Looking to revive health care reform in Congress, the Obama administration is touting an announcement today by large health care trade associations including the American Medical Association, the Pharmaceutical Research and Manufacturers of America, the American Hospital Association, America’s Health Insurance Plans, as well as the Service Employees International Union.
Together these big health care giants, allied with the SEIU, have “offered to squeeze $2 trillion in savings from projected increases over the next decade.” But before we sign off on any new health care spending, lets see them actually deliver on these “savings” first.
Much of the changes would come in the form of long touted delivery reforms, including the use of health IT, care coordination, disease management, “evidence based medicine”, the promotion of wellness and prevention, and such items as administrative simplification and standardization, the whole cottage industry of the latest health policy fashions.
Of course, no one can object to any industry finding new ways to cut costs and deliver better value for consumers. There is just one little problem. The consumers don’t control health care dollars in this huge and growing sector of the economy; only about sixteen cents out of the health care dollar is today directly controlled by consumers. Real control is vested in managed care officials, employers, and government officials, who alone control almost half of all health care spending today; and government officials will control much more if the Obama health agenda or anything like it is enacted by Congress.
Every American has a right, no, an obligation, to be deeply suspicious of this promise of $2 trillion in savings, and what this means for impending health care legislation.
First, there is simply no way to measure good intentions or promises, absent any details of exactly how these savings would be realized. Without measurable details accompanied by econometric analysis, no American taxpayer should put much faith in this “historic” development. Lobbyists in Washington trying to leverage their position to secure their own interests is nothing new, regardless of the press hype.
Second, if the health care industry representatives are merely re-stating the promised savings of the Obama Administration, we got a problem. President Obama’s budget and campaign promises don’t bend the spending curve; they accelerate it. The President is saying that in spending $2.4 trillion in health care, we are spending too much, and then proposes spending anywhere between $640 and $1.2 trillion more over the next ten years. So, this is nothing new. Concerning the President’s proposed savings, broadly similar to what the health care industry is promising, The Washington Post has already said it pretty plainly: the savings suggested by the President are phony.
Finally, let’s use this opportunity to strike a real health care deal. Let us take the Obama Administration and the Big Guys on K Street seriously. Let them deliver measurable savings that they promise on a year by year basis, over the next ten years, and then Congress can commit to an equal level of health care spending on reform. They say they can deliver, so, let them prove it. If the Administration and Congress and the health care industry giants sincerely believe their press releases on their vaunted savings, they should have no problem accepting such an arrangement. It would be fiscally responsible and would be square all around. Congress has already spent roughly $200 billion, through SCHIP expansion and the Stimulus on health care policy, not one dime should be spent until the savings materialize.
There is another option. Get the financing of health care reform right first, and then allow the market to power delivery reforms that deliver value to the patient, not to third party players in the system, whether government or industry officials.
That approach would address the misalignment of incentives. This includes tax and regulatory changes that would deliver real savings.
