May 12, 2009— -- President Obama met with business leaders at the White House today to discuss ways to reduce health care costs for businesses on this second day of health care discussions.
The president pointed to companies like Microsoft and Johnson & Johnson -- two of the five companies represented at the roundtable -- as examples of firms that have seen their bottom lines improve by putting in place efficient health care measures.
He added that these companies will be "informing the health care reform discussions that take place here in Washington" and can serve as a model for other companies and even the federal government.
"There's no quick fix, there's no silver bullet," Obama said in brief remarks following the roundtable. "When you hear what Safeway or Johnson & Johnson or any of these other companies have done, what you've seen is sustained experimentation over many years, and a shift in incentive structures, so that employees see concrete benefits as a consequence of them stopping smoking or losing weight or getting exercise. The provider incentives are aligned with the employee incentives as well, and changing the culture of a company."
The Obama administration, which has made health care a top priority, is touting its partnership with health care industry heavyweights and expressing confidence that a bill will pass this year. But some critics expressed skepticism about voluntary cost cuts.
At Monday's meeting at the White House -- which the president called a "historic" and "a watershed event in the long and elusive quest for health care reform" -- health care industry leaders pledged to trim health care costs by 1.5 percent annually over the next decade.
The savings would add up to $2 trillion by 2019, the White House said, and could save the average family of four $2,500 a year in the next five years.
But with little specifics so far on how cost cuts would actually be implemented by the industry, critics said the plan may meet the same fate as the failed health care plan President Jimmy Carter tried to put in place in 1977.
"The story today is one of largely wishful thinking about cost control," said Ted Marmor, a professor of public policy and management at the Yale University School of Management. "No one should believe either that the industry representatives can, even if they wished, control the behavior of their groups."
On how the plan would be enforced, Obama's newly minted Health and Human Services Secretary Kathleen Sebelius said the president has made it clear he wants to see action quickly. The president has said before that he wants to see an officially specified a time frame.
"I think that the industry leaders promised to come back to the president with specifics. What kinds of steps are going to be taken, how quickly. He made it clear yesterday that first of all, he's very committed to passing health reform this year," Sebelius said on "Good Morning America." "There is no other option but getting a bill passed this year, and secondly, he expects the industry leaders to begin work on cutting costs well before a bill is passed. So he wants us all to go to work together."
Obama told health care players at the meeting Monday, "You've made a commitment. We expect you to keep it," per White House press secretary Robert Gibbs.
Sebelius said there would be a transparent system so that the administration could monitor whether the industry is really keeping its end of the bargain, but she did not provide details on how that would be monitored.
Later today, Sebelius will hold a news conference with Treasury Secretary Tim Geithner and others to discuss a new report on Social Security and Medicare.
Health Care Reform Possible?
Reaction to the administration's health care reform agenda in the industry and on Capitol Hill has been mixed.
Sen. Ted Kennedy, D-Mass., probably the president's biggest supporter on health care issues in the Senate, lauded the president's efforts.
"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," he said. "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.
"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.
Others doubt any substantial measures will come out of the meeting.
"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."
"People in Washington imagine they can fabricate wholesale attacks on health care costs. They have failed for decades," said Alan Sager, director of the health reform program and the master's program in health policy and management at the Boston University School of Public Health. "Why should we expect them to do better this time?"
The pledged reduction of 1.5 percent in costs will not stop health care prices from rising, but the White House budget director said the plan, 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."
Orszag has frequently cited a study from the Dartmouth Institute for Health Policy and Clinical Practice that explored why the same health care coverage could cost up to three times more in one part of the country than in another, with no better results.
"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 principal investigator of the Dartmouth Atlas Project.
Although details have yet to be fleshed out, health care groups and administration officials said cost savings would be achieved by making the system more efficient, which would entail consolidating bills and filling out fewer forms, using new technology for less costly procedures and giving incentives to health care providers based on results, not the number of tests or hospital stays.
"Much of health care spending, probably 30 percent of it, is devoted to unnecessary stays in the hospital, unnecessary diagnostic tests, unnecessary referrals to specialists or more frequent visits then patients need," Fisher said.
According to David Dranove, professor of health industry management and director of the health enterprise management program at the Northwestern University Kellogg School of Management, the only way to effectively reduce the cost of health care over the next 10 years is to create a policy of cost control that holds the health care providers as allies.
"Cost control has also failed, because it hasn't enlisted doctors as allies. Instead, they've been squeezed on fees, manipulated, marginalized or simply ignored," Sager said. "If doctors support careful spending combined with health care coverage for all, this builds political support. ... It's the political equivalent of a policy that pulls itself up by its own bootstraps."
ABC News' Jake Tapper and Roger Sergel contributed to this report.