Obama's Healthcare Gambit

Healthcare bloggers on the left appear tentatively optimistic about the photo-op today. Drum:

My problem here isn't that the industry folks haven't proposed detailed plans or enforcement mechanisms.  That's to be expected.  My problem is that they're apparently planning to argue that things like streamlined billing and "encouraging" the use of evidence-based guidelines will be enough to entirely meet Obama's cost goals.  Cost effectiveness research?  No need!  A public plan?  No need!  It's just like 1993, when the HMO revolution was going to change medical care so dramatically that there was no need for Bill Clinton's healthcare reform.  That didn't work out so well.


Whatever kind of backstabbing these industry groups may or may not do in the future, they won’t be able to take back the fact that once upon a time they stood beside the White House in agreeing that it’s possible to achieve massive cost-savings without compromising patient care. That argument may well prove hugely important, politically, to getting a package through congress.

Ezra Klein:

What we have...are promises of future cost containment that exist alongside concrete and continued opposition to the cost containment ideas that are actually on the table. And for good reason. A 1.5 percentage point decrease in health spending is a 1.5 percentage point decrease in medical industry profits. This commitment doesn't contain any examples of concessions that will reduce a participant's revenue streams. Conversely, every time legislators have proposed a reform that will actually cut industry profits -- and thus cut health spending -- the industry has howled in pain and anger. It's hard to sync that with promises to cut spending by $2 trillion over the next 10 years by implementing a set of unspecified reforms.


By committing themselves to lowering costs, these industry leaders are essentially committing themselves to lower profits, which is illogical unless they see that as a best-case scenario. AHIP and some of these other groups have every incentive to guard their profits while rejecting reforms that would cut into them too heavily. For instance, cost control could be a bargain in exchange for killing the public option. The lack of detail in the letter should not go unmentioned, either, and the Administration must make mandatory some changes to reduce costs rather than relying on these former enemies of reform to voluntarily reduce. Because "reducing over-use" of health care can mean a lot of things - denying care, for example, which health insurers are really good at.

Jonathan Cohn:

Students of history may hear in Monday's announcement echoes of the infamous "Voluntary Effort"--a promise by the hospitals, during the late 1970s, to curb the cost of care in their facilities. They made the promise, in part, to derail talk of reform in Washington. And they succeeded in that. It was the cost control that, shockingly, didn't work out so well. Spending came down for one year, then started skyrocketing again.

But note the key difference between now and then: This time, the industry groups aren't promising to control costs as an alternative to reform. They're promising to control costs as part of reform. In fact, some of the efficiency steps they are proposing wouldn't even be possible without the sorts of changes now under discussion in Washington, because they require changes in legislation.