Good post.

My sense is that both sides are knowingly using the others.

The industry folks are claiming that they are committed to $2 trillion in savings during the period of 2010-2019-- which just a coincidence!-- is the budget window on which Obama's proposal will be scored. It feels like Obama's team has resigned themselves to not being able to pay reform with cost-savings themselves (Orszag is on the optimistic, but intellectually honest side of saying there are only $300 billion in savings), and without any politically clear ways to raise tax revenues, the $2 trillion figure could allow Obama to claim the program isn't a cost behemoth, for now. Depending on how the actual tax discussion goes, they'll dial up-or-down their need to rely on these "promised" savings to make reform cost-neutral. (And blame industry 6 years from now when the savings are starting to be realized.)

Why does industry go along with this? Survive another day. A "promise" of $2 trillion would allow the tough cost control policies to be avoided until the next round of reform. If there is agreement from both sides that a "win" is "universal coverage now, cost control later" then today makes a lot of sense. Otherwise, I'm with Ezra, its just a political photo op with the real news to come down the road.

A 1.5% reduction in health spending does not necessarily mean a reduction in health industry profits. In fact, spending could go down while profits increase. It all depends on the margin between revenue and costs. If there are economies of scale as more are insured or other efficiencies available, then industry profits may rise. We shall see.

"In essence, this is the entire medical industry stepping forward and declaring themselves partners in Obama's effort."

WRONG.

In essence, this is the entire health INSURANCE industry trying to save itself.

Do not confuse the "medical" industry (i.e., health care providers) with insurance.

We're being asked to believe:

Insurers will waste $2 trillion on ineffective procedures.

Unless the public option is dropped, and then they won't waste that money.

--------------

I'd rather have the public option.

Color me more skeptical than others - I'm a little surprised wisewon's being so generous on this one - there's almost nothing here, and nothing that suggests a lot of future improvement either. In exchange for vague "concessions" from the behemoths of health care delivery (AHIP, AMA, SEIU, AHA), the Obama team gets to say they've "done something" about health care costs. which, like much of the "future tense" approach this Administration has to doing things, has not actually happened, and won't actually be seen for years, if ever ($2 trillion in savings? Call me from 2019 and let me know).

Essentially none of these organizations has any direct ability to "control the growth of costs". The possible exception is SEIU, which will probably argue in negotiations that the 1.5% control shouldn't come from them, but from other cost saving measures, anyway (no COLA raises? Seriously?).

AHA and the AMA can recommend cost control options to their members... but I'd say we'll wait a long time to see actual hospitals or doctors institute serious savings, if any, that will be passed along to health consumers (and as noted already, they can still profit anyway). AHIP... well, never mind; this is one time when all he terrible things progressives say about them seems pretty self evident.

And as for the notions about "seats at the table" and what this means for "healthcare reform' that too seems like "not much." All four of these groups already mouth pretty words about the need for reforms while doing little and opposing the kind of serious changes that might actually improve delivery of care and its cost. All of which simply convinces me that the "optics we're getting are meant to convince us that the bad bill we ultimately get was "the best we can do". It's not, and neither is this.

Industry: "Tell you what, we will make a promise that conveniently closes your deficit gap. You take the public option off the table"

Administration: "OK"

Both sides are using the other, but the industry survives another scare. Rather than just say "OK" I'd like to see the Administration tie the public plan to a trigger, so if savings don't materialize, the public plan comes in

It's somewhat fantastic that this and Republicans vouching for the Swiss system are the starting point for negotiations on health care. Anyone recall what the corporate consensus proposal was in the 90s?

I also disagree that the insurers are declaring themselves partners here. They're doing the smart thing and proposing a compromise that sounds reasonable and will get Broderite centrist support and hopefully peel off Bayh, Collins, Nelson, etc to stop Obama from getting 60 votes on just about anything he wants.

This is another instance of industry flexing its muscles to 'insure' that the needs of the citizens do not take precendence over profits.

Great piece and this news was also met with my serious pregnant pause. Don't get me wrong, but their is still no advocate in the room for single-payer. I realize that what Obama committed himself to during the campaign was not exactly single payer but their voices should be in the room. As you pointed out so clearly, it is good news to have these players step in to a room to agree to work on the deal but it seems more "bark than bite". I surely hope this does not mean that what the American people get is some sort of Kyoto protocol that puts us on a path to universal but with years to wait until fruition. The system needs a shift so that our businesses can unburden themselves from these cost and the US public gets what should be a constitutional right, like in most of the civilized western (japan included) world.

