Obama’s health care num­bers were wrong

The Washington Times Weekly - - Commentary - Don­ald Lam­bro

Nearly four weeks af­ter Pres­i­dent Obama met with health-in­dus­try of­fi­cials tout­ing a “wa­ter­shed” cost-cut­ting agree­ment, the goal of slow­ing the sharp rise in med­i­cal care spending is elu­sive as ever.

Ap­pear­ing with ex­ec­u­tives of six in­dus­try groups on May 11, Mr. Obama an­nounced what he called a “his­toric” and “un­prece­dented com­mit­ment” by the med­i­cal care in­dus­try to “cut the rate of growth of na­tional health care spending by 1.5 per­cent­age points each year” that would yield $2 tril­lion in sav­ings over 10 years.

The story got front-page play and nightly news cov­er­age across the coun­try. How­ever, af­ter Amer­i­can Hospi­tal As­so­ci­a­tion Pres­i­dent Richard J. Umb­den­stock re­turned to his of­fice, he was be­sieged by calls from AHA mem­bers op­pos­ing such large cuts in spending. Days later, dur­ing a con­fer­ence call with 230 mem­bers, he told them the 1.5-per­cent-a-year sav­ings touted by Mr. Obama was a gross ex­ag­ger­a­tion.

The agree­ment with the White House to slow the growth in health care costs had been “spun way away from the orig­i­nal in­tent,” Mr. Umb­den­stock told his mem­bers, ac­cord­ing to an ac­count on the Politico Web site and other re­ports. “There has been a tremendous amount of con­fu­sion and, frankly, a lot of po­lit­i­cal spin,” he said.

“It’s been spun — or mis­un­der­stood — that th­ese six par­ties would save all $2 tril­lion. Not true. We can’t do this. We don’t rep­re­sent the whole sup­ply side of the equa­tion, and we can’t do it without the Amer­i­can pub­lic be­ing in­volved on the de­mand side of the equa­tion,” he said.

In­stead of 1.5 per­cent a year in cost sav­ings for the next 10 years, the groups had agreed to cut ex­pen­di­tures by up to 1.5 per­cent­age points over 10 years, not by that much each year. That meant the health care groups had agreed to a much smaller re­duc­tion in fu­ture health care costs that would add up to only a small frac­tion of the pres­i­dent’s imag­ined $2 tril­lion sav­ings.

An­nual health care spending is es­ti­mated to grow by an av­er­age of 6.2 per­cent a year dur­ing the next 10 years to $4.4 tril­lion by 2018, ac­cord­ing to the Depart­ment of Health and Hu­man Ser­vices.

Need­less to say, re­ports of AHA’s re­vi­sion of what Mr. Obama an­nounced did not get the same Page One cov­er­age as the orig­i­nal an­nounce­ment. A few news­pa­pers ran sto­ries (on the in­side), and sev­eral blogs wrote about it.

The White House seemed un­sure how to han­dle the con­tra­dic­tion in Mr. Obama’s orig­i­nal story and Mr. Umb­den­stock’s charge that the agree­ment had been ex­ag­ger­ated be­yond its orig­i­nal in­tent.

Nancy-Ann DeParle, White House Of­fice of Health Re­form di­rec­tor, “said ‘the pres­i­dent mis­spoke’ Mon­day (May 11) and again on Wed­nes­day (May 13) when he de­scribed the in­dus­try‘s com­mit­ment in sim­i­lar terms,” the New York Times re­ported May 15. But then Ms. DeParle “called back about an hour later on Thurs­day [May 14] and said: ‘I don’t think the pres­i­dent mis­spoke. His re­marks cor­rectly and ac­cu­rately de­scribed the in­dus­try’s com­mit­ment,’ “ the Times re­ported.

Days later, af­ter testy dis­cus­sions that went back and forth be­tween the White House and the six health care groups, the or­ga­ni­za­tions is- sued a state­ment, say­ing, “We are com­mit­ted to work­ing to­gether to bend the health care cost curve.” But no de­tails were of­fered as to how the cost sav­ings would be achieved.

“This thing looks like it was thrown to­gether as a photo-op event. They made claims for $2 tril­lion worth of sav­ings over 10 years that had no cred­i­ble ba­sis in econo­met­ric anal­y­sis,” said Robert E. Mof­fit, di­rec­tor of the Her­itage Foun­da­tion’s Cen­ter for Health Pol­icy.

“When the photo op took place, they spoke in terms of gen­er­al­i­ties, like stan­dard­iza­tion of forms, use of health-in­for­ma­tion tech­nol­ogy and ad­min­is­tra­tive sim­pli­fi­ca­tion. Un­less you have some kind of detailed ex­pla­na­tion of how the ini­tia­tives would be im­ple­mented, there is no way you could ar­rive at such a fig­ure,” Mr. Mof­fit told me.

Then, on June 1, the healthin­dus­try of­fi­cials took an­other stab at the elu­sive cost-sav­ings fig­ure Mr. Obama sought from them, but ap­par­ently they still fell way short of the White House goal by sev­eral hun­dred bil­lion dol­lars.

The groups iden­ti­fied sev­eral gen­eral ar­eas for sav­ings — from vague ad­min­is­tra­tive ef­fi­cien­cies and stan­dard­iz­ing claim forms — which they said could to­tal $1 tril­lion to $1.7 tril­lion in a decade. But they did not say how much the sav­ings would ac­crue to the gov­ern­ment in­stead of the health care sys­tem at large. Also miss­ing: any an­nual per­cent­age.

Each group of­fered its own pro­pos­als but did not say how much they would save be­cause they didn’t know.

“Clearly, this cost-con­trol plan was not well thought through and re­flects the ad­min­is­tra­tion’s dif­fi­culty in find­ing a way to pay the $1.5 tril­lion price tag on its healthre­form plan,” said GraceMarie Turner, pres­i­dent of the Galen In­sti­tute, a health car­ere­form group.

Mr. Obama hoped to bankroll his plan with his ca­pand-trade en­ergy taxes and by plac­ing lim­its on mort­gage in­ter­est and char­i­ta­ble de­duc­tions, but both of those pro­pos­als are dead. A value-added tax — a na­tion­al­sales-tax idea — is go­ing nowhere as well.

Be­tween the fail­ure to find spe­cific, mea­sur­able sav­ings and at­tain­able tax rev­enues, prospects for Mr. Obama’s health care plan are looking kind of shaky right now.

Don­ald Lam­bro is chief po­lit­i­cal cor­re­spon­dent of The Wash­ing­ton Times.

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