Council of Economic Advisers Lists Benefits of Cutting Health-Care Spending

By Ceci Connolly and Lori Montgomery
Washington Post Staff Writers
Tuesday, June 2, 2009

Slowing the growth in health-care spending from 6 percent a year to 4.5 percent would have enormous benefits for the nation's economy, creating as many as 500,000 jobs a year and increasing annual income for the average family of four by $2,600 over the next decade, the president's chief economic advisers said yesterday.

In a report set to be released today, the Council of Economic Advisers concludes that cutting costs while extending coverage to the 46 million people who lack health insurance would also dramatically improve the federal budget outlook, remove "unnecessary barriers" to job mobility and increase the nation's overall economic well-being by "roughly" $100 billion a year.

The report contains few details about how those ambitious goals would be achieved, however, and does not address any increased federal spending needed to implement health reform. And the White House economists acknowledge that shaving 1.5 percentage points off the rate of growth in health spending would be extraordinarily difficult -- "probably near the upper bound of what is feasible."

"The kind of reform that will bring about these economic rewards will not be easy. It will require truly game-changing innovations in many areas," the report says. "But, if we can bring about such changes, there will be substantial benefits to American households, businesses, and the economy as a whole."

For months, President Obama has framed the case for comprehensive health reform as a critical plank in his broader economic agenda. The report buttresses the political case by outlining an array of benefits that would be likely to flow from a successful overhaul of the nation's health system, including jump-starting a sluggish economy and closing a gaping hole in the federal budget.

But Republicans and independent analysts said it is far from certain that a broad expansion of health insurance -- which would entail significant upfront costs -- could achieve large savings over the long term.

"This report is nothing more than smoke and mirrors," House Minority Leader John A. Boehner (R-Ohio) said in a statement. "Everyone agrees that reducing the cost of health care would benefit our economy, but the administration hasn't offered a credible plan to do so without raising taxes or rationing care."

Although Obama wants Congress to craft a comprehensive health bill, the administration is stepping up its efforts to influence that process and rally public support. In a conference call late last week, the president implored some of his most loyal grass-roots supporters to begin mobilizing for a "big push" this summer.

"This is our big chance to prove that the movement that you started during the campaign isn't over, we're just getting started," he told members of Organizing for America, which is supported by the Democratic National Committee.

As part of that push, Obama also met recently with industry leaders who have pledged to help find $2 trillion in health savings over the next decade. In a follow-up letter to the president yesterday, the five trade groups and one labor union detailed changes that they say would reduce future medical spending by $1 trillion to $1.7 trillion.

Overall, the steps outlined in the 28-page letter amount to widely accepted ideas for improving care, such as reducing hospital-acquired infections, simplifying administrative processes, putting a greater emphasis on prevention and eliminating costly medical errors.

"This is a compilation of resolutions to do better," said Alan Sager, a professor of health policy and management at Boston University. "It is not a listing of forces or changes in behavior that will save money."

The document submitted by the American Hospital Association pledges to help its members follow the "Hospitals in Pursuit of Excellence Campaign," which highlights the need for hospitals to reduce infections that are transmitted to patients.

The report from the American Medical Association focuses on getting more doctors to follow "evidence-based guidelines" for treating back pain and heart disease, and for prenatal care. The pharmaceutical industry highlights how the use of medications early in an illness can reduce more costly therapies later on.

Howard Forman, a professor in the schools of medicine and management at Yale University, said that there is no dispute that the industry proposals represent sound public policy, but that the question is why those actions have not taken place already.

"We all know there are hundreds of billions of dollars of low-value or no-value health care out there," he said. "The issue is: How do you convert that into real savings?"

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