05.12.09

Obama's Health Care Kickoff

Even if yesterday's vague pledge by health-care industry executives to slash costs is realized, former Clinton budget adviser Matt Miller writes, our system would remain radically inefficient.

Washington is buzzing over the interest groups that gathered with President Obama at the White House Monday to announce their collective vow to slow the growth of health spending by 1.5 percent a year, which would save the country $2 trillion over the next decade. As Paul Krugman noted, the great significance of this industry kumbaya—which included the trade groups representing doctors, hospitals, insurers, drug makers, and medical-device companies—is that it means the Medical Industrial Complex is signaling it wants to support major action this year, not storm off in a huff to wreck the thing via a reprise of 1994's infamous “Harry and Louise” campaign.

And it’s true: If the sector can find a way to slow cost growth from 7 percent a year to 5.5 percent as pledged, it would save enormous sums for governments, businesses, and families—maybe even enough, according to the White House, to meet Obama’s ambitious (and little-examined) campaign pledge to shave family health costs by “up to $2,500” from where they would otherwise soar.

All potentially fabulous news. But put aside the fact that for now this commitment is a placeholder for good intentions, with only early sketches of how the goal might be met. There’s a larger truth that needs to be underscored amid the cheers. Even if this goal were achieved over the next decade, America’s health-care system would still be radically inefficient compared other advanced nations. The industry pledge would mean spending would grow from 16 percent of GDP last year to 18 percent by 2019 (just not to 21 percent, where it’s headed on current course). Other advanced nations today spend 10 or 11 percent of GDP and cover everyone. So when the dust clears a decade from now, we’re still likely to be wasting 6 or 7 percent of GDP compared to other wealthy nations, without better public-health outcomes to show for it. That’s upwards of a cool $1 trillion a year in excess spending—spending that’s devilishly hard to cut because every dollar of health-care “waste” is somebody’s dollar of income.

So, two cheers to the industry for taking this pledge. If it helps set a constructive tone that leads to major reform this summer, great. But no one should be deluded that it represents anything but the first baby steps of a long national journey to reengineer health-care delivery in ways that save money and improve lives.

Matt Miller, a senior fellow at the Center for American Progress, is the author of The Tyranny of Dead Ideas: Letting Go of the Old Ways of Thinking to Unleash a New Prosperity. He hosts Left, Right & Center, public radio's popular weekly political roundtable.