Health Care

Are There Strings Attached on the Cost Proposal?

by Tim Foley

categories: For Profit Insurance, Obama And Congress

Published May 10, 2009 @ 08:21PM PT

The rumor mill buzz suggests tomorrow could be a game-changer.  We’ll know for sure at 12:30 pm tomorrow, when representatives from America's Health Insurance Plans, the Pharmaceutical Research and Manufacturers of America, the American Medical Association, the American Hospital Association and the Service Employees International Union arrive at the White House tomorrow with a plan to reduce the growth of health care costs by 1.5% each year.  This could be a move forward for reform, or it could be a pre-emptive strike to preserve their share of the pie.

I’ve talked a lot this week about costs, and the necessity for someone to come forward with specific proposals to pay for reform.  If the details are concrete and actionable, the announcement tomorrow could be a good deal.  1.5% doesn’t sound like much, particularly since it’s slowing down the rate of growth, not yet dipping into the high costs we already have.  But given that health care cots are growing at double the rate of inflation, even just reducing growth can have a dramatic effect.  The number we’re hearing is that it would save $2 trillion over 10 years, which isn’t chump change.

There are some obvious things to watch once the proposal gets specific.

First, how specific is it?  If it claims to clamp down on the always-ambiguous “waste, fraud and abuse,” then the game hasn’t changed.  The trifecta of “waste, fraud and abuse” usually gets trotted out in the absence of a real plan for savings, usually because it sounds great but doesn’t actually require sacrifice from anyone.  On the other hand, if there’s a commitment for something we do know will save costs – less sexy but more necessary payment reform, including the oft-discussed bundling payments for episodes of care – then we can take it more seriously.

Second, which of these groups are giving something up in this proposal?  Part of the problem with AHIP’s last proposal on cost control was it was figuratively no skin off their nose.  The insurance industry’s record-setting profits over the last ten years indicate the growth of costs doesn’t dramatically affect them that much.  As such, their plan for health reform said the government should be empowered to cut costs, but didn’t propose anything AHIP itself would be doing to help.  They could offer to trim some of their administrative costs and tighten up their own abuses of the health care system, refunding that money to patients in the form of lower premiums or co-pays.  Or they could make an unprecedented commitment to only sell insurance options that include primary care.  Or they could just be there to cheerlead.  If most of these groups are cheerleading rather than giving something up for the common good, the game probably hasn’t changed.

Third, how much of this impacts Medicare and Medicaid?  Saving X dollars in the entire system is great, but finding savings specifically in the health programs the federal government already pays for will free up dollars to expand access.  Otherwise, this proposal could be a good deal for those who already have insurance, but do nothing to increase access to those who do not.  More to the point, just cutting costs isn’t anywhere near as good as cutting costs in a way that improves quality, access or improves the care we’re getting some other way.

Finally, where are the strings?  Tonight's speculation is that the White House wants to be free as Pinocchio on this proposal, even reaffirming its support for the public plan option and denying that it was in on the negotiations of this plan.  But if there are strings attached, that’s almost guaranteed to be bad for reform.  So much of our warped payment for medical care system, from the MRIs to the prescription drugs to the uncoordinated care to the administrative costs, is because someone’s pockets are lined with the waste in our system.  Reform has always been defeated in the past out of motivation for the profit margins of doctors (for Truman and Kennedy) or the insurance industry (Clinton).  Cutting costs but giving up something that could substantially transform the quality of the health care we receive, like comparative effectiveness research or a mechanism to transform the abuses of the private insurance industry, would be a crummy deal – even if it worked, we’d likely be back where we started in 25 years.

To continue the Pinocchio metaphor, either the president has no strings to tie him down with even the hint of a quid pro quo, or everyone at that podium is likely to have the lack-of-credibility long noses.  We’ll know more tomorrow.

(Photo credit:  +fatman+ on Flickr.)

Disclaimer:  Although I work for a division of SEIU, the views expressed above are my own, and not informed by any additional information other than what has been widely circulated through the media.