Health-Care Providers Pledge to Try to Curb Costs

by Lesley Politi on May 26, 2009

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Another article on health care costs, hopefully they do reduce and give some relief to everyone.

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WASHINGTON — Major health-care providers are planning to pledge Monday to President Barack Obama that they will work to reduce cost increases in the nation’s health-care system by $2 trillion over the next decade, officials said.

The move shows how the private sector is eager to appear cooperative as Congress tries to pass major health-care legislation by the summer. Opposition from many parts of industry, including doctors and health insurers, helped kill President Bill Clinton’s plans for overhauling health care in the early 1990s.

One of the biggest challenges for the new legislation is finding a way to pay for Mr. Obama’s goal of expanding coverage to every American. Costs are already rising rapidly in a system that doesn’t guarantee coverage for all.

Monday’s pledge doesn’t aim at cutting health-care spending overall, but merely restraining its rate of growth.

Groups representing hospitals, health-insurance companies, doctors, drug makers, medical-device makers and labor are joining in Monday’s announcement. According to a letter from the groups, reviewed by The Wall Street Journal, they will promise to help reduce the growth of national health-care spending by 1.5 percentage points in each of the next 10 years. “The times demand and the nation expects that we, as health care leaders, work with you to reform the health care system,” the letter says.

Currently, the U.S. spends more than $2 trillion a year on health care, or at least 16% of gross domestic product. Spending rose 6.1% in 2007. If that rate of growth can be kept in check, it would help employers and make it easier for the government to keep Medicare from blowing a hole in the federal budget over the long term.

White House officials said the savings could come from steps such as making payment systems more efficient and reducing administrative costs. However, the government doesn’t have the power to enforce any particular level of health spending, and some of the cost cuts hinge on whether Congress changes the rules for how doctors and hospitals are paid. Some experts don’t think such cuts will do enough to slow the health spending.

Mr. Obama has said he wants his health-care overhaul to improve the quality of care and lower costs. The White House is leaving the details to Congress while working behind the scenes to guide the effort. This week, the Senate plans meetings on how to widen coverage and pay for the plan.

Groups like the insurance industry hope that cuts to their payments would be offset by new rules that would require all Americans to have health insurance. Administration officials said the groups didn’t ask for anything in return for the cost cuts. But many of the groups want to head off regulations that could pose new burdens or curb their profits.

Health insurers, for instance, have made a series of concessions aimed in part at preventing the government from creating a public health-insurance plan for those not covered by Medicare and Medicaid. Insurers fear such a plan could drive them out of business.

Administration officials said that compared with current projections of health-care costs growing 7% annually, a reduction of 1.5 percentage points would save the average family $2,500 a year five years from now, compared with what costs would have been at the higher growth rate.

Even if the pledged cost cuts happen, the percentage of GDP spent on health care would still rise to 18% by 2019, the officials said. That compares with the government’s current projection of 21%.

“The heavy lifting is still on how to write down how to make it happen,” said Len Nichols, director of the health-policy program for the New America Foundation, a Washington think tank.

In their letter, the health providers said they would reduce costs by, among other things, simplifying administrative costs, making hospitals more efficient, reducing hospitalizations, managing chronic illnesses more effectively and improving health-care information technology.

The administration said “bundling” of payments to health-care providers is one example of how cost growth could be restrained. The idea is to give doctors and hospitals a single payment for treating a patient’s ailment, rather than paying separately for procedures and tests — a system that critics say can encourage more care rather than better care.

Lawmakers plan to include changes in health-care legislation that would make bundling easier, but the need for new rules is one sign that the cost savings are far from certain. Other proposed changes include using a common insurance-claim form to reduce administrative costs.

While health-care industry groups have expressed their eagerness to cooperate with Congress in writing the legislation, the dialogue is expected to grow more contentious in coming weeks as lawmakers begin pinning down details of how to expand coverage and pay for the overhaul.

On Monday, the Senate Finance Committee is expected to release several options for how to structure a public insurance plan, one of the most debated aspects of the overhaul. The options range from modeling it after Medicare to structuring it like state health-insurance plans currently provided to public employees.

On Tuesday, members of that committee will hold talks on how to pay for the health-care plan. The current price tag is expected to be at least $1.2 trillion over 10 years. In its budget for fiscal 2010, the Obama administration put aside more than $600 billion over 10 years for a new health-care system and said it would raise funds to make that spending “budget-neutral.” Lawmakers are weighing tough choices for how to finance the rest

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An average family of 4 with a mid-deductible plan pays about $12,000 a year. If this proposal works, they are stating it would take the cost of Health Insurance for the year to $2,500. That would be amazing as well as changing underwriting guidelines. How long it would take is the real question.

-Source: http://online.wsj.com

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