No Meeting of Minds

by Dave Schuler on May 15, 2009

Not so fast say the representatives of the health insurers and pharmaceutical manufacturers:

WASHINGTON — Hospitals and insurance companies said Thursday that President Obama had substantially overstated their promise earlier this week to reduce the growth of health spending.

Mr. Obama invited health industry leaders to the White House on Monday to trumpet their cost-control commitments. But three days later, confusion swirled in Washington as the companies’ trade associations raced to tamp down angst among members around the country.

After meeting with six major health care organizations, Mr. Obama hailed their cost-cutting promise as historic.

“These groups are voluntarily coming together to make an unprecedented commitment,” Mr. Obama said. “Over the next 10 years, from 2010 to 2019, they are pledging to cut the rate of growth of national health care spending by 1.5 percentage points each year — an amount that’s equal to over $2 trillion.”

I do not believe that President Obama misspoke. I believe there’s a profound lack of a meeting of minds.

The Washington office of the American Hospital Association sent a bulletin to its state and local affiliates to “clarify several points” about the White House meeting.

In the bulletin, Richard J. Pollack, the executive vice president of the hospital association, said: “The A.H.A. did not commit to support the ‘Obama health plan’ or budget. No such reform plan exists at this time.”

Moreover, Mr. Pollack wrote, “The groups did not support reducing the rate of health spending by 1.5 percentage points annually.”

He and other health care executives said they had agreed to squeeze health spending so the annual rate of growth would eventually be 1.5 percentage points lower.

As I suggested in my earlier post on this subject we’re talking about real mandatory health insurance in exchange for hypothetical cost reductions. Sounds like a pretty good deal for health insurers and pharmaceutical manufacturers to me.

As I have long maintained here I see no way to reduce our costs as we’ll need to without fiat pricing or a substantial increase in the supply of health care. As any economist will tell you the former will create shortages. I prefer the latter.

{ 1 comment… read it below or add one }

Brett May 15, 2009 at 4:06 pm

I’m curious where Obama go that figure, then, if the various groups he met with are now rushing to tamp down on it. Did one of the representatives go beyond his mandate and have to be reeled back in by his parent organization?

As any economist will tell you the former will create shortages.

That depends on how you ration it. You could presumably still get decent outcomes even if most people ended up waiting longer for non-essential care, or if doctors were paid less – but yes, you’d be spreading that care over a larger population, so odds are that total care per capita would go down.

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