President Obama and Secretary of Health and Human Services Kathleen Sebelius, shown at an April 28 press conference, have sought to calm concerns on both sides of the aisle in Congress concerning healthcare reform.
(Jim Young/Reuters)Photos (1 of 1)
Insurers offer Obama $2 trillion in healthcare cost savings
Healthcare providers tell the president they can trim rising costs by 1.5 percent a year simply by being more efficient.
By Ron Scherer | Staff writer/ May 11, 2009 edition
New York
In a move with major implications for the economy, some of America’s largest private healthcare providers plan to tell President Obama they will reduce the spending growth rate of healthcare by 1.5 percentage points per year.
If hospitals and large insurance companies succeed in doing this, it would have major ramifications for both individuals and the nation. For Americans, the savings could be significant – as much as $2,500 a year for a family of four by the fifth year of the program. For the federal government, the savings could be as much as $2 trillion during the next decade.
These amounts could potentially reduce the growth of the federal budget deficit as similar savings are passed on to federal programs such as Medicare, senior White House officials said Sunday.
Offer is a ‘game-changer’
“This is a game-changer,” said a senior White House official during a Sunday teleconference. The briefing was given on the condition that the officials not be named because they did not want to trump Mr. Obama’s formal announcement of the deal Monday.
Healthcare reform is one of the priorities of the Obama administration, which wants to find a way to provide healthcare for 46 million Americans who have no private healthcare coverage.
The voluntary effort will be announced by Obama Monday when he meets with representatives of six healthcare groups, including America’s Health Insurance Plans, the American Medical Association, and the California Hospital Association. White House officials maintain that the groups came to them with the offer without any quid pro quo. In the past, White House officials say, the groups have dragged their feet on cost containment.
The change has come about “because groups now realize we are all in the same boat and going in the same direction,” said the senior White House official. “Now, they are saying we want to be part of the solution, getting healthcare done.”
Reassuring Republicans and Democrats
Recently, Health and Human Services Secretary Kathleen Sebelius reassured Republican lawmakers that the Obama administration did not intend to drive private insurers out of business with its Health Care for America Now program, according to news reports. At the same time, the White House told Democrats it was still committed to a government health-insurance option.
White House officials indicated some of the savings would come from things such as common claims forms that would reduce administrative costs or a universal explanation of benefits. The groups were expected to come to the White House with concrete proposals.
The steps the healthcare industry will need to take will depend on healthcare reform, the White House said. For example, under current law providers are penalized if they are more efficient, the official said.
“We want to move the incentives away from more care and toward better care,” said the senior official. “We want to make it easier for private providers to provide quality and efficiency versus intensity.”
Healthcare spending rate: 7 percent more a year
White House officials estimate healthcare expenditures are growing at about a 7 percent annual rate. If the companies succeed, by the fifth year, there would be a zero growth rate. By the 10th year, calculated one senior White House official, the savings would be equal to 3 percent of the gross domestic product (GDP), or $700 billion – a figure close to the economic stimulus package that was enacted in January.
“This could be invested in education or other economic priorities,” a White House official said.
Without the savings, national health expenditures were on track to grow from 17 percent of GDP to 21 percent by 2010. With the annual savings, national healthcare expenditures would represent 18 percent of GDP.
Most analysts have assumed healthcare costs would continue to grow as the baby boomers age and require more medical services. As baby boomers grow older, their incomes also would probaby rise, meaning they would be able to spend more money on healthcare.
“We expect some increase in healthcare costs, but there will be a reduction in speed,” says the senior official.
Comments
2. SG in PG | 05.11.09
The problem with “voluntary” health care changes is that they can be voluntarily changed back at will. I hope there will be some teeth in this legislation.
3. Rob | 05.11.09
How will the promise be enforced and what are the penalties if they fail? I believe that the “offer” will be realized as much as I believe the bankers were properly bailed out for the consequences of their greed.
4. Tom Hartman | 05.11.09
Private health insurance has about an 11% administrative cost compared to 2% for public insurance. Private insurance profit is about 5.1%. Does America really need a “ten percenter” to get health care? I do not think so. There is more than a little irony that the health insurance industry is suddenly finding savings now that it is under pressure from a change in federal policy!
5. David Winblad | 05.11.09
I wish reporters could bring together more facts to educate readers on health care costs, why they keep going up, how much of GDP other nations spend on health care, etc.
I understand reporters are deadline driven and don’t have the information readers want to learn.
