Health Care 'Reform': Let's See How Long This Lasts

May.11.09 | About: iShares U.S. (IYH)

A very slow news weekend but it picked up a bit with the announcement by the administration that a mix of health care participants have pledged to work towards reducing health care costs by up to $2 trillion over the next ten years. Actually, they suggest they will slow the rate of increase in the next ten years so as astronomical as the bill will grow to be it will be $2 trillion less than it might have been.

This is an important point to keep in mind as the spin starts to use phrases like cutting the nation’s health care bill and chopping costs over the next couple of months. No such thing is happening. The cost is going to skyrocket but the plan as proposed by this amalgamation of providers promises to slow the growth by using various cost containment procedures. The plan based on the details advanced so far is full of broad policy initiatives that have floated around for years but lack any specific market testing to validate their cost saving claims.

Mostly this is an attempt by interested health care private interests to get out front of the Obama plan. It represents a dramatic turn from the last fight when they openly opposed and won the battle against “Hillary Care.” It appears as if they feel a frontal assault is a risky ploy given the President’s popularity and the virtual control of Congress vested in the Democrats.

Business Week has a good article on this and I particularly liked their summation concerning the strange alliance of private interests in this initiative:

Indeed, the six organizations meeting with Obama have divergent interests: The hospital groups (American Hospital Assn., California and New York hospital associations) generally want to lower costs for hospitals, which currently absorb the bulk of the burden of caring for the uninsured and underinsured. AHIP wants to avoid seeing its members cut out of any successful health-care reform package. PhRMA, the drug industry trade group, would like to avoid significant restrictions on drug prescribing by doctors.

Health insurers in particular are worried about the Administration’s proposal to create a public health-care plan as an alternative to private health insurance. But one of the Administration officials who spoke Sunday said that issue was not discussed in talks over the industry proposal. “The President likes the public plan,” the official said, and it remains “part of his campaign plan.”

How long they hang together is any one’s guess. There is little commonality of interest here save for trying to bend upcoming legislation more in their favor. More to the point, it seems pretty clear that the route favored by Obama is heavy on public participation in health care and most likely a precursor to a single payer system with substantial government control over treatments and costs. In that light, they may only be providing him cover from a fiscal standpoint to move aggressively towards that goal.

Remember one thing as these negotiations go down the road. Every time someone talks about eliminating wasteful health care expenditures they’re talking about eliminating someone else’s income stream. There is no way you cut costs or the increase in costs by not taking money out of someones pocket. Sooner or later those someones are going to push back.