Obama, Health Industry Pledge to Cut Health Spending Growth by $2 Trillion

By Fred Lucas | May 11, 2009 | 7:03 PM EDT

President Barack Obama, accompanied by American Medical Association President J. James Rohack, speaks about health care reform, Monday, May 11, 2009, in the State Dining Room of the White House in Washington. (AP Photo/Charles Dharapak)

White House (CNSNews.com) – Hoping to sell a health care reform package to Congress by the end of the year, President Barack Obama pledged that with the help of other “stakeholders” in the health care industry, the growth of costs can be cut by $2 trillion by 2019.

Representatives of the insurance, pharmaceutical, and hospital industries, as well as doctors and organized labor met with Obama at the White House on Monday to discuss ways to cut costs by 1.5 percent a year for the next 10 years.

“Their efforts will help us take the next and most important step – comprehensive health care reform – so that we can do what I pledged to do as a candidate and save a typical family an average of $2,500 on their health care costs in the coming years,” Obama said.
“What they're doing is complementary to and is going to be completely compatible with a strong, aggressive effort to move health care reform through here in Washington with an ultimate result of saving health care costs for families, businesses and the government,” said Obama.
“That's how we can finally make health care affordable, while putting more money into the pockets of hardworking families each month. These savings can be achieved by standardizing quality care, incentivizing efficiency, investing in proven ways not only to treat illness but to prevent them,” the president said.

Obama was accompanied when he spoke by Thomas Priselac, CEO of Cedars Sinai Health System; Richard Clark, CEO of Merck & Co.; George Halverson of the Kaiser Foundation; James Rohack, president of the American Medical Association (AMA); Dennis Rivera of the Service Employees International Union (SEIU); and Michael Mussallem, CEO of Edwards Life Science.
The annual growth rate of public and private health care expenditures is projected to average 6.2 percent through the next decade.
That could mean health spending will go from 17.6 percent of the Gross Domestic Product now to 20.3 percent in 2018, according to a letter to the president from leaders of Advanced Medical Technology Association, America’s Health Insurance Plans, AHA, AMA, PhRMA, and the SEIU.
“We are determined to work together to provide quality, affordable coverage and access for every American,” the letter said. “It is critical, however, that health reform also enhance quality, improve the overall health of the population, and reduce cost growth.
“We believe that the proper approach to achieve and sustain reduced cost growth is one that will: improve the population's health; continuously improve quality; encourage the advancement of medical treatments, approaches, and science; streamline administration; and encourage efficient care delivery based on evidence and best practice,” the letter added.
Obama’s goal is to create a public health insurance plan that would compete with private health insurance companies.
On other fronts, the economic recovery package that he signed into law earlier this year contained $20 billion for health information technology, which apparently will put the medical information of every American on a centrally linked system by 2014.
Also, the bill put $1.1 billion toward a “comparative effectiveness” council, which will seek the most cost-effective treatments. Critics say this will lead to health care rationing.
“I’m committed to building a transparent process where all views are welcome, but I'm also committed to ensuring that whatever plan we design upholds three basic principles,” Obama said.
“First, the rising cost of health care must be brought down; second, Americans must have the freedom to keep whatever doctor and health care plan they have, or to choose a new doctor or health care plan if they want it; and third, all Americans must have quality, affordable health care,” the president said.
“It is reform that is an imperative for America's economic future, and reform that is a pillar of the new foundation we seek to build for our economy – reform that we can, must, and will achieve by the end of this year,” he said.
Without measurable policy proposals, what the president and industry leaders talked about at the White House on Monday was “bumper sticker policy,” said Robert Moffitt, director of health policy studies at the conservative Heritage Foundation. 
“Government projections on health care programs are worthless when you look at Medicare and Medicaid projections,” Moffitt told CNSNews.com.
While more efficiency is usually better, cost-cutting is not automatically a positive thing in health care, he said.
“Health care is 17 percent of the Gross Domestic Product [the total value of all goods and services produced in the United States]. If we do nothing between now and 2025, it will be 25 percent of the Gross Domestic Product. How do you prevent that expansion?” said Moffitt.
“Unless you resort to some sort of supply restriction or prescription restrictions, physician payment reform and hospital payment reform is not going to do it. Hospital spending dwarfs all other spending. How do you limit that? Cut hospital stays?” he added.
The Obama budget for fiscal year 2010 creates an incentive-penalty program based on hospital readmissions in a 30-day time period. According to the White House, readmissions patients within a 30-day time frame often result from a bad discharge policy and follow-up.
Under the proposal, hospitals will receive bundled payments that cover not just hospitalization of an individual, but follow-up care. Hospitals with high rates of readmissions will be paid less if patients are readmitted to the hospital in the same 30-day period.
While Obama has pledged that, under his plan, all consumers would be able to choose between a government-run program and a privately run program, a study by the non-partisan Lewin Group suggested a government insurance plan could crowd out private insurance.
“Premiums under the public plan would be up to 30 percent less than private insurance plans if Medicare payment levels are used,” Lewin Group Vice President John Shelis told the House Ways and Means Committee in April.
“Due to the substantial cost advantage, we estimate that up to 119.1 million of the 171.6 million people who now have private employer or non-group coverage would move to the public plan,” Shelis added.

That would put private firms at a competitive disadvantage, Moffit said.
“President Obama's promise that anyone who wants to can keep their private health insurance cannot be kept,” Moffitt said.