6. gjdagis | 05.11.09
Obama can’t be serious to suggest that providers are even able reduce costs AND provide “quality care” care. Practitioners are already forced to limit patients to 12 minutes (which must include history taking, examination,diagnosis, treatment and comprehensive charting) in order to make ends meet. We are TOLD how much to charge unlike auto mechanics and many others in the various service industries who set their own prices. If it gets any worse there will be NO providers since we will all practice on a cash only basis. Look to where the real problem lies; in the insurance bureaucracy and the trial lawyers who ruthlessly pursue malpractice suits just to name two.
7. Bryan Stewart | 05.11.09
This is a reduction in the rate of growth, just like our goverment to call that a savings or a cut. The cost of health care is too high now, decreasing the rate of growth is still growth…..
8. Raul E Blanco | 05.11.09
Insurers offers Bla, Bla, Bla . And ask, DO NOTHING, they are very comfortable, the way thing are. Do nothing against the PROFITERS ,of this human MISERY, for which they don’t care, If there is more myseri! its better for them!! That the why can compare the difference between , someone who, can pay, healtht Insurance, and someone who cannot!! SO, THEY LIKE THE WAY THING ARE.
9. kathy hunter | 05.11.09
HOW DO YOU FIGURE THAT AS THE BOOMERS GROW OLDER THEIR INCOME WOULD RISE? SEEMS TO ME YOU HAVE A LOT LESS MONEY WHEN YOU RETIRE THAN WHEN YOU ARE WORKING.
10. Caruso | 05.11.09
This is a 1.5% reduction in the rate of annual increases in spending, not a reduction of the actual cost of healthcare. Brilliant.
So, 46 million Americans get free healthcare while I continue to pay for mine and theirs? Fantastic.
11. Ricardo Sanchez, M.D. | 05.11.09
Any “savings” in the out of control health care sector are good news. But watch out for artful semantic wrapping paper: the game changes is to “reduce spending growth rate”. This should remind us of the promise to “create jobs” which was magically replaced by a stimulus package that “saves existing jobs”.
12. Norris Hall | 05.11.09
In the US, a simple operation for dysphagia cost $2500 for someone like me without health insurance. In Thailand, the same operation costs me $100!!
Health care in the United States is outrageously overpriced.
The US heathcare industry is running scared.
They are afraid that President Obama will tackle the healthcare problem in this country by cutting their outrageously overpriced profits.
So they are throwing out a bone. A future promise of some future savings that they’d be willing to sacrifice to bring down future costs.
What they are actually hoping for is to keep President Obama from enacting anything that looks like the rest of the developed world, where governments either mandate lower costs or manages universal heathcare.
That would really make it difficult for doctors to make their 6 figure incomes.
I hope President Obama doesn’t get fooled by this delaying tactic.
We need healthcare costs reductions now…drastic deductions…not puny 1 or 2 percentage points.
13. Matthew Kruvczuk | 05.11.09
In other words, we have been robbing you blind for years, but now we will cut the rate of growth at which we rob you each year by 1.5%. Look at us we are great humanitarians not dirtball leeches.
14. David W | 05.11.09
I would prefer the President to proceed with his own agenda concerning healthcare and present both ideas to the American people in order to get a fair assessment of what acutal saving on healthcare can be achieved. I get the feeling the healthcare providers are saving face to cut their losses on their unchallenged quest of raping the American people.
15. wcmiller | 05.11.09
Insurance companies have brought us managed care. Payments to hospitals, doctors and other providers of care have steadily gone down, while insurance premiums have continued to go up. Under the insurers plans, deductibles and copays have steadily increased. Under managed care, the patient sees his doctor and then a clerk at the insurance company who hasn’t seen or spoken with the patient decides what medicines or tests the patient can get under the plan, and of course the company makes more money the more times that it says NO. What have the insurers spent the money that they “saved” on? United Health care’s situation is instructive. Their CEO, Dr. Maguire, was paid $150 million in salary and recieved $2 BILLION in back dated stock options before he resigned when the SEC investigated. WE as a nation should not make the mistake of letting these crooks cheat us again. Sincerely, W. Charles Miller Jr., M.D.
16. Ben Siebert | 05.11.09
What a Croc. This happened for no other reason than the insurance companies know Obama is popular enough to get socialized medicine passed very quickly. Look what he has done to banking and the automobile business, without public support to socialize them. But the public does want socialized medicine, and the insurance companies see that they will soon be out of business. As a conservative republican, I am for socialized medicine. I have seen and used medical facillities all over the world, and contrary to what the media tells us, America does NOT have the best healthcare system in the world. We rank 43 in infant mortality, and less than that in longevity.
