Health Care Industry Letter Challenges The CBO To Find Savings

This year’s effort to reform health care is the year of strange bedfellow coalitions. A number of of industry-union-consumer group alliances like Better Health Care Together, Divided We Fail, The Health Care Dialogue and more, have already rhetorically devoted themselves to reducing health care costs and expanding access to better quality care.

Today, another round of doctors, hospitals, drug makers and insurance companies are “voluntarily coming together” to present President Obama with a letter promising to reduce the growth rate in annual health spending by 1.5 percentage points a year over the next 10 years, lowering spending overall health care spending by $2 trillion (this represents a 20 percent reduction in projected growth.)

Administration officials estimate that with such reductions, a family of four would save $2,500 and by 2019 national health expenditures would decrease by 3 percent of GDP, or $700 billion. The fiscal gap would shrink by 5 percent of GDP and the nation would inch towards a sustainable fiscal trajectory, they project.

The numbers are significant, impressive, but short on specifics for how industry will reduce costs. Early reports indicate that the signers — the Advanced Medical Technology Association (AdvaMed), America’s Health Insurance Plans (AHIP), the American Hospital Association (AHA), the American Medical Association (AMA) and Pharmaceutical Manufacturers of America (PhRMA), among others — hope to contain costs by implementing “aggressive efforts to prevent obesity, coordinate care, manage chronic illnesses and curtail unnecessary tests and procedures; by standardizing insurance claim forms; and by increasing the use of information technology, like electronic medical records.”


The industry is suggesting that these cost containment measures — which don’t score too well with the Congressional Budget Office — would in fact yield cost savings and help finance health reform. The letter blunts conservative critics who argue that health reform is unsustainable or too expensive, and it also takes on the CBO, whose models are likely under-scoring the savings from reforms.

Industry groups stepping up and committing themselves to supporting common sense — even progressive — cost containment measures is a major political victory for the administration, one it can use to pressure the stakeholders to adopt reforms. Still, as Paul Krugman argues, “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.”


Download the full letter here.