Obama Hails the Industry's Promise to Cut Costs by $2 trillion in Next Decade

Obama, health industry bigs hammer out plan; critics take wait-and-see attitude.

May 11, 2009, 8:06 AM

May 11, 2009— -- President Obama called today's meeting with health care industry heavyweights "historic" and "a watershed event in the long and elusive quest for health care reform," despite the muted reaction outside the White House as proponents and critics wait to see how the plan actually develops.

The president, echoing his past remarks, emphasized today that health care reform is a central component of fixing the economy and the lives of the American people.

He told health care players at the meeting, "You've made a commitment. We expect you to keep it," according to White House press secretary Robert Gibbs.

"We cannot continue down the same dangerous road we've been traveling for so many years, with costs that are out of control, because reform is not a luxury that can be postponed, but a necessity that cannot wait," the president said in a speech following the meeting.

"It is a recognition that the fictional television couple, Harry and Louise, who became the iconic faces of those who opposed health care reform in the '90s, desperately need health care reform in 2009. And so does America. That is why these groups are voluntarily coming together to make an unprecedented commitment," he added.

There was mixed reaction from Capitol Hill. Sen. Ted Kennedy, D-Mass., probably the president's biggest supporter on health care issues in the Senate, lauded the president's efforts.

"This is an extraordinary moment of opportunity for real reform in health care," he said. "The president knows it's time to act and is providing impressive leadership. Members of Congress from both parties and leaders of the insurance industry know that the time has come to reduce costs and expand access to quality health care for all. The American people are right to call on Congress and the administration to delay no longer in easing the heavy burden of ever-increasing health costs that crush the budgets of families and businesses alike."

Others were more skeptical.

Sen. Charles Grassley, R-Iowa, the ranking Republican on the Senate Finance Committee, and a chief Republican negotiator trying to figure out how to pay for health care reform, said in a statement that the idea of the White House and the insurance industry saving $2 trillion is a great one, but he'll believe it when he sees a nonpartisan score from the Congressional Budget Office (CBO).

"For health care budgeting purposes, CBO's word is the only one that counts," he said in the statement.

A senior administration official had made it clear Sunday that the CBO does not analyze the impact on national health expenditures.

"I would not anticipate that CBO will be 'scoring' the statement or the event that is occurring tomorrow, in part because CBO traditionally does not evaluate or does not score impacts on national health expenditures, but as you look out over a long period of time, the impact on national health expenditures is absolutely crucial to achieving long-term fiscal savings for the federal government itself, because, again, if not, it's not a sustainable system," the administration official said.

Some say today's meeting was hardly a breakthrough and, in fact, Obama's plan for companies to voluntary make these cost cuts may meet the same fate as the failed health care plan President Jimmy Carter tried to implement in 1977.

"I am convinced that the people who sat around that table and the president himself sincerely believe this was a good plan, and yet I kind of have a feeling it was Kabuki theater," said Uwe Reinhard, a professor of political economy at Princeton University.

"One should be careful not to promise too much."

The president has said before that he wants to see health care reform enacted and signed into law by the end of 2009, but Gibbs would not expand today on whether the president has told Congress when he wants a bill.

Gibbs said he does not have a firm timetable on how health care will play out on the Hill but said that both House and Senate finance committees are "actively working on this."

Sen. Max Baucus, D-Mont., the chairman of one of the key congressional committees that the president is entrusting to draft the legislation, has said the Senate Finance Committee could begin drafting the legislation at the beginning of the summer, with a bill up for a vote before the August recess.

'I Will Not Rest'

In a move White House officials have called a "game-changer," representatives of the major players in the health care industry -- who the White House calls "stakeholders" -- came to the White House today to pledge to reduce health care costs by 1.5 percent annually over the next decade.

The savings would add up to $2 trillion by 2019, and today's move could save the average family of four $2,500 annually by 2014, the White House said.

The pledged reduction of 1.5 percent in costs will not stop health care prices from rising almost twice as fast as regular inflation but the White House budget director said today's announcement, if enacted, will make the system sustainable.

"By the end of 10 years, health care would be 20 percent of the economy," Peter Orszag said. "This kind of change could reduce that by 3 percent of the economy, that's $700 billion in one year alone."

Obama cited today's meeting as an example that competing ideologies that would not have previously attended such a meeting are now coming together. He lauded the cooperation of various interest groups with a stake in the issue.