Weboy,

Maybe my post wasn't clear.

Shorter me: Both sides are helping the other by not having to accept real cost control measures. Obama doesn't really want them because they're a political nightmare, industry doesn't want them because they threaten profits. So both sides agree to help each other out, allowing Obama to potentially "claim" $2 trillion in fake savings to get his bill through Congress.

Oh... well, then. I guess we agree. :)

Obama has taken Single Payer off the table; next to go will be the option to choose a government plan. The fix is in.

Obama (and Baucus) want A BILL. Just anything won't do, but something that is more cosmetic than substantative is probably OK to them.

I agree with all those above that this is well less than reason for cheer. I strongly suspect this is an effort to peel away the 'moderates' in advance by giving them some perch to hop upon.

I do think that getting the structure right is more important than demonstrable cost savings because fine tuning later on a good plan can bring down future costs. The inverse isn't likely to be true. A weak plan (less than universal, no public option, no government role, for instance) can't likely be made better down the road or improve cost controls.

The basics of Medicare haven't really changed since 1965. Once in place, legislation is hard to change, except to weaken it. Example: 1930's regulatory controls on financial institutions.

This is the health insurance industry saying, "Please don't have a public insurance option!" So it is imperative that we do have one. That is the only way to make the private insurance industry cut costs is to have a public option that isn't out to make an obscene profit off of health care.

Of course this is symbolic! But that does not mean it isn't a real breakthrough. All politics is symbolic, folks. The real "win" from all of this is that the Republicans are further isolated, as Ezra notes, and by not issuing any specifics out of this meeting, the stakeholders have put themselves in an even more vulnerable position. If they had demanded the removal of the public plan in public, for example, then when the public plan was not removed, they could have withdrawn their support. But the very vagueness of the joint statement is a huge victory for the Administration. The picture of Obama standing in front of the "guys" (and where was Karen Ignani?) conveys a lot more than any denials they can make later on.
Actually, this meeting is the end result of almost a year of private meetings between these very stakeholders and Senator Baucus' and Kennedy's staff. During that time, this group of industry folks made sure that they would get what they wanted -- "everybody in" -- individual and eployer mandates are way more important than even the public plan option. After all, every one of those stakeholders win if more of their customers can pay for their care (or if the government can subsidize them).

Of course this is symbolic! But that does not mean it isn't a real breakthrough. All politics is symbolic, folks. The real "win" from all of this is that the Republicans are further isolated, as Ezra notes, and by not issuing any specifics out of this meeting, the stakeholders have put themselves in an even more vulnerable position. If they had demanded the removal of the public plan in public, for example, then when the public plan was not removed, they could have withdrawn their support. But the very vagueness of the joint statement is a huge victory for the Administration. The picture of Obama standing in front of the "guys" (and where was Karen Ignani?) conveys a lot more than any denials they can make later on.
Actually, this meeting is the end result of almost a year of private meetings between these very stakeholders and Senator Baucus' and Kennedy's staff. During that time, this group of industry folks made sure that they would get what they wanted -- "everybody in" -- individual and eployer mandates are way more important than even the public plan option. After all, every one of those stakeholders win if more of their customers can pay for their care (or if the government can subsidize them).

I'm sure this is my fault, but I don't get the math that says a 1.5% reduction of spending on health care will equal $2 trillion dollars over 10 years.

that's 200 billion per year? and that's around 1.5% of what is being spent?

I think not.

A 1.5% reduction is easy. Just reject another 1.5% of claims. (yeah, it's a joke. sure it is.)

But I think people are right about the math. The supposed number for total US health spending in 2007 was supposedly $2.24 trillion, of which 1.5% would be about $34 billion. So even allowing for inflation by the end of the period we're talking at most $100 trillion a year.

What has government ever done better than private, competitive industry?

Coming soon to your town the Boomers Federal Health Home. Hope you remember how to do your laundry without a washing machine, if you ever had to.

