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Obama Endorses Health Industry's Goal to Rein In Costs

Despite Fanfare, Experts Say Plan Lacks Key Details

President Barack Obama declares health care costs out of control and says something must be done now, following a meeting with health care industry officials.
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Washington Post Staff Writers
Tuesday, May 12, 2009

In his quest to transform American health care, President Obama appeared yesterday to put his faith in pledges from some of the interest groups that helped scuttle reform 15 years ago, but the industry's promises fell well short of the White House's expansive claims.

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"This is a historic day, a watershed event," Obama said after a meeting with lobbyists representing doctors, hospitals, drug manufacturers and medical-device makers. "Over the next 10 years -- from 2010 to 2019 -- they are pledging to cut the rate of growth of national health-care spending by 1.5 percentage points each year -- an amount that's equal to over $2 trillion."

In a letter to the president however, the organizations made a more limited commitment.

"As restructuring takes hold and the population's health improves over the coming decade, we will do our part to achieve your Administration's goal," the six trade groups wrote.

Administration allies cheered the news that the once-recalcitrant health lobby is eager to join reform negotiations. But many offered a cautionary note that warm words from the industry cannot be mistaken for enforceable policy changes.

"It's a goal and a good goal," said Sen. Charles E. Schumer (D-N.Y.). "But it's hardly locked in stone."

Obama has consistently framed his desire to overhaul the health system in the context of broad economic pressures. Health-care spending has been increasing much faster than the overall economy, straining businesses, consumers and state and federal governments, which finance care for the poor and elderly.

Though experts agree that the health system is inefficient, squeezing out savings has proven difficult. Yesterday's announcement, despite the fanfare, shed little light on precisely how the industry and government might achieve $2 trillion in savings over the next decade.

Despite the high-profile attention -- complete with a photo opportunity in the White House State Dining Room -- the industry offered just a handful of ways to achieve significant cost reductions, most of which were included in Obama's budget proposal.

"An unrivaled set of abstractions and posturing," said Alan Sager, a professor of health policy and management at Boston University. Among the specific money-saving items listed in a White House document are streamlining billing procedures, investing in preventive care and offering financial incentives to hospitals that reduce readmission rates.

"It would be difficult to wring 1.5 percentage points out of this list of proposals," said Robert D. Reischauer, former director of the Congressional Budget Office.

Many experts say it is possible to reduce the rate of growth in medical spending, but that it could take years to accomplish and it could involve painful trade-offs for patients and providers.

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