Obama, don’t get soft on health care changes. Socialize the medicine.
17. linmil | 05.11.09
I would be wary of any healthcare savings that the insurers say they can produce. Those saving will be taken out of the pockets of smaller healthcare and mental health providers by denying claims and reducing rates. The small providers will be forced out of business and that will reduce healthcare options for a large number of Americans. A better offer to would for insurers to reduce profits.
18. Roy | 05.11.09
Promises from the health industry? That should ease everyone’s worries. B O can use it to silent the single payer advocates once and for all. I have my Medicare so I will be amused by the unfolding shenanigans.
19. Bob Smith | 05.11.09
Lowering the out of control “growth rate” is not a savings. Give me a break.
That’s right up there with creating or “preserving” jobs.
The spending rate is already higher than yearly inflation. Pretending they’re cutting costs in a meaningful way to promote an agenda is bad journalism Mr. Scherer.
Use logic and reason and people will respect your opinion.
They will only lower their costs when the government stops subsidizing healthcare. Until then there will be an incentive to fleece the system.
20. David | 05.11.09
Miracles persist. Thank you God. It’s about time an industry this big gets its act together enough to contribute back in such a huge way to the citizens of this country. Now lets pray for the oil industry to do the same or similar.
21. Nabi | 05.11.09
It seams that the thieves are smart. They do not want to be regulated. So, they are willing to give some back for now. They would have to give up more if they chose to be helped by the government. Unlike the banks, they are not falling for it. In a few years they can start to recoup what they gave up and continue their path to strip everyone naked with their “Hippocratic oath.”
22. Ron from Elk | 05.11.09
Oh now they think they can save us money after the President threatens to disable their little empire. We have seen some benifits from all the research but I don’t see it. My HMO wants to give my personal information to my Employer. Important medications have high copays. I rarely get the benefits of new technology, I am forced to use physicians on their list. I was healthy for years, what happened to all that money. Oh yeh that was another company. My MD barely has enough time to talk to me and doesn’t remember much between visits. I pay more for healthcare than most of the rest of the world. The only excuse is that my healthcare is better? I don’t think so. I don’t want to save money, I want a complete change. I want the vampires out of the system. Don’t listen to them Obama, kick some fanny. We need real healthcare, this isn’t a “for profit” domain of public need.
23. Beezer | 05.11.09
Why is it that health providers are only now offering this “cost containment”? Is it because they know if they do not, they run the risk of endangering the incestuous partnerships they have with insurance companies? The very same relationships that will become obsolete due to the (more and more imminent) plan to institute a national health care insurance plan?
This will become a tool to be used by insurance companies to say “oh, we won’t need a nationalized health care plan, because now we can cut the cost on insurance premiums by 7% - 10%” when they know a national health insurance plan will force them to rate cuts of up to 25% - 33%.
24. Concerned | 05.11.09
Why wait 5 years? We need the bump, and the savings now. I see so much waste in the entire field…
25. photty | 05.11.09
Is this the big health care reform program ?? What a fraud. I never did believe it anyway. Unless you go for European-style single payer there will be NO significant solution to the problem. So President Obama is going to dance thru this problem with talk and fluff.
26. RABO | 05.11.09
Let’s not even go down this road where insurance providers pretend to be the solution. They are the problem! If the adminu=istration caves into yet another empty promise from the insurers Americans should take to the streets with pitchforks and torches. . . .
When will we get REAL reform?
27. jerry rogers | 05.11.09
One thing that will happen is the insurance companies and intermediates will
“skin the providers”. Nothing will change to reduce costs on their end.
28. Rhonda | 05.11.09
As much as these ideas …sound wonderful . I wish they would get the idea that they need to cut back and not reassign the monies until they find other funding. Doing that only redirects the problem into a different category.
Rhonda Hargrove
31. BRH | 05.11.09
Long ago, in the BR era (Before Reagan), medical insurance organizations were required to be non profit. Too bad Obama is going to let the for profit insurance companies continue, even if they are going to be regulated.
One thing this deal makes clear: There has been precious little competition in the health insurance industry up till now. They have been defrauding their customers for years.
32. Jeff | 05.11.09
Saving a family of four $2500 annually in health care is great, but what will their total expenses be? $5000? $7500? The cost of health care in this country is still astronomical. We need to rolled back existing costs, not just the rate of growth.