According to your link at the WaPo, the plan is "to trim the rise in health-care costs by 1.5 percent a year". This is different than decreasing the total amount of spending. Total costs will still rise, since total growth is ~3.6% per year.

They agreed to cut the "growth" of spending by 1.5%. This was not an agreement to cut spending, just not let it grow as fast...how do you measure that?

Obama said let's play musical chairs.

They could have stayed away, but they decided that we were definitely gonna play musical chairs, so if they wanted a chair to sit down on they'd better play too.

Now the question is, how many chairs are we gonna pull.

We know the industry has to shrink, they want to control the music, and after the first round declare "OK, we played musical chairs! All done now."

When thieves gather to divide up the territory, and there is less territory than there used to be, suddenly every one else at the table is the enemy.

Getting together to beat up the guy who called the big meeting is one approach... (Hillary care defeat...), but now they've decided not to do that.... which means that the enemy is sitting at the table with them....

What has government ever done better than private, competitive industry?

It's trivially easy to counter this with examples. An answer of "nothing" could only follow if the question as you've stated it here were extensively qualified. I suspect you've answered the question this way, but left your qualifiers implicit.

Why not make those explicit? Otherwise this will become an extended game of That Doesn't Count!

(Proceed cautiously, though! Your list of qualifications might look to a non-Libertarian like a typology of acts more suitably undertaken by the public than the private sector!)

Real Healthcare Reform
Changing Priorities, Incentives and the Rules of the Game; Creating an Electronic Health Record for Every Citizen Who Wants One

If you have the financial resources of Bill Gates or Warren Buffett you needn’t pay money to a health plan each month, since if you get sick or injured – even very seriously - you have more than enough money to pay all your medical bills yourself.

But those of us who have significantly less financial resources must find some other means of dealing with the thousands or even hundreds of thousands of dollars or more of medical expenses that we might incur should a serious illness or injury be our fate.

Enter the concept of “health insurance”.

Large numbers of individuals and/or their employers pay some money each month into one or another big pot called a “health plan”. Those individuals who remain essentially very healthy for many years and then suddenly die or perhaps leave a particular health plan for some other reason – if they have put more money into the pot than was taken out to pay all their medical expenses - wind up helping to pay the medical bills of those members of the health plan who become seriously ill or injured and incur a lot of medical expenses.

Many Americans covered by some form of health insurance don’t seem to fully understand or perhaps choose to ignore the fact that if they become seriously ill or injured, for the most part their medical bills will be paid by the members of their health plan who have remained healthy. Keeping members of a health plan healthy by preventing illness and injury is critically important, but is something not currently given the high priority and attention it deserves.

Some Americans believe that healthcare should become a “right” of every American citizen. If a nationalized single payer health plan were enacted, every American citizen who became ill or injured - for any reason whatsoever - and incurred significant medical expenses would for the most part have his or her medical bills paid by U.S. taxpayers. Many Americans oppose such a system for America recognizing that significant difficulties such as long waiting periods and rationing of care exist in such types of government healthcare systems that currently operate in other countries such as Canada and the United Kingdom.

For any health plan to work which has a large number of people pooling their money to essentially pay the medical bills of whichever members of the plan become seriously ill or injured, rules must be established as to when and how much money may be taken out of the pot e.g. “legitimate” doctor bills and hospital bills. Equally important is keeping track of the amount of money that is being put into the pot each month in premiums paid by health plan members or their employers. If too much is being paid out in expenses as compared with the amount being received in premiums, the pot will soon become empty and the health plan will go broke.

As previously mentioned, the monthly premiums paid by individuals or their employers go into a health plan’s big pot from which “covered” healthcare expenses are paid. But also from this pot are paid all the health plan’s administrative expenses including what may be big salaries and golden parachutes for CEO’s and other “healthcare executives” – individuals who may be paid to find technicalities of one sort or another in the health plan’s agreements so the health plan can deny or reduce payments, raise premiums, cancel insurance, or in one way or another minimize or exclude “bad risks” from the health plan. All such questionable business practices are done to enable the health plan to make a profit and remain in business.

Currently we are experiencing continual increases in healthcare costs that are unsustainable and which, if unchecked, will soon seriously threaten the future of the entire American economy. Healthcare costs must be controlled, but how? If a healthcare system made up of health plans is going to have a chance of both meeting the needs of health plan members and simultaneously develop the ability to keep costs under control, priorities, incentives, and the rules by which the game is played all must be changed.

The good news is that a lot of illnesses and many injuries are actually preventable. But how will prevention ever become a top medical priority when doctors, hospitals, and other providers get paid largely for diagnosing and treating illness and injury, not for preventing it?

Although health promotion and disease and injury prevention receive fashionable and socially acceptable lip service, the fact is that most of the participants in what should be more appropriately called our “sickness and injury care system” actually have no significant financial incentive whatsoever to spend any significant time and energy in genuinely promoting health and helping to prevent disease and injury.

Much to the contrary. Other than the actual members of a health plan – patients and potential patients - and their employers and perhaps the employees of some health plans, most participants in our sickness and injury care system - because of the way they are paid - have an enormous (if unspoken) financial incentive for massive amounts of disease and injury – much of which is preventable – to continue to occur in America. Strictly from a financial point of view, for those whose incomes come solely from the treatment – not the prevention - of illness and injury, the more illness and injury that occurs, the better. And if the illness or injury is serious and requires perhaps many expensive tests, multiple surgical procedures, and other very complicated prolonged treatment in an intensive care unit, so much the better; just as long as those unfortunate individuals who happen to be ill or injured are “covered” by “good insurance”, i.e. health plans that are reliable bill payers.

This is not to say that there are not some excellent very dedicated and hardworking doctors and other health professionals - although they are paid on a fee for service basis to care for illness and injury – who nevertheless attempt to essentially work themselves out of a job by making health promotion and disease and injury prevention a top priority with their patients.

It should also be recognized that some existing health plans – e.g. Kaiser and Group Health - combine insurance, doctors, and hospitals into a single entity in such a way that provides everyone - including all the health plan’s doctors - a real incentive to spend time and effort with patients on health promotion and disease and injury prevention as well as on early diagnosis and treatment.
But unfortunately the above examples represent only a small part of the sickness and injury care system that currently exists throughout America.

For the most part - because of the way they are compensated – the majority of doctors and other professional providers, acute care hospitals and long term care facilities, pharmaceutical manufactures and pharmacists, medical and surgical equipment manufacturers and personal injury and malpractice attorneys - among others - depend mightily on massive amounts of disease and injury occurring in America; and these participants in our sickness and injury care system would be significantly negatively impacted if a lot of the preventable illnesses and injuries were actually prevented. This must be changed.

Unless the incentives and rules are changed to give as many participants as possible a real financial stake in health promotion and disease and injury prevention, in early diagnosis and treatment, and in maximizing health and minimizing disease and injury, healthcare costs in America will never be brought under control. Making appropriate changes in the incentives and the rules of the game is the real task and challenge of “healthcare reform”.

What about financial incentives for individual health plan members? Should individuals receive a financial incentive to be healthy? It is well recognized that engaging in regular exercise, abstaining from tobacco, and eating moderately so as to maintain a reasonably normal body weight are all significant factors in helping to promote an individual’s health and wellness. These healthy behaviors can all be confirmed by simple tests performed or ordered in a doctor’s office. Why shouldn’t those individuals who practice these health promoting behaviors and comply with recommended immunization schedules and appropriate preventive screening examinations such as for colon cancer and breast cancer pay significantly less in premiums to their health plan each month than those who don’t?

To really reform healthcare we must find ways – through changes in incentives and the rules of the game - to actually prevent what is preventable, to maximize early diagnosis and treatment, and minimize disease and injury with all its associated cost. We must find ways for participants to be part of our “healthcare system” and not just a part of our “sickness and injury care system”.

Significant changes in the rules of the game for our legal system – tort reform – is also critically important so that the gaming of the system now being done by personal injury and malpractice attorneys and their clients can be ended and so that the exorbitant costs to physicians and other professionals for malpractice insurance can be dramatically reduced.

Truly transforming our “sickness and injury care system” into a “healthcare system” by making significant changes in the incentives and the rules of the game may seem to be a formidable task and one that probably has never really been done before on a large scale anywhere in the world. But it is a worthy task and a critically important task for the future of America and its people.

