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A Game Changer for Health Costs?


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By Drew Altman
Sunday, May 17, 2009

The announcement that health-care industry groups plan to voluntarily shave $2 trillion off the rate of increase in health spending over the next 10 years reminded me of the voluntary effort launched with similar fanfare in the Carter administration. Then, industry groups fended off Jimmy Carter's efforts to aggressively control the costs of hospital care by offering to do it themselves. Their efforts helped slow the rate of increase in health spending for a few years -- and helped defeat Carter's plan -- but then the rate of increase in costs spiked again.

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Historically, efforts to control growth in health costs have sometimes achieved successes, but higher rates of increases have always returned. Meanwhile, health costs continue to consume a bigger and bigger share of our economy.

Ever since the Carter presidency -- during which I worked in what is now the Centers for Medicare and Medicaid Services -- the voluntary effort has been viewed in health policy circles as something of a farce -- a president diverted by an industry trying to fend off cost-containment actions it views as more harmful to its bottom line. Today, though, the industry is at the table in an unprecedented way, and its efforts are not an attempt to block action on health reform legislation.

But this private effort -- which President Obama has been clear is compatible with, but not a replacement for, Congress's challenge of designing and paying for health reform legislation -- underscores how the prospect of broader action by a president and Congress, including specific ideas industry groups don't like, such as a public plan option, can motivate industry to do more than it otherwise would.

The good news is that the health-care industry has publicly recognized that the rate of growth in health spending is unsustainable and needs to be reduced (even if the announced goals do not prove fully achievable, either because national associations cannot deliver their members or expected savings do not materialize). Such recognition will provide cover for other efforts to reduce health spending. And it's possible that some of the ideas the industry groups propose, or similar ones, will emerge in health reform legislation on Capitol Hill.

The bigger test will come once health reform legislation is written and details about how it will be financed become clear. Will the industry remain supportive or will it revert to form and protect its bottom line? At that point, the debate will enter a critical phase -- and if the industry is still at the table then, health care's legendary interest groups will really have changed their ways, and prospects for reform will be vastly improved.

The writer is president and chief executive of the Henry J. Kaiser Family Foundation.

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