Monday, June 15, 2009

Just Which $2 Trillion Were They Talking About?

Just two weeks after putting $2 trillion in health care cost reductions on the table, the response to President Obama's plan to cut the health care providers by a total of $618 billion over the next ten years ($305 billion in his original budget and another $313 billion this week) is startling--if not in the final analysis predictable.

Given that, at present trends, we are on our way to spending $35 trillion on health care services during the next ten years you wouldn't think $618 billion (two percent of $35 trillion) would be so hard for the health care providers to contribute to the effort--especially after they told us cutting $2 trillion was something they knew how to do.

First, the American Medical Association (AMA) made it clear to the President he'd better not cut their payments by imposing a Medicare-like public plan, complete with much lower reimbursement rates, on them.

And at today's speech by the President to the AMA, did you also notice how quiet the audience was when he also suggested that an independent body of experts, MedPAC, rest control of Medicare reimbursement from the Congress as a means to further control costs?

But it isn't just the AMA that suddenly can't find any savings to put into the health care pot. It's all of the other $2 trillion health care providers as well--hospitals, drug companies, and medical device companies.

This from Monday's Wall Street Journal:

"The sharp response from the hospital industry, which under the proposal faces reductions in subsidies exceeding $100 billion over 10 years, illustrates the administration's challenge in winning the deep concessions from industry needed to pay for the overhaul. After agreeing in May to contribute to a $2 trillion reduction in health spending over 10 years, the hospital industry is now bristling at the prospect of more givebacks -- this time, cuts that would be set in law.

'We're certainly disappointed,' said Rich Umbdenstock, chief executive of the American Hospital Association, an industry group. 'It will be very, very difficult for hospitals to live with cuts of that magnitude.' He said what concerns the group is that the cuts were being laid out before lawmakers have agreed on concrete proposals for reducing the number of uninsured...

"The pharmaceutical industry recently has been negotiating with the White House and Congress over how much it would contribute to the cuts, said several people familiar with the negotiations. Drug companies were initially asked to contribute $100 billion over the next decade, but pressed for their contribution to be closer to $60 billion, they said. The industry argued that giving up too much in payments would cut into spending to develop new drugs.

"Otherwise we might all just become generic drug companies,' said one industry official familiar with the talks. The White House on Saturday said it would save $75 billion over 10 years by paying better prices for drugs under the Medicare Part D prescription drug plan.

"The Access to Medical Imaging Coalition, which represents makers of medical-imaging equipment, said the administration's proposed cuts 'will impair access to diagnostic imaging services and result in patients' delaying or forgoing life-and-cost savings imaging procedures."

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