Will Health Care Providers Really Reduce Spending?

The press exhibits some skepticism—but more is needed

Yesterday, six protagonists in Washington’s unfolding health care drama sent a letter to the President saying they have “joined together in an unprecedented effort…to offer concrete initiatives that will transform the health care system.” The American Hospital Association, the AMA, PhRMA, the SEIU, America’s Health Insurance Plans (AHIP), and AdvaMed, a trade group for the medical technology industry, said they would do their part to achieve the administration’s goal of “decreasing by 1.5 percentage points the annual health care spending growth rate—saving $2 trillion or more” over the next decade.

Most of the letter was what an actuary I once worked with called a “blah blah paper,” full of vagueness, generalities, and empty rhetoric that neither identifies what the groups will do nor describes how they are going to do it. There were no concrete proposals for cost containment, other than the limp ones already on the table like more health promotion and preventive care (which don’t really save much money). Most important, the letter did not propose any real enforcement mechanisms to ensure that the group will meet their targets. A few of the suggestions included:

• Reducing over-use and under-use of health care by aligning quality and efficiency incentives.

• Reducing the cost of doing business by addressing cost drivers in each sector, through common sense improvements in such things as care delivery models and workforce deployment and development.

• Focusing on obesity prevention commensurate with the scale of the problem.

You get the picture—a lot of Orwellian empty words and symbiotic PR for the industry and the administration. In fact, the announcement was carefully orchestrated over the weekend geared for early Monday pickup, and the industry and White House press folks probably were not disappointed. Two heavies on the elite opinion circuit, Paul Krugman and Jonathan Cohn, offered positive thoughts. Krugman, while raising questions about the industry’s motives, called the letter “tremendously good news,” adding “the fact that the medical-industrial complex is trying to shape health care reform rather than block it is a tremendously good omen.” Cohn also called it “good news,” noting that the industry groups are, for once, promising to control costs as part of reform, not as an alternative to reform.

Others were less gleeful. “I smell a rat,” wrote Michael Cannon on the Cato Institute’s blog, suggesting that the groups’ real interest may be fighting spending cuts later. “Lobbyists never advocate less revenue for their members. Ever. If they did, they would be fired and replaced with new lobbyists.” Foxnews.com, too, was highly skeptical, noting that voluntary cost-control efforts had failed in the past. University of North Carolina health policy expert Jonathan Oberlander told me: “Voluntary efforts don’t generally work in cost containment and that one (by the hospitals) didn’t work very long to slow costs, but it did help defeat cost containment proposals proposed by the Carter administration.”

Some in the MSM also saw through the holes in the industry’s pronouncement, recognizing the lack of an enforcement mechanism. The Washington Post said “many of the aspects of the plan remain unclear,” and noted its toothlessness. The Wall Street Journal pointed out that the government has no power to enforce any particular level of health care spending, and that experts doubt whether the savings that would come from streamlining payment systems and reducing administrative costs will actually slow medical inflation in the long run. The AP reported Iowa Sen. Charles Grassley’s assertion that only when the Congressional Budget Office rules that concrete proposals from the industry result in any savings will it be “big news.”

Still, yesterday’s announcement was big news, and the actors got the applause they sought. The Spanish language station Univision called the announcement “historic,” the same term the President used. USA Today’s story was upbeat, giving AHIP president Karen Ignani the last word and letting her spread the message her group has been peddling for months: “Cost savings of this magnitude could go a long way toward ensuring that every American has access to affordable, quality coverage.” While the President and the industry were playing to the crowd, a senior administration official was more honest, telling Ezra Klein at The American Prospect’s blog: “This is a commitment, not a plan.”

Although most journalists understood that the gesture had no teeth, they didn’t address the touchier subject of real cost containment, like capping spending in various health care sectors. These groups—the docs, the hospitals, the drug companies—would wage a holy war against such controls, which is why the pols aren’t pushing them.

So instead we urge the media to strike out on their own and use the industry letter as a departure point for exploring some real cost containment questions, and the disconnect between reality and a PR stunt.

• Will the SEIU really tell nursing homes and hospitals to pay its members less? That’s hardly a recipe for organizing workers.

• How does this gesture square with the AMA’s current drive to make sure doctors don’t get the large cuts in their fees scheduled for next year? The fee cuts were part of past government attempts to slow the spending on doctor care in the Medicare program, but docs don’t want to lose the income.

• Will big PhRMA continue to increase costs of brand name drugs to compensate for lost revenue from greater use of generics?

• How do increased costs generated by the hospital industry’s building spree, the biggest in decades, mesh with yesterday’s letter?

• Will the medical tech industry stop pressuring Congress to intervene each time Medicare says it won’t pay for this treatment or that because the evidence is not there or is unclear?

Campaign Desk would like to see some answers.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman.