Editors Note: This piece by veteran THCB contributor, Robert Laszewski, first appeared on Kaiser Health News. The piece is republished here with permission.
President Barack Obama has said many times, any health care bill that
costs about $1 trillion would be paid for, roughly half and half, with
savings in the health care system and new revenues (taxes).
told, health care providers will likely get hit by $500 billion in
federal payment reductions over 10 years from what they would have
received otherwise. This is their "savings" contribution to help pay
for the overhaul effort. It amounts to no more than a couple of
percentage points less than they would have received anyway.
more importantly, the Congress is getting ready to spend $1 trillion
over the same 10 years mostly to expand Medicaid and provide subsidies
to the uninsured to help them purchase private health insurance and be
able to pay their medical bills. The health industry, by giving up $500
billion, gets millions more patients armed with public and private
health insurance cards. Not a bad deal—particularly when the other $500
billion needed to finance the bill comes from new levies on taxpayers,
not bigger industry cuts.
The details show an even prettier picture for the business of health care.
American Medical Association came out in favor of the House Democratic
health care bill when the House Democratic leadership promised the
doctors $230 billion in new spending to cancel out any future Medicare
physician cuts (which are scheduled under an existing law called the
Medicare Sustainable Growth Rate Formula). As a result, the doctors
don’t have to give up anything under the health bills, and would
actually pick up $230 billion under the House bill over 10 years.
pharmaceutical manufacturers also cut themselves a deal with the Senate
Finance Committee and the White House. They limited their contribution
to health care reform to only $80 billion over 10 years. But in return,
they got a commitment that their cuts would not be deeper, and maybe
more importantly, that their drug patents for cutting-edge biologic
drugs would be guaranteed 12 years of exclusivity. They are so happy
they are getting ready to spend tens of millions of dollars in advocacy
advertising in favor of health care reform. One Associated Press report
says they will spend at least $150 million.
also cut a similar deal. They limited their losses to $155 billion over
10 years—a spot they appear more than happy with. Heard any hospital
executives complaining about health care reform lately?
in mind that at current trends we are on track to spend almost $40
trillion on health care in the United States over these same 10 years.
Those hospital and drug company voluntary cuts are chicken feed. The
doctors are not even being cut.
Then there is the intriguing
story of the insurance industry. No negative anti-reform “Harry and
Louise” ads from them this time. Why? They know the public option
health plan designed to compete with them is all but politically dead
out of legitimate fears the government would end up dominating the
market. Why call attention to yourself when all those folks at the town
hall meetings and cable TV are doing the job for you?
insurance companies are pretty sure they will have to give up about
$150 billion in “extra” private Medicare payments—but that might not
even happen at the rate things are going for the Democrats.
the public option is going to be sacrificed by the president and
Democratic leaders to get a health care bill, that leaves legislation
that would mandate (through an individual mandate and maybe some type
of employer requirement) that millions of Americans buy insurance.
Even better, those people would be getting subsidies that would cost
the federal government as much as the $700 billion so they could afford
to buy those new health insurance plans—billions of dollars that would
get passed on to hospitals, doctors, drug companies and all the rest.
From the looks of these health care bills, this “health care reform” thing will be great for business!
as far as “bending the curve” and beginning to make our health care
system any more affordable or sustainable—or any less of a burden on
patients and taxpayers—I can’t find it.
If that were the case, we’d be seeing lots of negative ads.
All we are getting is lots of negative pubic reaction because people smell something is not quite right.
Robert Laszweski has been a fixture in Washington health policy
circles for the better part of three decades. He currently serves as
the president of Health Policy and Strategy Associates of Alexandria,
Virginia. Before forming HPSA in 1992, Robert served as the COO, Group
Markets, for the Liberty Mutual Insurance Company. You can read more of
his thoughtful analysis of healthcare industry trends at The Health
Policy and Marketplace Blog, where this post first appeared.