Health Care Providers Commit to Reducing National Health Spending

Administrators, hospitals, drug makers, and insurance companies, along with President Obama, have joined forces to reduce national health spending. The commitment could save families $2,500 annually by the fifth year and a total of $2 trillion over 10 years. By making this commitment, the providers hope to prevent new government price constraints that might be imposed by Congress or a National Health Board. The plan is based on cutting the growth rate of national health care spending by 1.5 percentage points each year over the next decade.

Key Takeaways:

• The health care providers' commitment aims to reduce national health spending by 1.5 percentage points each year for the next decade, saving a total of $2 trillion.
• Signatories of the letter include the Advanced Medical Technology Association, American Hospital Association, American Medical Association, America's Health Insurance Plans, Pharmaceutical Research and Manufacturers of America, and the Service Employees International Union.
• The plan focuses on preventing obesity, coordinating care, managing chronic illnesses, and reducing unnecessary tests and procedures.
• Private insurers and government programs could save money by paying for entire episodes of care instead of each service separately.
• Administration officials emphasize the importance of health care reform to achieve the savings described.
• The commitments made by health care providers would hold down the share of health care spending to 18% of the economy, saving nearly $700 billion in 2019 alone.

Statistics:

• Health care spending is projected to grow at an average of 6.2% annually over the next decade, reaching $4.4 trillion in 2018.
• The current share of health care spending as a percentage of the overall economy is 17%, expected to grow to 21% in 2019 without change in existing law.
• The commitment to reduce national health spending by 1.5 percentage points each year would hold down this share to 18%, equivalent to savings of nearly $700 billion in 2019 alone.
• The government could save nearly $600 billion over the next decade if the health care industry increased its productivity growth by 1.5 to 2 percentage points annually.
• Total savings over 10 years: $2 trillion

Sources:

• White House officials, as reported by The New York Times.
• Letter from six leaders of the health care industry to President Obama, signed by executives of the Advanced Medical Technology Association, American Hospital Association, American Medical Association, America's Health Insurance Plans, Pharmaceutical Research and Manufacturers of America, and the Service Employees International Union.
• A report by the Center for American Progress and the Democratic Leadership Council, authored by David M. Cutler, a Harvard economist.