The president said health care reform must and will be achieved by the end of the year.

"For decades, we've talked about reducing costs, improving care and providing coverage to uninsured Americans. But all too often, efforts at reform have fallen victim to special interest lobbying aimed at keeping things the way they are; to political point-scoring that sees health care not as a moral issue or an economic issue, but as a wedge issue; and to a failure on all sides to come together on behalf of the American people," the president said. "This is a historic day, a watershed event in the long and elusive quest for health care reform."

Obama said he welcomes all opinions, but added that there are three points on which he is not willing to negotiate -- that rising health care costs have to be contained, people should be able to keep the doctor or plan they have or to choose a new doctor or health care plan, and finally, all Americans must have quality affordable health care.

He cited the example of his own mother, who died of ovarian cancer, struggling with medical expenses until the end.

"I will not rest until the dream of health care reform is achieved in the United States of America," Obama said.

With the savings, the administration hopes millions of Americans who don't have or cannot afford insurance will be able to get a plan.

White House officials often cite a study from the Dartmouth Institute for Health Policy and Clinical Practice that explored why the same health care coverage can cost up to three times more in one part of the country than in another, with no better results.

Where Will The Savings Come From?

"I think the most important lesson of our work is that we do not need to spend more to get better health or health care. We can actually spend less and get better care and better health. That's the surprise," said Dr. Elliott Fisher, principal investigator of the Dartmouth Atlas Project.

As part of cost savings, primary care physicians would get most of the control over a patient's health care. This, proponents of the plan say, would improve coordination between a patient and their doctor, who would serve as a "coach" and keep track of the patient's health.

Potential cost-cutting measures would reward "physicians for working together to keep people healthy and to bring them back to health as quickly and inexpensively as possible," Fisher said.

Savings would also be achieved by using cutting edge technology for less costly medical procedures.

Another measure would be to eliminate unnecessary tests and hospital stays, and provide financial incentives to medical providers so that they are encouraged to cut costs by avoiding unnecessary services. The administration also wants to streamline the medical process by having one bill for all of a patients' tests rather than separate checks for each medical exam and procedure.

"Much of health care spending, probably 30 percent of it, is devoted to unnecessary stays in the hospital, unnecessary diagnostic tests, to unnecessary referrals to specialists, or more frequent visits then patients need," Fisher said.

He added that changing the payment system will also help trim costs.

"Right now, a doctor is only paid if you show up at the office. If we imagine a new system where physicians could be paid to help keep you out of the office they would have more time for you when you needed to be seen," Fisher added.

Health Care Reform

Health care has been on top of Obama's agenda since he took office. In the $3.55 trillion budget, the administration set aside $634 billion in a reserve fund dedicated toward health care reform and officials have said more could be spent in the coming years.

"This time, the call for reform is coming from the bottom up, and from all across the spectrum: from doctors, from nurses, from patients, from unions, from businesses, from hospitals, health care providers, community groups," Obama said in March during the White House summit on health care. "This time, there is no debate about whether all Americans should have quality, affordable health care. The only question is, how?"

"If we don't address costs, I don't care how heartfelt our efforts are. We will not get this done. If people think that we can simply take everybody who's not insured and load them up in a system where costs are out of control, it's not going to happen. We will run out of money," he said.

Obama has cited health care reform as one of the five pillars of the foundation that the administration will aim to build to strengthen the economy.

In a speech in Missouri marking his 100th day in the White House, the president urged Congress to get a health care reform package on his desk by the end of the year.

The White House, which is calling today's meeting a breakthrough, said the willingness of health care providers to implement cost-cutting measures means health care reform will happen this year.

The health care industry is trying to join the reform parade so as to shape the policy away from measures they do not want to see. For example, the insurance industry does not want a government health plan that will directly compete with their for-profit ventures.

Whatever their motives might be, the move discussed today could directly help Daniel and Judith Russo, two of millions of Americans for whom rising health care costs mean economic doom. The couple, who pay for their own insurance, said their health care budget cuts deeply into what they hoped would be savings for their retirement.

"We're depleting what would have been savings for retirement. We're spending our retirement pre-retirement age," Daniel Russo said. "I find it frustrating at my age, after working hard, to be punished by the system that I've played by the rules."

ABC News' Karen Travers, Z. Byron Wolf, Sharyn Alfonsi, Audrey Grayson, Susan Rucci and Sarah Herndon contributed to this report.

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