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Source says two reps of health care industry to offer $2T savings plan

Sunday, May 10, 2009 | 5:42 p.m. CDT; updated 11:26 a.m. CDT, Thursday, September 3, 2009

WASHINGTON — Top representatives of the health care industry plan to offer $2 trillion in cost reductions over 10 years in a bid to help pass President Barack Obama's health overhaul, a source familiar with the negotiations said Sunday.

Industry officials representing health insurers, hospitals, doctors, drug makers and a major labor union plan to be at the White House on Monday to present the offer.

Costs have emerged as the biggest obstacle to Obama's ambitious plan to provide health insurance for all Americans. The upfront tab for the federal government from Obama's proposed expansion of health coverage will be due right away while the savings he expects from wringing waste and inefficiency from the health care system will take longer to show up.

A source outside the administration told The Associated Press that the savings would come from slowing projected cost increases by a small percentage each year for 10 years. The result over time would be an estimated $2 trillion in savings on health care costs. The source requested anonymity in order to speak before the public announcement.

Trying for a deal now

In a rare move before the administration has unveiled all the details of its proposal, the industry groups are trying to strike a deal now with Obama officials to help get coverage for all Americans in the hopes they can stave off legislation that would restrict their profitability in future years. Obama has courted industry and provider groups, inviting representatives to a health care summit discussion at the White House. There is a sense among some of the groups that this may be the best opportunity to strike a deal before public opinion turns against them, fueled by anger over costs.

Insurers, for example, want to avoid the creation of a government health plan that would directly compete with them to enroll middle-class workers and their families. Drug makers worry that in the future, new medications might have to pass a cost-benefit test before they can win approval. And hospitals and doctors are concerned the government could dictate what they get paid to care for any patient, not only the elderly and the poor.

It's unclear whether the proposed savings will prove decisive in pushing a health care overhaul through Congress this summer, as Democratic leaders have vowed to do. Covering the estimated 50 million uninsured Americans could cost from $1.2 trillion to $1.5 trillion over 10 years. To pay for that, lawmakers would have to identify specific savings in government programs like Medicare, or come up with new revenues.

Different from the Clinton years

But the industry offer shows a willingness to help find the money. That's far different from the situation in the 1990s, when insurers and other key groups successfully opposed the Clinton administration's plan to cover all Americans.

"This is intended to get all the groups to share responsibility about bending the cost growth curve downward," said Ron Pollack, president of Families USA, a liberal group that advocates for expanding coverage. Pollack said he was aware of intense negotiation in the last few weeks between the groups and the administration, but not the specifics.

The AP source said the groups include America's Health Insurance Plans, the Pharmaceutical Research and Manufacturers of America, the American Medical Association, the American Hospital Association and the Service Employees International Union.

The insurance industry group has said previously that it was working on a plan to "bend the cost curve" by shaving a small percentage a year from annual increases that now run far ahead of general inflation.

"It's still going to cost more each year, but hopefully not as much as has been projected," said John Rother, a top health policy strategist for AARP, the seniors' lobby.

Relying on Congress for the details

Obama's health care plan is not a detailed legislative proposal, but a set of goals. Obama is going to rely on Congress to write the detailed version. The president wants to build on the current system, in which employers, government and individuals share the responsibility of paying for coverage. Most Americans would still have private insurance, but the government would play an even bigger role than it does now, by subsidizing premiums for some middle-class families and by setting national consumer protections.

People working for big companies would probably not see big changes in how they get health insurance. But self-employed people and those working for small businesses would be able to get their coverage through a new kind of insurance purchasing pool, called an "exchange." Plans in the exchange would have to follow new consumer protection rules. For example, they could not deny a person coverage because of existing health problems. And they would not be able to charge sick people more.

Lawmakers in Congress are generally following the Obama outlines, with some exceptions. In the Senate, for example, the plan is likely to include a requirement that all Americans carry health insurance, much as states now require motorists to carry auto coverage. Obama had proposed to require parents to get their kids covered, but said a mandate for all would not be affordable for many individuals and families.

 


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