Concerns on Reform’s Price Tag

July 8, 2009 at 6:00 PM EST
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Three major hospital organizations joined the effort to cut medical costs and agreed to contribute $155 billion over the next 10 years to the cost of health care reform. Betty Ann Bowser reports.
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JIM LEHRER: Major hospital organizations joined the effort today to cut medical costs. It was the latest move to help pay for a sweeping reform of the health care system.

Betty Ann Bowser has our lead story report.

BETTY ANN BOWSER, NewsHour correspondent: Vice President Joe Biden announced the deal in Washington today with administration officials and leaders of the nation’s three largest hospital groups by his side.

U.S. VICE PRESIDENT JOSEPH BIDEN: Those who don’t have insurance because they’ve lost their jobs or have been denied coverage because someone in their family has a pre-existing condition are throwing themselves at the mercy of the people who represent the major hospitals in the United States of America today. And, as a result, our hospitals are cracking under the weight of providing quality health care for Americans who lack insurance.

BETTY ANN BOWSER: Under the agreement, the Catholic Health Association of the United States, the American Hospital Association, and the Federation of American Hospitals would give up $155 billion of future Medicare and Medicaid payments over 10 years.

The vice president had few details on exactly how the savings would be achieved, but he outlined the basic plan.

JOSEPH BIDEN: These reductions will be achieved through a combination of delivery system reforms, additional reductions in hospital, and additional reductions in the hospital’s annual and inflationary updates.

As our system becomes more efficient thanks to innovation, technology and electronic records, we’ll show increases — we’ll slow, I should say, increases in Medicare and Medicaid payments to hospitals. As more people are insured, hospitals will bear less of the financial burden of caring for the uninsured and the underinsured and we’ll reduce payments to cover those costs in tandem with that reduction.

Hospital groups pledge help

Rich Umbdenstock
American Hospital Association
As more people are covered, then hospital payments can go down in some categories, but that there has to be a link between the two. We're very hopeful that this is a first step toward helping the nation get to full coverage for all of our Americans.

BETTY ANN BOWSER: The hospitals are counting on the administration's promise that millions of uninsured Americans will soon get coverage under a health care overhaul. Rich Umbdenstock is the president of the American Hospital Association, the AHA.

RICH UMBDENSTOCK, president, American Hospital Association: As more people are covered, then hospital payments can go down in some categories, but that there has to be a link between the two. We're very hopeful that this is a first step toward helping the nation get to full coverage for all of our Americans.

And as we do that, more uncompensated care for hospitals will be compensated under this new coverage, so we can then start to cut some of the payment elements. We will be reimbursed at a lower rate than would have been otherwise expected or projected, but overall we'll receive more revenues because more patients have coverage.

BETTY ANN BOWSER: According to the AHA, the nation's hospitals lost an estimated $34 billion in 2007 caring for those who could not pay. Today's agreement is about half of the amount of savings initially proposed by President Obama last month.

The deal was worked out under the guidance of Senate Finance Committee Chairman Max Baucus, who's trying to craft a bipartisan health reform bill. Two weeks ago, the Montana Democrat and the White House reached a separate deal with the pharmaceutical industry. Under that agreement, drug manufacturers would contribute $80 billion dollars over 10 years to cut the costs of drugs for the elderly and help fund a reform bill.

And last week, retail giant Wal-Mart announced it would support a requirement that employers provide health care for their employees, all of which led up to today's announcement.

The agreement could give the president some momentum on health care reform at a time when lawmakers are still feeling the sting of sky-high estimates on an overhaul from the Congressional Budget Office and are struggling with legislation that would not increase the deficit.

SARA ROSENBAUM, George Washington University: This is exactly the kind of deal-making that underlies any great effort at legislative reform.

Skepticism emerges over savings

Sara Rosenbaum
George Washington University
It's definitely real money, in that you can see that hospitals are going to get paid less over the next 10 years than they otherwise might get paid.

BETTY ANN BOWSER: Sara Rosenbaum chairs George Washington University's Health Policy Department.

SARA ROSENBAUM: What the White House and what Congress gets out of this is this tremendous appearance of goodwill, momentum, willingness to be part of this vast effort at reform, this feeling that's sort of all hands on deck for reform, and this inexorable movement toward the goal line. And I think that becomes as important in this kind of a climate as the actual savings.

BETTY ANN BOWSER: House Minority Leader John Boehner wasted no time today in leveling criticism of the Biden announcement, saying, "The administration and congressional Democrats are literally bullying health care groups into cutting backroom deals to fund a government takeover of health care."

At the same time, there were questions about whether the savings will really be as significant as the administration says.

SARA ROSENBAUM: It's definitely real money, in that you can see that hospitals are going to get paid less over the next 10 years than they otherwise might get paid.

But, at the same time, there are two aspects to this that make the money someone less real, which raises the skeptics. One is that some of the tradeoffs that the hospitals might have gotten or that pharma might have gotten are worth money in their own right. "You know, we won't cut you here, but we will cut you here."

The other tradeoff is that -- and this is an artifice of the problems with how legislation moves in Washington -- some of the most important savings are to the health care systems as a whole. They're not necessarily savings to the federal government's bottom line.

BETTY ANN BOWSER: The White House and Democrats are continuing to work on other possible agreements to cut costs, including one with doctors, but plans on how to pay for the bill got even more complicated today, when one idea on the table -- taxing some employer-sponsored health benefits -- was nixed by leading Democrats. They say polls show Americans are opposed to it.