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U.S. Hospitals Offer $155 Billion for Health Reform

“We have never been as close as we are today,” Biden said of health care reform. “We have these hospitals working with us, and we have the pharmaceutical industry working with us, we have doctors and nurses and health care providers with us, we have the American public behind us, and everyone sees that we need change.”

Listen to the full announcement here:

Most of the savings from the deal, which was first reported Tuesday by the Washington Post, would come from lower-than-expected Medicare and Medicaid payments to hospitals.

The news is a bright spot for the Obama administration in what has otherwise been a difficult week for the administration’s health care agenda, as the president’s plan to sign health care legislation into law this year has hit roadblocks in Congress.

Hospital spending makes up about 31 percent of the $2 trillion the U.S. spends annually on health care, and so is a key area to trim costs. President Obama had proposed $220 billion in cuts over 10 years. Under the current deal, hospitals negotiated the smaller $155 billion number.

The agreement doesn’t restrict lawmakers from demanding more cuts later, but according to Kaiser Health News, industry insiders say that the hospitals hope to create goodwill with the agreement now so that they will have influential negotiators on their side when the House and Senate later meet to hammer out joint legislation.

The agreement is the latest in a series of deals with health industry stakeholders aimed at reducing costs to contribute to health care reform and covering the uninsured. Two weeks ago, pharmaceutical makers agreed to contribute $80 million in revenue over 10 years.

The deals provide important political momentum to the administration as it tries to push health care reform through Congress.

“The very groups we have been talking to have been the most vocal opponents of health care reform; now they are becoming the vocal proponents for health care reform,” White House Chief of Staff Rahm Emanuel told the New York Times.

But not all lawmakers and are convinced that the deals will actually save enough money, as hospitals, drugmakers and other stakeholders have negotiated concessions for their agreements. For example, the hospitals received assurance that any potential new public insurance plan would not pay at Medicaid reimbursement rates, which hospitals believe are too low.

“We have yet to evaluate what are the specifics and particulars,” Sen. Olympia Snowe, R-Maine, told the paper. “So it’s uncertain. [The agreement] could be helpful, I just don’t know.”

The American Hospital Association, the Federation of American Hospitals and the Catholic Health Association all agreed to the current deal, under which about $100 billion in savings would come from reduced Medicare and Medicaid payments. About another $40 billion would come from reducing payments that hospitals receive to treat the uninsured. However, the payment cuts would not begin for a few years, until many of the uninsured would presumably have had a chance to enroll in new insurance programs created under health insurance reform legislation.

Both the drug maker deal and the hospital deal are contingent on passing health care reform legislation this year.