33. Ben Poliakoff | 05.11.09
So hospitals and large insurance companies are going to reduce the spending growth rate by 1.5% this year with with proposal. Spending growth rate? Does this mean that if spending would have increased by $100 million, instead it will only increase by $98.5 million? Or does it mean that the $100 million would have been a growth rate of 7% instead the rate will be at 5.5% meaning $71 million dollars. In either case, this does not seem like the kind of savings that will have much of an impact on the cost of health care. Where does the savings come from within hospitals and insurance companies? If there are efficiencies they can implement why aren’t they doing them already to become more profitable. Are they simply reducing their profits? No CEO of a public company would ever come out and say “Hey, We aren’t going to be less profitable.”. Their stock would drop. This whole thing makes no sense. What make sense to me is insurance companies don’t want the government to offer affordable health because they don’t want to compete. They are offering up a piece of fluff in hopes the congress can take this promise back to their constituents and say “Look what we got the insurance companies to promise. Looks like we don’t need the government to offer affordable health care after all”.
34. Jack | 05.11.09
This offer to cut health care cost is so self-servingly disengeuous. If they can cut costs as they “offered” to do now, why didn’t they do it until now? Why should be trust them to do right by the American consumer? Their offer isn’t worth anything. I’d rather trust legislation to do it than take their worthless word for it.
35. Marn Reich | 05.11.09
If the residents of the United States knew the true differences between the cost and quality of our healthcare compared to our peers in other developed countries, the health insurance industry would create a big increase in the unemployment figures.
36. Terence Conklin | 05.11.09
It’s hard to say which is more scary. This move by the health care industry to “cut costs by $2 trillion over 10 years” or Obama’s use of that offer to push his agenda. We must remember that in that same 10 years will see $25 trillion spent on health care to that same industry. not including increases. That is still $8,000 for every individual in the U.S. The industry is salivating over all that cash and Obama’s plan to give them an IV like needle into it, directly from the taxpayers into their pockets. When in YOUR life do you spend $8,000 per year for health care? At what age will that occur? When is YOUR break-even age? Will it be 10 years into your career when you have given them $80,000.? Will it be at 20 years into your career and $160,000 has been handed over? No, I think we need to get costs truly under control first. Make the cost of medications, visits, tests, and treatment comparable to Europe first. My wife and I receive all our health care in France and we gladly pay at the cashier, without insurance. It costs us pennies on the dollar compared to here. The U.S. needs a government funded system of clinics where services reflect the real price instead of the inflated, golden-goose system, we have. THEN we can talk about insurance for really big, but unlikely, illnesses. I have million dollar “catastrophic” health insurance with a $5,000 deductible for $1,200 a year but it stipulates I must spend a majority of my time outside the U.S. where care is affordable. The insurance industry knows what is wrong but they will not let you in on it. The U.S. is way out of whack! It is tragic to see Obama helping them lock us into an enslaved paying relationship before we even get the sniffles.
37. Eddie | 05.11.09
They should place a cap on malpractice law suits, and limit the number of cases an attorney can file and will save even more.
38. Teddy | 05.11.09
I love these companies that rev up the PR machines and say we can save TRILLIONS. Talk it cheap, let’s see the savings already.
39. Marv | 05.11.09
The benefits of a being a citizen of the USA should include “free” health care and “free” education. We’re the most backward of all industrialized countries when it comes to providing these (at any cost). Many uneducated (educated too) people work all their lives here, in this society, and have nothing to show for it but bad health and debt. Many if not most of these people, through no fault of their own, never had the background or the opportunity to be educated. Although they work hard or they’ve always worked hard these people neither had nor have the money to afford it. The jobs they have or had won’t support the cost. The oligarchy for profit organizations (and their paid for congressmen) running the current health care system have created this never ending always increasing debt and dependency system to enrich themselves. The insurers don’t care about people. Don’t compromise!
40. James Raider | 05.11.09
PERCEPTION IS EVERYTHING, it seems, and the Obama White House has mastered the art of affecting consciousness in presenting itself, and particularly the “budget cuts.”
http://pacificgatepost.blogspot.com/2009/05/obamas-aggressive-budget-cuts.html
Obama is completely squandering an opportunity for reform.
41. Realist | 05.11.09
Some more of Obama’s political brilliance. Fight the insurers head -on, as some lefties would like, and you lose. They are just too powerful - for now. But they know trouble lies ahead for them.
