Obama, Trade Assn. Reps Join on Health Care

Published July 1, 2009

Representatives of five major health care trade associations have presented President Barack Obama with a proposal to reduce the growth of health care costs over the next 10 years, according to a White House announcement on May 11.

The proposal, which lacks publicly known specifics, is designed to save an aggregate of up to $2 trillion over that period, significantly less than the $2.4 trillion spent on health care in the United States in 2008 alone, according to government figures.

Obama’s announcement was followed by some confusion, as representatives for the organizations questioned his recounting of their plans. (See story page 3.) An Obama official followed this by admitting the president “misspoke” about the health industry organizations’ proposal, then recanting and saying Obama spoke correctly the first time.

Mixed Signals

The misunderstanding resulted from differing interpretations of what, and over what time period, each party was committing to, according to Peter Orszag, director of the White House Office of Management and Budget, in explaining the misunderstanding on his White House blog.

According to Orszag, Obama’s claim the industry had committed to a reduction in spending growth of 1.5 percentage points per year was misinterpreted by the health care associations’ members as meaning they had promised to do so immediately, rather than cutting the growth rate slowly at first with the ultimate goal being a 1.5 percentage point annual reduction by the end of a 10-year window. The participants had agreed to the latter approach, Orszag wrote.

Both sides issued press releases in the days after the original meeting, attempting to clear up the misunderstanding.

“Our organizations are currently engaged in an intensive process to develop proposals to reduce the rate of increase in future health care costs,” said the health care industry representatives in their statement. “And to be successful, we must take action in public-private partnership. We look forward to offering cost-savings recommendations in the weeks ahead.”

Market Solutions Needed

Criticism of the proposal by the trade associations representing health insurers, hospitals, drug companies, doctors, and medical device makers has been harsh. While one administration official referred to the agreement as a “health care reform game changer” and Obama called it “historic” in a May 11 press conference, many say it contains little in terms of specifics or enforcement mechanisms, and even less regarding a workable strategy to lower health care costs.

“While there is a very real possibility that the various interest groups now involved in the health care debate in Washington may come together to agree on further socialization of our nation’s health care industry, the idea that this could save the nation $2 trillion or more—while not seriously impacting the availability or quality of care—is absurd,” said Paul Gessing, president of the Rio Grande Foundation. “There are plenty of free-market solutions out there that could accomplish significant savings while improving quality at the same time, most likely to the detriment of many of the aforementioned special interests.

“However, a government-managed solution will inevitably result in worse care and greater rationing to achieve these ‘savings,’ as those are the incentives in place and central planners lack the necessary information to improve efficiency,” Gessing added.

‘Divvying up the Pie’

“This is Big Government teaming up with Big Labor, Big Hospitals, Big Insurers, and Big Medicine to divvy up the health care pie between them,” said Greg Scandlen, director of Consumers for Health Care Choices at The Heartland Institute.

“All of these interest groups have proven to be ineffective at delivering value to the American people,” Scandlen continued. “They have created this system that is wasteful, inefficient, inconvenient, unaccountable, of questionable quality, and far too expensive. Every penny they spend comes from us, the American people, and is supposed to be used for our benefit. It is past time to let people control their own money and make their own decisions on the services they value.”

Devon Herrick, Ph.D., a senior fellow and health care economist at the National Center for Policy Analysis, said, “The health care industry is composed of 750,000 physicians in addition to tens of thousands of hospitals and clinics, labs, etc. The individual providers that make up the health care industry have no incentive to reduce their billed charges, because they are not competing on price. Moreover, the so-called health care industry representatives have no authority to force the individual providers to do so.”

Industry Groups Capitulating

Many industry groups already have given in to the drive for government control of health care, says Twila Brase, president of the Citizens’ Council on Health Care.

“Organized medicine, pharmaceutical and medical device manufacturers, and health insurers are no longer trying to maintain an independent and free health care system,” Brase said. “Instead, they are vying for a seat at the table of national health care.

“Together they have agreed to abandon the patient, determining that their own corporate survival is more important than the survival of patient freedom, professional integrity, and medical ethics,” said Brase. “This organized industrial collusion with the Obama administration promises to lead to health care rationing and politics-based medicine—and higher administrative expenses. There will be more dollars directed into paperwork and reporting focused on command and control rationing strategies, and fewer dollars directed into real hands-on patient care.”

Joe Emanuel ([email protected]) writes from Georgia.