Insurance Industry to Obama: “Make us do it.”

by Jason Rosenbaum :: Filed Under U.S. Domestic Issues :: May 11th, 2009 @ 10:22 am EST

The big news on health care reform today is a voluntary agreement by the insurance industry and provider groups to lower costs by 1.5% per year:

Doctors, hospitals, drug makers and insurance companies will join President Obama on Monday in announcing their commitment to a sharp reduction in the growth of national health spending, White House officials said Sunday.

The officials said the plan could save $2,500 a year for a family of four in the fifth year and a total of $2 trillion for the nation over 10 years. That could make it less expensive for Congress to enact comprehensive health insurance coverage, a daunting challenge facing the Obama administration.

At this point, administration officials said, they do not have a way to enforce the commitment, other than by publicizing the performance of health care providers to hold them accountable.

The key here is buried in the details. Jon Cohn at The New Republic has them:

Students of history may hear in Monday’s announcement echoes of the infamous “Voluntary Effort”–a promise by the hospitals, during the late 1970s, to curb the cost of care in their facilities. They made the promise, in part, to derail talk of reform in Washington. And they succeeded in that. It was the cost control that, shockingly, didn’t work out so well. Spending came down for one year, then started skyrocketing again.

But note the key difference between now and then: This time, the industry groups aren’t promising to control costs as an alternative to reform. They’re promising to control costs as part of reform. In fact, some of the efficiency steps they are proposing wouldn’t even be possible without the sorts of changes now under discussion in Washington, because they require changes in legislation.

The insurance industry has, in a sense, endorsed the Obama vision of health care reform. They have said to the President, “Hey, if you make the changes you talked about in the campaign, we can reduce costs.”

Now, of course, they remain opposed to a public health insurance option. So the key here will be accountability. As Bob Laszewski says, it’s “trust but verify.” The industry will never make a binding commitment to control costs, so we need to put something in place that can police this agreement. That something is a public health insurance option.

Currently, the industry still enjoys a monopoly over most markets. Giving people a choice will be a way to keep these companies honest and stiff competition will make sure these cost reduction goals are met.

(also posted at the NOW! blog)