The hospitals are the latest to strike a cost-cutting deal with the White House, according to the Washington Post. While the details have not yet been released, the hospitals reportedly have agreed to a $155 billion cut over ten years, mainly from phasing down extra payments for indigent patients (called disproportionate share payments) as coverage is expanded to the uninsured. Last month, the pharmaceutical industry struck a similar deal to trim Medicare Part D expenditures by $80 billion over the same time frame, bringing the combined savings from the hospitals and drug companies to some $335 billion, or about a third of the estimated trillion dollars required to fund pending health care reform legislation. The Wall Street Journal reports that the insurance industry is poised to chip in another $100 billion in savings.
Opposition to cuts that adversely affect their members is part of the DNA of these powerful health care sectors. Why are they now agreeing to cuts? What's in it for them?
One is that such deals may ward off even bigger cuts, like the $200 billion in cuts to hospitals that Obama proposed in his budget. It also gives the industry groups more leverage over other elements - for instance, the hospitals reportedly received assurances that the public plan option will not be based on Medicare rates.
Not everyone in Congress is pleased with such deals. Politico reports that some powerful House Democrats are stewing because the agreement with drug companies could deny them access to the "tens of billions of dollars that House Democrats would argue were given away to drug manufacturers as part of the bargaining in the Republican-backed Medicare prescription drug."
Despite the rumblings in some quarters in Congress, the White House clearly welcomes agreements with industry that would cut the costs of health care reform. Especially if such deals keeps industry from launching "Harry and Louise" style attack ads.
Notably absent (at least so far) from such deal-making are physicians as represented by the American Medical Association. The AMA was part of the "bending the curve" group that promised to trim the rate of growth in health care expenditures, but to my knowledge, the AMA is not making promises to the White House that lock in a certain level of savings or cuts from physicians.
This underscores that fact that physicians are in an unusual place in the health care reform debate. Congress is planning to spend more money on doctors, and even more on primary care doctors - the only question being how much more - while other sectors are being asked to agree to trim spending by hundreds of billions. Because of Medicare's sustainable growth rate (SGR) formula, physicians are facing a 21 percent payment cut next year, and unless Congress scraps the SGR, such cuts will continue, year-after-year-after-year. It will take hundreds of billions of dollars in increased spending on physicians just to wipe out the accumulated SGR cuts.
One simply can't expect a lot of savings from doctors when they already are facing deep cuts, and when they have not seen their Medicare fee updates keep pace with inflation for at least the past seven years. Also, initiatives that could generate long-term savings, such as payment reforms designed to align physician payment incentives with the value of care provided, are going to take years to roll out and not likely to achieve immediate budget savings.
Congress and the White House may not ask physicians to pony up more savings, but they do expect that physicians will recognize and support their efforts to wipe out the accumulated Medicare pay cuts and raise primary care fees, and that doctors ultimately will be on board in support of health reform.
Today's question: What do you think about the deals being made with industry? Should the medical profession itself be offering its own savings?