One significant part of this process is developing the capability of creating an electronic health record for every American citizen who wants one. We need a standardized framework that will allow every American citizen to have an individual electronic health record – a computerized medical record - that can be accessed by all the doctors who care for a particular individual, regardless of wherever on the planet the doctors or the patients happen to be. It would be like having your own personal online banking account that only you have the password to, but which you can share with the doctors who are caring for you, wherever you or they may be.

I applaud those who are using their energy and expertise to upgrade our deplorable current paper medical records system and bring medical records in America into the 21st century. Developing a standardized framework for an electronic health record - for every citizen who wants one – created by your doctor with your assistance, with proper security and safeguards - is something that our national government can and should do as a part of healthcare reform.

If done well, electronic health records will be transformational in helping doctors efficiently and effectively care for patients and will save an enormous amount of time, effort, and money which is currently wasted on needless and frequently inaccurate duplication. And having an accurate electronic health record for an individual will also facilitate appropriate health promotion and disease and injury prevention for that individual. Like the telephone and the computer, someday we will all wonder how we ever got along without individual electronic health records.

All this requires action, not just words. Now is the time for Americans and their leaders and doctors and other health professionals to step up to the plate and begin the process of transforming our “American Sickness and Injury Care System” into an “American Healthcare System” that is worthy of our great country.

Robert Westafer M.D.

As others have pointed out, the promise is to shave 1.5 percentage points off of the rate of growth of health care spending. I haven't done the math, but I trust Paul Krugman's mathematical ability, and he goes along with the $2 trillion figure. That it amounts to that much over the course of 10 years is due to the magic of compounding, or in this case, the magic of what is NOT compounded.

Ah, off the growth rate. Interesting. Also means that all the interesting savings are in the out years...

All over the country, innovative ideas are being implemented in the workplace to improve the health of workers and reduce the rising rate of health care spending. Skyrocketing health care costs are crushing families and companies, impeding businesses’ ability to expand and compete, and stunting the country’s economic growth. Some employers and unions – spanning industries, firm size, and workforce demographics – are using creative approaches to reverse that trend in their workplaces. Here is what the Obama administration just released. http://pfx.me/Bt

@ Robert Westafer:

There are so many holes in the clamor for electronic records, one could drive ambulances through them, if the industry permitted that.

For instance, there has been no serious in-depth discussion of how to handle the inevitable flood of record-hacking. With so much money at stake by the medical industry and physicians, you and I both know that information will be at a premium and worth a fortune. Hacking could also lead to untold financial and medical misery for victims without recourse. Putting prohibitive penalties in place for hackers BEFORE the hacking takes place, to include barring future participation in the medical fields, would be a bare minimum standard, but that will not happen.

Another less obvious concern is how over-reliance on past treatments and diagnoses, which may or may NOT even be accurate, will make medicine even more CYA-only than it is now. The art and science of medicine will become ever more about just the administration and accountability-avoidance aspects.

There will be no effort to update people's medical records when new medical knowledge, procedures, research discoveries and treatments become available, and patients will not benefit from those advances as long as there is one iota of profit involved in the medical decision making.

Single-payer physician advocates have researched the reputed "cost savings" of putting all records into readily hackable electronic databases for easy retrieval and lazy over-reliance by medical personnel, and discovered it's a non-starter. There is no cost savings, in fact the costs are higher in both implementation and maintenance. Check out the recent Congressional testimony of David Himmelstein of Physicians For A National Health Plan, which can be found here:
http://www.pnhp.org/blog/2009/04/23/david-himmelsteins-testimony/.

"Cost savings" is just code for refusing care and treatments for more of the insured. And as much as physician and industry apologists like to say it is, "healthcare" is not the same as "health insurance." Notice that there's no mention of "profit savings" and the medical lobbies are terrified of a public health option that bypasses the needless vultures of the insurance middlemen.

A public health plan that can insure every American who wants it is the only true reform. All else is keeping the profit motive as the true focus, not health.

I do think that getting the structure right is more important than demonstrable cost savings because fine tuning later on a good plan can bring down future costs. The inverse isn't likely to be true. A weak plan (less than universal, no public option, no government role, for instance) can't likely be made better down the road or improve cost controls.

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Real Healthcare Reform
Changing Priorities, Incentives and the Rules of the Game; Creating an Electronic Health Record for Every Citizen Who Wants One

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