Health Care Industry Pledge to Cut Costs: No News at All

The big news on health care reform last week, when at a press conference, President Obama announced that the “Health care industry is said to promise to hold down costs voluntarily” (New York Times, Monday May 11, 2009, p. A11; p. 1 in the Kansas City Star), turned out to be no news at all when 4 days later the Times reported that “Health care leaders say Obama overstated their promise to control costs”. Actually, while it may have been news, it was never serious or real; rather it was a desperate attempt by these players to derail serious health care reform (an effort which still well may be successful).

Apparently, much of the impetus for this press conference came from the Service Employees International Union (SEIU), bringing together insurers (America’s Health Insurance Plans), the Pharmaceutical Research and Manufacturers of America (PhaRMA), the Advanced Medical Technology Association (AMTA, representing device manufacturers, such as Medtronics – see recent columns), the American Hospital Association (AHA) and the American Medical Association (AMA). This allowed the President to announce “These groups are voluntarily coming together to make an unprecedented commitment. Over the next 10 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 $2 trillion.”

Note that this is cutting the “growth rate”, not cutting the cost. Nonetheless, it would be not insignificant. If it were real. But even before the rapid backpedaling reported on May 14, observers were noting that there was no “there” there. “It was a promising event, but probably not the ‘watershed event’ that President Obama had proclaimed it,” opined a Times editorial on May 13, ”So far, all we have is a vague and unenforceable promise that may never materialize.” By the 14th, the signatories to the letter reported that they could not even deliver their constituencies: “There’s been a lot of misunderstanding that has caused a lot of consternation among our members” (president of AHA), “The groups did not support reducing the rate of health spending by 1.5 percentage points annually” (executive VP of AHA), “...`there was no specific understanding’ of when the lower growth rate would be achieved” (EVP of AMTA). The Times reports that “Nancy-Ann DeParle, director of the White House Office of Health Reform first said ‘the president misspoke’ on Monday and again on Wednesday when he described the industry’s commitment…” but “…called back an hour later…and said ‘I don’t think the president misspoke.” Clear as a bell.

So what does this all mean? Is it a good thing or a bad thing? Certainly the fact that these big players in health care felt the need to say something is important. Most of them represent companies and groups (such as doctors and hospitals) that we will need to have in the American health care system when we finally get one. We’ll need doctors and hospitals and even pharmaceutical and device manufacturers (if, hopefully, not as rapaciously profit driven and often corrupt as they are now). America’s Health Insurance Plans? Maybe not. So maybe it is significant that the group that felt that it could defeat health reform in the early 1990s with its “Harry and Louise” commercials (correctly, apparently, with some help from an incredibly arcane Clinton plan) signed on.

The worst part of this whole episode is not the quick backtracking of most of the participants came well before any “concrete proposals”, as the Times May 13 editorial called for. It is that the President, presumably on the advice of his health care “team” such as Ms. DeParle, gave such prominence to this nonsense at all. In the first place, we don’t just need to “slow the growth” in costs (and we do need to), we need a huge cut in the cost of health care to start out. This can come through a single-payer type of Medicare-for-All program that dramatically cuts the administrative costs of our system while, oh yeah, also covering EVERYBODY. (I’m sorry; I can’t say this enough. NOT more kids, more middle-class people, more poor people, more people with pre-existing conditions, but EVERYBODY. This is not just for moral reasons – though they are enough – but for saving money. The cost of programs and bureaucracies to figure out who is eligible and who is not is astounding!) Then, after we get this big one-time savings, we need effective mechanisms to control the growth of costs, including ones I’ve previously discussed, such as clinical practice guidelines and technology assessment (May 12, 2009), controls on drug and device costs, use of generic drugs, etc. Increased efforts for prevention is very good and important but may not save money (see previous entries, Feb 13, 2009).

The pharmaceutical and device makers would continue to make profit, but a lot less. That is a good thing. The insurance companies could stay in business but only as plan administrators as they are now for Medicare, not as for-profit entities. That we allow insurance companies to be for-profit in this country, unlike most, is the biggest obstacle to real health savings, both directly because of the cost and indirectly because of the tenaciousness with which they will use their wealth and power to fight any real change. As Paul Krugman pointed out in his otherwise surprisingly optimistic column on May 11, “Remember that what the rest of us call health care costs, they call income.”

It is going to take a lot of work by the rest of us to overcome the influence and wealth of those of call it income. Do not underestimate that power. Just this week, on another issue, 2/3 of the US Senate voted against limiting the usurious interest rates often charged by banks on credit cards as well as pay-day lenders and others. There is no way to describe this other than a clear statement that says “We are in the pockets of the banks.” These are the same banks whose terrible policies caused the collapse of the world’s economy and required huge federal bailouts, and the Senate still votes their interests over those of the American people. So assume nothing. Keep the pressure on. If you care about genuine health reform, you have to repeatedly, clearly, and insistently let your representatives know. The “health care” (more properly the “make profits from dollars that should be spent on health care”) lobby is taking them to dinner.