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Health Care Industry Unveils Cost-Cutting Plan

MICHELE NORRIS, host:

And for more on this story, we now turn to NPR health policy correspondent Julie Rovner. Julie, as Nancy Anne DeParle just mentioned, Congress is already at work on health care legislation, so why this announcement at this particular time?

JULIE ROVNER: Well, you know, one of the biggest reasons that we as a nation spend too much on health care is what economists call misaligned incentives. What that means is that too many people in the health care system have a financial incentive to spend more than might be strictly medically necessary. So the idea in remaking the system is to have what we call aligned incentives, where you get better health care for less money. Well, today's announcement by the president and his group is a case of aligned incentives, I think.

NORRIS: And so how are the incentives aligned in this case?

ROVNER: Well, it turns out that tomorrow there are two events that are related to health costs that both these groups that made this offer and the administration would like to get ahead of. On Capitol Hill, the Senate Finance Committee is going to have its last big hearing before it begins actually writing its health care bill. And this one is going to look, not coincidentally, at how to pay for the changes that it wants to make. And these groups who are generally considered the biggest culprits in the health care spending problem, wanted to be able to say that they've made suggestions for how to save some money.

Meanwhile, the administration is going to release its annual report on Medicare's finances. And it is expected to show that the part of Medicare that funds hospital care is going to go broke within just the next few years. So I think this was an effort by both the industry groups and the administration to get a jump on two potentially negative health cost stories. I think that's why we saw it today.

NORRIS: So the groups want to make some suggestions on how to save money. How big are the sacrifices that these groups are willing to make to cut costs here? Are we talking about real reduction?

ROVNER: Not really, and I think that's important. Frankly, this is the easy stuff. Mostly what these groups are agreeing to do is the kind of changes that both candidate Obama and candidate McCain were talking about last year on the campaign trail. These are things like computerizing medical records, changing the way health care is billed and paid for, providing only care that's been proved to work - that sort of thing.

It's all pretty fuzzy and, frankly, not all that hard to agree to in this form. And it's basically the price of admission for these groups for being at the table when some of the really hard decisions start to get made.

NORRIS: So what about the hard decisions? What will it take to save the $2 billion?

ROVNER: Well, the Congressional Budget Office, as I mentioned at the beginning, said that you really have to change financial incentives for doctors and hospitals, change the way they go out and actually practice medicine. That sort of thing is going to be much more difficult. Those are the decisions that Congress is going to have to make in legislation. What these groups have been talking about - the types of things that we've seen here have been shown not necessarily to save as much money as they've been talking about.

NORRIS: What would really save money? I mean, the big changes, the seismic changes that I think the administration is really hoping for.

ROVNER: Well, those are things that Peter Orszag, the budget director, likes to talk about - about bending the curve, about making those things change. And, again, you don't have to change a lot over a long period of time. As you go out in terms of years, they can make big differences. But certainly you're going to have to change the way doctors and hospitals get paid.

Some people are going to have to take less and that's not really what these groups are talking about here. These groups are talking about straightening out the system, doing efficiencies that clearly are going to make the health system better and run better and work better.

It's not going to be the big money, though. The big money is going to be redistribution and that's where the fights are going to happen. And we will start to see that in the next few weeks as Congress starts to write this legislation.

NORRIS: Now, Julie, you've been covering this issue for a very long time. And when people talk about health care in this town sometimes they just roll their eyes. What's different? What's changed since the Clintons rolled out their massive health care reform plan?

ROVNER: Well, certainly these groups being at the table is a big deal. In that sense, these are groups that were the main opponent of the Clinton reform plan. And they are now basically suing for peace, if you will. For whatever reason they are doing this and, yes, they're not making these huge massive, you know, sacrifices yet, but the fact is that they're there. They're with the president. And they're saying we want to move forward in this process. That's a big change.

NORRIS: Thank you, Julie.

ROVNER: You're welcome.

NORRIS: That's NPR's health policy correspondent Julie Rovner. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

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