Insurers pledge to cut spending growth

June 1, 2009

Providers, plans and pharma companies promise to produce savings through tried and true methods, but skeptics doubt they'll make any sacrifices

NATIONAL REPORTS - Major healthcare providers joined with insurers last month to propose a concerted effort to moderate the rising healthcare spending curve. Coalition members went to the White House on May 11 to promise President Barack Obama that together they would decrease the growth in healthcare outlays over 10 years-a move calculated to save $2 trillion.

HealthNet President Jay Gellert, Kaiser CEO George Halvorson and Karen Ignagni, president of America's Health Insurance Plans (AHIP), were there, along with leaders of the American Medical Assn. the American Hospital Assn., the Pharmaceutical Research and Manufacturers of America, the Advanced Medical Technology Assn. and service workers union official Dennis Rivera, who organized the effort.

Economists in the Department of Health and Human Services have projected that healthcare spending will grow an average 6.2% a year over the next decade to reach $4.4 billion in 2018. Slowing down that growth rate, as proposed, will yield substantial savings for both the government and private sector.

SEEKING SPECIFICS

There was considerable skepticism, however, about the group's ability to deliver on its cost-cutting promise because the initial proposal contained few specifics. The coalition offered a number of noncontroversial, tried-and-true reform strategies: curb unnecessary care, establish incentives for a more efficient system, reduce hospitalization, follow evidence-based best practices, manage chronic diseases more efficiently, adopt health information technology, and promote wellness and prevention.

Insurers noted later that they consider administrative simplification a source of potential savings. Insurers plan to work with providers to streamline processes for exchanging information on claims, payment, eligibility and other areas. More uniformity and standardization, Ignagni noted at a press briefing, could free up more time for doctors to spend with patients, while also driving down hospital costs.

That would be useful, as a study from the Commonwealth Fund says that physicians spend $31 billion a year dealing with insurance forms and processes. The hours of paperwork involve prior authorization, filing claims, credentialing, contracting and quality data reporting.

Coalition members promised to provide more detailed cost-cutting strategies this month. The expectation of critics is that those proposals for savings would offer more gain with little real pain.

For example, pharmaceutical companies indicated that the best way to reduce healthcare costs is to increase drug utilization-wisely and appropriately. Provider organizations appear to be looking for ways to do things better to achieve cost savings, but not necessarily taking a hit on payments.

And the group indicated that the savings may not appear immediately. While coalition members reiterated that their goal is $2 trillion in savings over 10 years, that won't necessary mean the same gains every year. Some savings may not appear until several years out as reforms kick in.

Yet, Obama has told the organizations that he "will hold you to your pledge to get this done." And Office of Management and Budget (OMB) Director Peter Orszag points out that spiraling healthcare costs are boosting insurance premiums for families, forcing state governments to curtail healthcare programs, and threatening the solvency of the Medicare and Medicaid programs.

Insurers and providers will have trouble explaining to policy makers and the public that they don't know where all the billions in cuts for next year will come from.