Health care companies to cut costs: what’s in it for them?

“An unrivaled set of abstractions and posturing,” is how a Boston University Professor of Health Policy described the announcement that health companies (insurers, providers and drug companies) have promised to enact $2 trillion in cost-cutting measures over the next 10 years.

This ceremonial commitment came on the heels of Democrat’s revealing their willingness to use reconciliation to push universal health care legislation through soon. While the announcement was a nice gesture, it left many of us wondering, where’s the beef? First, with no enforcement mechanism, the government cannot force the companies to follow through on their promises. And secondly, if realized, these savings wouldn’t benefit the government alone, but would also accrue to the consumers of health services. In other words, the money saved won’t be put in a big pot that the government can reach into to fund their healthcare initiatives.

So what did this announcement really mean? For example, might the President be willing to explore reforming healthcare without instituting socialized healthcare? That seems unlikely. The more likely explanation is that up until now, the major road block to providing a public, government-run health insurance has been finding a way to pay the ever increasing bill for such a Medicare-style entitlement, and the President believes that “lowering the costs of health care will complement the overall reform of the health-care system” that Congress is getting ready to take up soon.

What about the insurance companies? Why would they be willing to get on board with an administration and Congress that is set to pass legislation that could devastate, if not eliminate, their industry? The New York News Blog provides a rundown of opinions on this issue that range from believing that this group has accepted what’s coming down the pipeline and is now ready to stand shoulder to shoulder with this administration to suspecting that the industry hopes that universal healthcare will “give them a huge revenue boost in the short term – and then every lobbyist … will fight those spending reductions over the long term”.

Some examples of the cost-cutting measures offered up include making payment systems more effective, reducing administrative costs and improving technology. However, similar efforts have failed in the past, and experts say it will be difficult to squeeze that kind of savings out of these kinds of proposals.

So, the question remains, did these health companies come to the table because they wanted to be players that would help reshape healthcare as we’ve known it? One person suggested they wanted a seat at the table so as to avoid being on the menu. Yesterday’s announcement may have been long on admirable goals and short on the details as to how we get there, but one thing is for sure: this administration and Congress is intent on passing healthcare reform and soon. Yesterday’s announcement may have been unclear and may not have seemed like the game changer we expected on the surface, but with even the health companies seeming to accept government-run healthcare as inevitable, it was the first symbolic step toward socializing healthcare in America.

*Originally published May 12, 2009 on the American Issues Project Blog, here.

Tags: health care reform, socialized health care