Insurance companies are especially nervous about the creation of a government-backed health coverage plan that would be available to all as an alternative to private insurance. They fear, and rightly, that this would displace their own products and squeeze them out of healthcare.
Published: May 13 2009 20:09 | Last updated: May 13 2009 20:09
This week Barack Obama announced a compact with US healthcare suppliers: hospitals, pharmaceutical and insurance companies and other interested parties. They promised to reduce the growth of healthcare costs by $2,000bn over the next decade. It was a “historic day, a watershed event”, said the president, a first step on the road to comprehensive healthcare reform.
Although not without political significance, the announcement was far less than the breakthrough Mr Obama claimed. That impressive-seeming reduction in costs is no more than an aspiration. None of the parties is formally committed to any part of it, and there is no mechanism for enforcement or accountability. Incentives within the system are unchanged and will continue to push costs up. Declarations of this kind have been made many times.
But although it was no watershed event, it was not a non-event either. The announcement signalled willingness, if not eagerness, on the part of the US healthcare industry to engage itself in the Obama administration’s efforts at reform. Rather than seeking to stop the effort cold, the strategy that was successfully used against the Clinton administration’s proposals, providers want the place at the drawing board that Mr Obama has offered them. They are acknowledging he is serious, and that this time something is really going to happen. The question is: what?
Unbridgeable differences remain on crucial questions. Insurance companies are especially nervous about the creation of a government-backed health coverage plan that would be available to all as an alternative to private insurance. They fear, and rightly, that this would displace their own products and squeeze them out of healthcare. Many Democrats, of course, regard that prospect with delight: if things worked out that way, it would be “single payer” by stealth.
As for cost control under anything like the present structure, the question is: how? Explicit rationing is political poison, and doctors and hospitals are already resisting subtler efforts to economise. To sense the scale of the problem, note that if the $2,000bn in cost reductions were somehow achieved, it would reduce growth in US health spending from about 7 per cent a year to about 5.5 per cent. Spending on health, currently in the neighbourhood of 16 per cent of US gross domestic product, would still grow as a share of the economy. Getting a grip on this requires a radical plan that the administration has yet to disclose and which the healthcare industry, despite this week’s watershed event, is certain to oppose.
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