Health-care industry vows to contain costs

WASHINGTON — A group of trade associations is pledging to reduce the growth rate of health-care spending by 1.5 percentage points a year for the next decade in a show of support for President Obama's call to overhaul the nation's health-insurance system.

The group is scheduled to present its commitment today at a White House event where Obama will speak about the need to overhaul the nation's health-care system to reduce individuals' costs and to provide health-insurance coverage for more Americans.

Among the groups behind the pledge are the American Hospital Association, the American Medical Association, Pharmaceutical Research and Manufacturers of America, America's Health Insurance Plans and the Service Employees International Union.

While the voluntary pledge may sound small, officials said Sunday that by the fifth year it could translate to $2,500 in annual savings for a family of four, and by 2019, it could yield $2 trillion in savings for taxpayers. That's according to two senior administration officials who spoke on condition of anonymity at the insistence of the White House.

Put another way, White House officials said, the savings would "virtually eliminate" the budget deficit within 10 years.

The savings, they said, could come from industry concepts such as administrative simplification, care coordination and bundling of payments, as well as other steps still being developed. Some would require congressional action.

White House officials said there is no mechanism to ensure that the groups live up to their offer, only the implicit threat of public embarrassment. And it would be difficult to track whether they come up with the savings, other than the imprecise measure of comparing current projections of health-care cost increases with future actual costs.

Nonetheless, White House officials were optimistic about the offer from industry officials who previously have tried to put up obstacles to changes in the health-care system.

Much of the proposal tracks with ideas Obama included in his draft budget, and the goal of slowing the rise in health-care costs by 1.5 percentage point a year first was articulated by the administration. Lawmakers, however, are considering more draconian cuts.

The offer is the industry's latest attempt to secure a seat at the bargaining table, as Democrats consider legislation that simultaneously would hold costs in check and extend coverage to millions of uninsured people.

Drugmakers, insurers, hospitals and the American Medical Association were among the harshest critics of a similar push by President Clinton in 1993. The insurance lobby, for instance, sponsored the "Harry and Louise" ads that ultimately turned popular sentiment against those efforts.

But the explosive cost of health care has since strangled pay raises for most workers and slowed profits for many business, causing the industry to shift its posture dramatically. Earlier this year, it offered a major concession: to abolish policies that deny coverage because of pre-existing coverage. In return, insurers said they want legislation that mandates insurance for every American.

During the presidential campaign, Obama opposed such a requirement. But many Democrats back the concept, comparing it to automobile insurance.

The prospect of millions of new customers has been a major enticement for other industry players as well. Drug manufacturers, suffering declining profits as consumers switch to cheaper generic medications, have put money and lobbying muscle behind universal coverage, expecting the newly insured will become new customers.

White House officials said many of the cost reductions would be "crucially dependent" on changes being contemplated in Congress as part of a health-care overhaul package.

The groups will have to streamline administrative costs, better coordinate care and bundle payments to achieve projected savings. If they can slow spiraling cost increases, prospects for expanding health-care coverage to 46 million uninsured Americans would improve greatly.

Experts estimate that extending coverage to every American would cost $1 trillion to $1.5 trillion over the next decade, much of it going to startup costs.

The United States spends about $2.2 trillion a year on medical care, representing about 16 percent of the overall economy.