The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Health Care Industry Groups Identify Cost Savings

Posted by Alan on June 1, 2009


The devil dances in the details and that’s especially true when it comes to health care reform. Words and policies seem to mean something different depending on your perspective and where you fit in the system. It’s like a group of people each looking into a room from a different window. It’s the same room, but it sure looks different depending on where you stand. Testing this is both easy and fun: get a doctor, hospital administrator and insurance executive in the same room and ask them to come up with a shared definition for the term “cost containment.”  For extra fun, ask them to come up with ways to implement cost containment.

Meanwhile, back at the details: back in May, leaders of six health care stakeholders met with President Barack Obama to promise $2 trillion in medical cost savings over the next 10 years. The meeting was groundbreaking, in that the six groups were: a) willing to appear together; and b) asking to be part of the reform process instead of simply opposing everything. In the past, these organizations — the Advanced Medical Technology Association (AdvaMed), America’s Health Insurance Plans (AHIP), American Hospital Association (AHA), American Medical Association (AMA) , the Pharaceutical Research and Manufacturers of America (PhRMA) , and the Service Employees International Union (SEIU) — were not known for working together.

While the mere act of making the promise was significant, as a friend of mine is fond of saying, “it’s trash ’til it’s cash.” Promises are cheap — especially in Washington, D.C. — so the real question was: how would they go about achieving these savings?

Now we know. The six groups sent their medical cost reduction proposals to the White House today. It calls for simplifying administration and reducing the cost of doing business (expected to generate $500-$700 million in savings), better managing chronic disease ($350-$850 billion in savings), and helping clinicians and other providers more cost effectively improve quality and safety for their patients ($150-$180 billion). You may have noticed, even the high end fails to reach $2 trillion, coming in at around $1.73 trillion — still a healthy number (you’ll pardon the pun). And the groups claim their cost estimates were conservative, so the proposals may represent even more savings.

According to the Associated Press, are already harping that the proposals fail to identify how any savings “would accrue to the federal government, rather than to the health care system as a whole.” Because the Obama Administration needs to find the resources to pay for health care reform, this kind of detail is critical. Further, as noted by Politico.com, it’s not clear how the proposals would be enforced — or even if they are enforceable.

Another interesting aspect of the submission is that each organization wrote their own section. There’s nothing wrong with this and it may even help hold each group accountable. But it does make for a disjointed presentation.

While imperfect, the document moves the health care reform debate forward. Lawmakers will no doubt comb through the package to find elements they can incorporate into legislation. And even if there are still lots of dancing devils yet to identify, the mere existence of proposals put forward by these groups to reduce costs in the system is a sign that the health care reform debate this time actually has a chance of improving America’s health care system.

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