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Old Enemies Unite to Embrace Health-Care Reform


Lobbyists for seniors, drug makers, and physicians show new determination to end cost inflation

What could unite the American Medical Assn., the lobbying arm of the pharmaceutical industry, Regence BlueCross BlueShield, and the Service Employees International Union (SEIU) in a common cause? Surprisingly, health-care reform. The four groups and others joined together to launch a multimillion-dollar ad campaign on Jan. 8 calling for fast action on the issue from the Obama Administration.

These are some of the same forces that scuttled President Bill Clinton's health-care reform effort in 1993. Now insurers, employers, drug companies, and doctors are all clamoring for change. Their about-face is driven not so much by the 45 million uninsured Americans as by the $2.2 trillion the U.S. spent on health care in 2007, equal to 16% of the gross domestic product. That's 6.1% more than was spent the prior year. Since 6 in 10 non-elderly Americans are insured through their jobs, much of those costs come directly out of corporate pockets.

There's still sure to be intense wrangling over details—including where, exactly, costs should be cut from the system. But the points of concurrence between the different interest groups are striking this time around. Incoming President Obama wants large employers either to provide insurance to their workers or pay into a publicly funded program, and employers aren't vigorously resisting this idea. Nor are insurers loudly protesting Obama's call for increased regulations. "In 1993, everyone got their second choice, which was to do nothing," says Len M. Nichols, health-care policy director for the New America Foundation, a nonpartisan Washington think tank. "This time around, everyone knows that the status quo is clearly not sustainable."

Obama's appointment of former South Dakota Senator and longtime reform proponent Tom Daschle as Health & Human Services Secretary is widely read as a sign the new President means business. Now, Washington is awash in reform pitches. Senator Max Baucus (D-Mont.), chairman of the Senate Finance Committee, issued his plan in December, and Senator Ted Kennedy (D-Mass.) is working on a bipartisan bill that should land within a month.

Comprehensive proposals have been presented by the Business Roundtable, the Healthcare Leadership Council, the American Benefits Council, AARP, even America's Health Insurance Plans (AHIP), the industry's lobbying arm. "Unlike the health-insurance industry in 1993, we recognize that the nation expects us to come up with proposals," says AHIP President Karen Ignagni.

It helps that Obama is not looking for a big expansion of the government's role in covering the uninsured, although the Congressional Budget Office does estimate his plan could cost up to $65 billion to implement. Obama wants to decrease the number of uninsured by preserving the employer-based system while tinkering with tax and regulatory policies.

Insurers are gearing up to oppose Obama's call for a government-funded plan to cover people who can't afford private coverage. The industry also wants Congress to mandate that all Americans must buy coverage, a radical change that Obama has been reluctant to embrace but Baucus supports.

Covering the uninsured may seem relatively easy, however, compared with pushing through cost-cutting measures. Almost every proposal aims to overhaul the way doctors and hospitals are reimbursed, for example. Today, most medical providers are paid for every single procedure and service rendered. Various studies have estimated that a third of health spending is wasted on unnecessary care, and many blame this fee-for-service system.

FEE RESTRUCTURING?

Most reform proposals, from both Congress and business lobbies, want to reward quality of care, preventive care, and outcomes, rather than volume. But Richard J. Umbdenstock, president and chief executive of the American Hospital Assn., warns that "if there are going to be payment cuts to hospitals, then we're not interested."

But even doctors aren't happy with the present system, and they may be willing to accept fee restructuring in return for the $50 billion Obama says he will include in his stimulus package to set up electronic medical-records systems.

An early indication of whether lawmakers will take on the doctors could come this spring when Congress must consider Medicare payments. Physicians are scheduled to get an automatic 21% Medicare fee cut on Jan. 1, 2010, because of a legislative mandate known as the sustainable growth rate (SGR). Congress has overridden the SGR cuts seven times, but this time it may use the issue as a vehicle for overhauling physician payments.

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Arnst is a senior writer for BusinessWeek based in New York.

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