Government

Health care leaders pledge $2 trillion in spending cuts

The AMA indicated it will push for medical liability reform for doctors in exchange for reducing health spending growth.

By David Glendinning , Doug Trapp — Posted May 18, 2009

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A diverse and influential group of organizations representing physicians, hospitals, insurers, drug manufacturers, medical device companies and service workers pledged to work together to reduce national health care spending by $2 trillion or more over the next decade in an effort to enable health system reform.

The groups met with President Obama May 11 to say they would do their part to reduce the annual rate of health spending growth by 1.5% per year over the next 10 years. The organizations included the Advanced Medical Technology Assn., the American Hospital Assn., the American Medical Association, America's Health Insurance Plans, the Pharmaceutical Research and Manufacturers of America, and the Service Employees International Union.

If successful, the effort would not decrease total spending on health care but would significantly reduce the rate of spending growth. Government actuaries have estimated that such growth otherwise would average 6.2% per year over the next decade.

After meeting with the groups privately, Obama described the announcement as a "watershed event" in the health system reform debate. "Their efforts will help us take the next and most important step -- comprehensive health care reform."

The groups involved have not always agreed with each other or with those in government on the need to overhaul the system, Obama noted. "In fact, some of these groups were among the strongest critics of past plans for comprehensive reform."

Some experts said the development bodes well for the success of reform this year. "If the savings described today truly occur, this may be one of the most significant developments in promoting meaningful health care reform," said Ron Pollack, executive director of the health consumers group Families USA.

A May 11 letter to the president said the organizations are developing consensus proposals that would achieve the savings. The initial descriptions lack many details. Instead, they include broad cost-saving concepts such as administrative simplification, reducing over- and underutilization of services, care coordination and health information technology.

The groups said they would release more details within weeks. The White House has given them a deadline of early June to submit proposals.

But some skeptics weren't waiting that long to dismiss the announcement as largely inconsequential. "Today's announcement promises savings with no concrete plan to achieve them and no enforcement mechanism if they don't," said House Minority Leader John Boehner (R, Ohio).

Boehner noted that pledges of future cost savings do nothing to reduce the budgetary costs to Congress of overhauling the system. Obama still has not explained how he will pay for his multitrillion-dollar plan, he said.

The half-dozen organizations acknowledged that the promised spending reductions were voluntary for now, but they indicated that several of the measures could be written into law. Despite the $2 trillion goal, the groups said they were confident none of their members, including physicians and other medical professionals, would need to swallow major pay cuts to make the goal a reality.

Groups keeping own priorities

The organizations that made the savings pledge made it clear they would continue to promote their own reform policy goals despite the common effort. AHIP, for instance, continues to oppose a White House proposal to offer a government-run public health plan to compete with private insurers, but SEIU supports the move.

In some cases, the organizations connected the savings goals directly to their own priorities.

"As we mentioned to the president, if we can have additional liability protection ... then we can achieve even more spending curbs and a reduction in cost," said AMA President-elect J. James Rohack, MD.

Physicians often want to help reduce over-utilization but find it difficult, Dr. Rohack said. As a cardiologist, for instance, he said some of the screenings he orders for patients are likely unnecessary, but he feels compelled to prescribe them because of the liability risk.

But some observers said the development simply showed health industry stakeholders attempting to gain more leverage in the reform debate by making vague commitments that are relatively easy to offer. A truly substantial shift by the groups would have taken more time and involved more major policy changes by these membership organizations than was apparent in this case, according to Joseph Antos, a health care scholar at the conservative American Enterprise Institute.

The groups' statement that they are still working on long-term plans for ideas that in some cases date back decades instills discouragement rather than hope, Antos said. "What it says is that all the ideas that all of us hope will work still aren't ready for prime time, and they're not going to be ready for years to come."

Public plan in play

Others saw the move primarily as a bid by the health insurance industry to gain negotiating room for mounting a stronger opposition to a public plan insurance option, though the organizations insist that issue never came up in their talks.

"This commitment to cost-cutting is a good-faith gesture by the health care industry, but it does not mitigate the need for a public plan option in the upcoming reform bill," said Sen. Charles Schumer (D, N.Y.). Conversely, Sen. Orrin Hatch (R, Utah) has said Democrats are using the threat of a public plan to force concessions from the private insurance industry.

Members of Congress have begun taking sides on the public plan option. Senate Finance Committee Chair Max Baucus (D, Mont.) and the panel's highest-ranking Republican Charles Grassley (Iowa) on May 11 released the second in a series of three policy-options papers that includes three ideas on how to create a public health insurance plan.

But many Republicans oppose the idea, because they say the government won't be able to create a public health plan that allows private plans to compete with it on a level playing field. Baucus said in early May that the idea was under fire but not dead. "The public plan may be on the side of the table, but it's on the table."

Physician organizations largely have withheld judgment on the concept. AMA President Nancy H. Nielsen, MD, PhD, said the insurance industry needs reforming. But she added that "there has been a long history of public programs that are not adequately funded, resulting in cuts to those who provide health care and access challenges for those who get care through these programs."

The American Academy of Family Physicians board of directors voted in April to support the public plan option, said AAFP President Ted Epperly, MD. Primary care fees actually may rise if it is adopted, he said.

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