By Dan Eggen and Ceci Connolly
Washington Post Staff Writers
Thursday, March 5, 2009; A01
Just four months ago, the pharmaceutical industry was prepared for the worst. Drugmakers feared that Barack Obama would press for price controls on prescription drugs and readied plans for a multimillion-dollar ad campaign against the idea.
Instead, Obama chose a more modest approach after becoming president, proposing to extract bigger discounts on medications bought through Medicaid. The plan could save the drug companies billions a year compared with price controls.
"This is a great start," said W.J. "Billy" Tauzin, a former House member from Louisiana who now runs the Pharmaceutical Research and Manufacturers of America (PhRMA), referring to Obama's health-care plan. "There are things we don't like about it. But there's time to discuss all that."
Obama's opening gambit to dramatically expand the health-care system has attracted surprising notes of support from insurers, hospitals and other players in the powerful medical lobby who are set to participate in an unusual White House summit on the issue this afternoon. The lure for the industry is the prospect of tens of millions of new customers: If Obama succeeds in fulfilling his pledge to cover many more Americans, those newly insured people will get checkups, purchase medicine, undergo physical therapy and get surgeries they cannot afford today.
To start the process, Obama has proposed a $634 billion health-care reserve fund that would be partially paid for with targeted cuts in payments to insurers, doctors, hospitals, drugmakers and other providers, and he has vowed to fight attempts to water down the package.
The unstated intention of Obama's approach is to dole out the pain in small, easier-to-swallow bites to minimize opposition, White House aides say. Under the president's plan, hospitals, doctors, drugmakers, insurance companies and wealthy seniors -- all of whom will be represented at today's summit -- would sacrifice. But if the system was calibrated properly, no one would lose too much.
Not everyone is happy, of course, and lobbyists and health-care experts warn that major obstacles lie ahead. The seniors lobby AARP, for example, opposes Obama's recommendation to raise Medicare prescription premiums on wealthy retirees. Major insurers also dislike his proposed overhaul of the Medicare Advantage program, which markets managed-care plans to seniors, while home-care providers object to cuts to their Medicare reimbursements.
Former Columbia/HCA executive Richard L. Scott has launched a nonprofit group called Conservatives for Patients' Rights, which promises a $20 million multimedia ad campaign warning that the country is hurtling toward socialized medicine. Scott, who was pushed out of Columbia/HCA in the 1990s and now runs a chain of Florida urgent-care clinics, said in an interview that he has put up $5 million of his own money to kick-start the effort, with hopes of building a grass-roots campaign.
"Imagine waking up one day, and all your medical decisions are made by a central national board," Scott says in the group's first radio ad, which warns of "a system like England or Canada, where national boards make your health-care decisions and waiting lists reign supreme."
But overall, the tone of the debate so far is strikingly different from that in the early 1990s, when well-funded lobbying groups united to crush President Bill Clinton's health-care proposal.
"I'm very encouraged by what's going on now," said Bill Gradison, a former head of the Health Insurance Association of America, which funded the "Harry and Louise" ad campaign that helped torpedo the Clinton plan. "My impression is that there's been a real openness to reach out to diverse interests, not leaving anyone out -- which is how a lot of people felt back in the 1990s. . . . They seem to have learned the lessons of what not to do this time."
Obama has made overhauling health care a centerpiece of his young presidency, with the stated goal of assembling a broad reform package by the end of the year that would push the nation closer to universal coverage. The number of Americans without health insurance is now estimated at 46 million.
The president has cast the effort as a fiscal priority amid the economic crisis, calling it "a historic commitment to reform that will lead to lower costs and quality, affordable health care for every American."
Rather than single out any one player in health care, Obama's plan would inflict "flesh wounds" on virtually every major stakeholder, said Nancy Chockley, president of the National Institute for Health Care Management, a nonprofit group funded largely by Blue Cross Blue Shield. The key, she added, is that none of the wounds would be fatal.
"You look down the list, and no one's going to be happy," Chockley said. "But nothing is a lay-down-the-gauntlet" style attack.
Melody C. Barnes, Obama's domestic policy adviser, said: "The important outcome for everyone is reduced costs. We all have to put something down on the table."
Keeping the major players on board could be crucial to Obama's success. The health-care sector is one of the mightiest political forces in Washington, spending nearly $1 billion on lobbying and contributing $162 million to candidates of both parties over the past two years, according to the Center for Responsive Politics. Obama's presidential campaign received nearly $19 million from health-care companies and their employees.
For the industry, expanded coverage could open up huge new markets. As drug companies learned when President George W. Bush and Congress created a new Medicare prescription drug benefit in 2003, "long-term success is built on market share," said Chris Jennings, a former Clinton health adviser.
"Expansion of coverage certainly creates a variety of opportunities for the private sector," said Sen. Ron Wyden (D-Ore.). The prospect of that new business is one way to "keep the powerful interests" at the bargaining table, he added.
Hospitals and physicians would also win significant reprieves under Obama's initial proposal. The president would leave untouched $20 billion in annual payments for hospitals that care for large numbers of uninsured patients, focusing instead on more modest cutbacks for doctors and hospitals that do not meet certain quality standards. His plan also includes budget language that would spare doctors a 21 percent reduction in pay next year and 5 percent cuts in future years.
Karen Ignagni, president and chief executive of America's Health Insurance Plans, said members of the insurers group are deeply concerned about Obama's proposal to switch the Medicare Advantage program to a competitive bidding process, arguing that it would force seniors to bear a disproportionate share of the costs. The administration says the change would save $175 billion over the next decade.
But Ignagni, who will attend today's summit, also said her group is willing to make sacrifices to reach an agreement. "The coin of the realm for 2009 is not the old-fashioned playbook of ads and 30,000-feet campaigns," she said. "The coin of the realm is for stakeholders to come to the table with real proposals and solutions."
Another major challenge could come from the AARP, which strongly objects to making wealthy seniors pay higher premiums for drug coverage. "Asking seniors to pay more is not a solution to the skyrocketing costs of prescription drugs," said spokesman Jim Dau. "Rather than shift more costs to seniors, AARP urges more focus on lowering soaring drug-cost increases."
William Dombi, a vice president of the National Association for Home Care and Hospice, complained that his relatively small sector is being hit inordinately hard by Obama's proposal to slash $37 billion in Medicare payments that the president says are bloated. "Because the others are bigger, they have greater entree and greater influence," Dombi said. "That's why they're not complaining -- they don't have anything to complain about."
Drew Altman, head of the Kaiser Family Foundation, said the debate "will get a lot tougher" in the months ahead. "We're still more in the happy-talk stage of health reform," he said, adding: "In Washington, there is a machine set up to fight every fight. No battle goes unfought."
Research editor Alice Crites contributed to this report.