Obama and Advamed: Some Details Emerge

The White House released the two page letter from Advamed (an association  including America’s Health Insurance Plans, The American Hospital Association, the American Medical Association, PhARMA, the SEIU (a large union) and medical device manufacturers) detailing promised health industry efforts to curb costs.  The goal will be to save $2 trillion over 10 years, so health care costs will increase from $2.5 to $3.5 trillion (instead of $4 trillion) from now until 2019.


The White House, in its statement, said


We need to reform our payment system to promote efficiency and accountability while we eliminate waste and cost shifting; align incentives toward quality care and healthy outcomes; encourage shared responsibility; reduce fraud and abuse; build the base of information to undertake future program modernization; address the underlying causes of unnecessary health care spending; and encourage care coordination, prevention, and other services that are found to promote high quality, efficient health care

From the White House, a summary of promised cost savings (all over 10 years):

·         Bundled hospital payments to avoid paying for readmissions ($25 billion)

·         Decreasing payment to private Medicare Advantage plans  ($177 billion)

·         Increased drug rebates to state Medicaid programs (amount not specified)

·         Decreased fraud (amount not specified)

·         Increased inpatient quality ($12 billion)


So, only $214 billion  of the promised $2 trillion in 10 year savings is clearly defined. 


From Advamed, a list of promises includes

·         Administrative simplification, standardization, and transparency

·         Aligning quality and efficiency incentives to decrease overuse and misuse

·         Encouraging coordinated care and evidence-based practice

·         Reducing the cost of doing business


Advamed also suggests that the country must stress health promotion and disease prevention – with special attention to obesity prevention.


The White House memo includes real dollars, although not nearly enough – and the Advamed proposal is a good statement of principles, but without enough detail to assess its chances of success.  


Some questions raised by these communications

1)      Will the Advamed constituents agree to a government-financed system competing with private insurers?  Many feel that this would lower costs per unit substantially – so physicians and hospitals could join the insurance industry in opposing this.

2)      Will the Advamed constituents call off their opposition to a national Comparative Effectiveness effort?   Pharma and the device companies are worried that this will lead to restriction of access to new technology, and the UK experience shows that a comparative effectiveness organization could negotiate lower prices.

3)      Will providers aggregate to allow for true bundled payments?

4)      Has the administration calculated the impact of reducing undercare as we improve the health care delivery system –and removed that from the “savings” accrued from these other laudable efforts?


Getting these disparate organizations together is an excellent first step.  It looks like the Obama administration continues to push hard for meaningful health care reform.