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The Healthcare Industry Makes Its Move on Reform

The Obama Administration's reaction to the healthcare industry's offer to cut $2 trillion in costs over the next decade was predictably favorable. Administration officials said that if the industry could fulfill its commitment, it would cut the average annual cost of coverage for a family of four by $2,500 in the fifth year. Equally important, the pledge from groups representing health insurers, physicians, hospitals, pharmaceutical companies, and device makers, as well as the Service Employees International Union, signals industry support for President Obama's initiative to enact major health care reform legislation this year.

Some commentators suggested that savings of this magnitude could also advance the cause of universal coverage. "This could free up money to provide insurance for people who don't have coverage," said George Stephanopolous of ABC News, adding that the U.S. now has its best chance of getting health care reform in 15 years.

Marc Ambinder of The Atlantic said this was big news: "It means that the White House is gonna get health care reform, this year." Jonathan Cohn at The New Republic's blog also thought the industry move increased the chances of a reform bill being passed. Even if the healthcare groups' motives are dubious, and the details in their proposal sketchy, he said that they have "the right principles and goals, ones that will align closely with the ideas of Obama and his allies on Capitol Hill."

Ezra Klein, a blogger for The American Prospect, agreed that the industry's move increases the odds of reform. "In essence, this is the entire medical industry stepping forward and declaring themselves partners in Obama's effort," he wrote. "It leaves Republicans isolated."

But Klein parted ways from his colleagues in assessing the real motives of the industry groups, all of which have fought various reforms in the past. For example, he noted that both Big Pharma and the device makers have opposed comparative effectiveness research, which might lead to decreased coverage of some of their products. And the insurance industry, he pointed out, continues to fight the inclusion of a public plan in the reform proposal, claiming that it would drive private insurers out of business. The question, he said, is what the industry will do with the seat at the bargaining table that today's announcement has supposedly earned it. (Actually, there was never going to be any reform without the industry participating in the dealmaking.)

I'm with the skeptics. It's gratifying to see this major support for Obama's reform effort--which will need all the help it can get. But nobody does anything for nothing, and the proposed cost-cutting measures--lowering administrative costs, reducing hospitalization rates, improving management of chronic diseases, increasing hospital efficiency, and expanding the use of health information technology--are all goals that will either reduce the revenue of some industry sector or require considerable time and investment to achieve. There's no guarantee that the promised savings will actually materialize; but it's a good bet that in the meantime, potentially effective reforms that would threaten various industry players will be derailed.


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