So, rather than a direct confrontation with the insurance industry, which at present leads nowhere, he allows the appearance of a compromise. They perceive that they need to be “at the table rather than on the menu.” When their “collaboration” fails to produce the promised results, and/or they find their position unprofitable, they collapse under their own weight, not unlike GM. BUT, there is no perceived need or public demand for a bailout. Harry and Louise suffocate on their own and the public approves. Brilliant.
42. Archie1954 | 05.11.09
From personal experience I can tell you that creating savings in the healthcare world requires a joint effort. I have singlepayer national healthcare. My taxes together with $1,200 in annual premiums cover everything for a family of four except cosmetic procedures. However, I for one, realize that if I demand mercedes service when I’m paying for a volkswagen then the system will breakdown. So when I asked my doctor to remove a small benign growth on the back of my leg and he responded that he would check with the hospital to see when an operating theatre was available together with nurses, I said no. I told him that if he couldn’t do it in his office then I would forgoe the procedure. He said “OK roll up your pantleg” and he nipped it off in the office in less than 10 seconds. End of story. the savings to the healthcare system from that one demand made by me was substantial, just multiply it by hundreds of thousands and you get the picture. Also doctors must be indoctrinated with the requirement that they cut costs (always in a way that does not put their patients in any danger). I refer to new technology for instance. I know of a new machine that can diagnose potential heart attacks by showing blocked arteries. It can also tell if a person has a faulty heart valve or has a potential for a stoke. It will also show lung function and can be used to fine tune heart monitors. This machine is easy to use with operators not requiring more than a couple hours practice before being able to handle the machine. It is small and extremely portable and can be utilized in non medical venues if necessary such as portable clinics in shopping malls. The test takes two minutes and is non invasive. Do you think doctors would be interested? Think again. The doctors are not the least bit interested because the machine is too simple, too inexpensive, too easy to run and the test results are instantaneous and non invasive. No! Doctors are only interested if the machine is very expensive requiring months of study to know how to operate it and necessitating long tedious and invasive testing. Believe me I know from personal experience that what I say is true. However if the US is to finally provide all inclusive healthcare doctors are going to have to learn that big and expensive is not necessarily the best.
43. Francis E Reynolds | 05.11.09
I did not vote for letting the health insurance companies, big pharma and for profit healthcare providers off the hook.It’s time(way past time)to “go to the matresses on this”. STOP ALL THE ABUSE NOW!!
I hold the administration and congress to account for the outcome. Lawmakers MUST find other sources of campaign financing or find other employment.
44. Jude | 05.11.09
Yeah, like we can believe ANYTHING they have to say!
They are in the business to make money for their stockholders–
Instead, what I’d like to see is for SOMEone to say how MUCH profit is morally TOO much
45. Alice | 05.11.09
Why can’t I have “Archie 1954’s” insurance costs. My husband and I are on Medicare and have supplemental insurance and it cost us $587.61 per month, that is $7070.32 per year.
46. rlspatacon@hotmail.com | 05.11.09
Sure, if instead of growing their take at 7%, the insurers “agree” to grow “only”at 5.5% it would be a huge savings!
And a “game changer” too!
It is like telling a victim whose watch was left behind by the robbers that it represents a “savings” since they only made off with his wallet. Good grief Audacious Hope!
47. Mark | 05.11.09
Obviously this issue is all the fault of greedy individuals and their lawyers. These people should not be allowed to sue the people who are trying to help them. The solution is simple. Let experts in the industry come up with the best system to solve the problems. Increase the salaries of the executives that run the large pharmaceuticals and insurance companies, and hospitals, say double their salaries, to pay them for their service on a national corporation, like the FDIC, that will discuss and create policy that will reduce health care costs while keeping their businesses viable, even increasing their profits, so that they can continue to serve us.
48. Blake | 05.11.09
The fact that the healthcare industry has the capacity to offer $2 Trillion in savings should be a red flag to anyone with common sense.
49. unlending | 05.11.09
cutting costs is simple. reduce quality and ration services. done.
careful what you wish for.
50. aldo vogelfrei | 05.12.09
We need to get rid of the insurance companies and institute single payer health care. Period.
51. minimlst | 05.14.09
Nothing about providing coverage for all Americans. I’d like to see all of the current health insurance players out of business and then we can just start over.
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1. Paul | 05.11.09
Don’t believe anything insurance companies say.