'What we call health care costs, they call income'

Health care industry groups met with President Obama yesterday to propose $2 trillion in reductions in the rate of growth of health care costs. They committed to reduce the growth in costs by 1.5% each year for ten years.

Insurance companies, hospitals, physicians, pharma and labor organizations are supporting this voluntary plan in the hopes of fending off legislation that controls costs. The groups include the American Hospital Association, the American Medical Association, America’s Health Insurance Plans, the Pharmaceutical Research and Manufacturers of America, the Advanced Medical Technology Association, and the Service Employees International Union.

According to Ricardo Alonso-Zaldivar and Philip Elliott, "it's unclear whether the proposed savings will prove decisive in pushing a health care overhaul through Congress. There's no detail on how the savings pledge would be enforced. And, critically, the promised savings in private health care costs would accrue to society as a whole, not just the federal government. That's a crucial distinction because specific federal savings are needed to help pay for the cost of expanding coverage."

President Obama's stated that "we cannot continue down the same dangerous road we've been traveling for so many years, with costs that are out of control, because reform is not a luxury that can be postponed, but a necessity that cannot wait... It is a recognition that the fictional television couple, Harry and Louise, who became the iconic faces of those who opposed health care reform in the ⿿90s, desperately need health care reform in 2009. And so does America... That is why these groups are voluntarily coming together to make an unprecedented commitment. Over the next ten years - from 2010 to 2019 - they are pledging to cut the growth rate of national health care spending by 1.5 percentage points each year - an amount that's equal to over $2 trillion."

Janet Adamy of The Wall Street Journal reports that "administration officials said, they do not have a way to enforce the commitment, other than by publicizing the performance of health care providers to hold them accountable. By offering to hold down costs voluntarily, providers said, they hope to stave off new government price constraints that might be imposed by Congress or a National Health Board of the kind favored by many Democrats."

Jeffrey Young at The Hill.com reported that this commitment would "translate into annual savings of $2,500 for a family of four after five years. Over time, slowing the growth of healthcare spending at this rate would 'virtually eliminate the nation’s long-term fiscal gap.'"

But will these trade associations still be on board with the Tom Daschle's view that "a public plan will reduce costs and improve access"? "Employer premiums could be substantially lowered with the choice of a public health-insurance plan; a typical American family could save nearly $1,000 a year in reduced premiums alone. If containing costs is one of our biggest goals, how can we not do this?"

Economist Paul Krugman at the New York Times urges caution and explains that there are reasons to be cynical of the industry's intentions. "Before we start celebrating, however, we have to ask the obvious question. Is this gift a Trojan horse? After all, several of the organizations that sent that letter have in the past been major villains when it comes to health care policy... The point is that there’s every reason to be cynical about these players’ motives. Remember that what the rest of us call health care costs, they call income... I still won’t count my health care chickens until they’re hatched. But this is some of the best policy news I’ve heard in a long time."