Obama Praises 'Historic' $2 Trillion Health Care Savings Plan

President Obama on Monday hailed a health care industry proposal to cut costs over the long term as an "historic" step in the quest for health care reform

The president spoke after meeting with top industry representatives, who offered $2 trillion in spending reductions over 10 years. 

"This is a historic day -- a watershed event in the long and elusive quest for health care reform," Obama said. 

He warned that such steps need to be taken to turn the country away from what he called an "unsustainable course" that threatens businesses, government and families. 

"We can't continue down the same dangerous road we've been traveling for so many years, with costs that are out of control ... reform is not a luxury that can be postponed, but a necessity that cannot wait," Obama said. 

"That's why these groups are voluntarily coming together to make an unprecedented commitment." 

One goal, though, is to make health care more affordable so the government does not create a system to enroll middle-class workers and their families that directly competes with the health care industry. 

Under a government system, drug makers worry that in the future, new medications might have to pass a cost-benefit test before they can win approval. And hospitals and doctors are concerned the government could dictate what they get paid to care for any patient, not only the elderly and the poor. 

Representatives of industry and provider groups were invited to the White House Monday. Many of them were part of a health care summit held at the White House in March. 

The groups attending Monday include the American Hospital Association, American Medical Association, Pharma, AdvaMed, America's Health Insurance Plans, SEIU, the Greater New York hospital association and the California Hospital association. 

The groups concede that their prices are not going down, they are merely slowing the rate of growth. But economists say the move would create breathing room to help provide health insurance to an estimated 50 million Americans who now go without it. 

Senior administration officials who briefed media on the topic on Sunday said the change will save 1.5 percent or nearly one-fifth in the annual rate of increase in health care spending over the next decade. 

In 2019 alone it would reduce national health care expenditures by 3 percent of gross domestic product -- or almost $700 billion, said officials. For a family of four, that would be a savings in about $500 on increased health care expenses in the first year, and including interest, about $2,500 five years out. 

White House officials did not link the move to any public health care plans promoted by the administration, saying that is a separate issue. However, the White House characterizes the move as "unprecedented." 

"We view this as a game changer when it comes to the discussion about health reform and it makes even clearer than ever that health reform is going to happen this year in the Congress," one senior administration official said. "With regard to the federal budget, ironically, there is nothing that could be done that would be more substantial for addressing our long term fiscal challenge than this kind of step to reduce the rate of health care spending. 

The offer from the industry groups doesn't resolve thorny details of a new health care system, but it does offer the prospect of freeing a large chunk of money to help pay for coverage. And it puts the private-sector groups in a good position to influence the bill Congress is writing. 

The estimated federal costs range from $1.2 trillion to $1.5 trillion over 10 years, and so far Obama has only spelled out how to get about half of that. Administration officials would not say Sunday how much they think Obama's plan will ultimately cost, but they indicated they were confident it can be paid for. 

Obama has offered an outline for overhauling the health care system, and he wants Congress to work out the details and pass legislation this year. His plan would build on the current system in which employers, government and individuals share responsibility for paying the cost and care is delivered privately. The government would play a stronger role by subsidizing coverage for many more people and spelling out stronger consumer protections. 

It's unclear whether the proposed savings will prove decisive in pushing a health care overhaul through Congress. There's no detail on how the savings pledge would be enforced. And, critically, the promised savings in private health care costs would accrue to society as a whole, not just the federal government. That's a crucial distinction because specific federal savings are needed to help pay for the cost of expanding coverage. 

Administration officials said they didn't expect all the saving strategies to be announced Monday, nor did they have access to specifics on how the groups reached their estimates and analysis.
But the initial reaction was positive. 

"While serious questions remain about the details, AARP believes the agreement of providers to slow the skyrocketing cost of health care is critical for the health reform we are all working toward," said John Rother, policy director for the seniors' lobby. "Reducing the skyrocketing cost of health care is the only way to create a health care system that works for all Americans; after all, what good is access to a system that we can't afford?" 

Ron Pollack, director of Families USA, a liberal group that supports coverage for all, said the health insurance industry came up with the target of a 1.5-percentage-point reduction. Karen Ignagni, president of the insurers trade group, America's Health Insurance Plans, took the idea to other major interest groups, said Pollack, who was familiar with the talks among the industry groups. 

"If these cost savings are truly achievable, this may be the most significant development on the road to health care reform," said Pollack. "It would cut costs for families and businesses and enable subsidies to be offered so everyone has access to quality, affordable health care." 

Obama's plan envisions that people would be able to keep the coverage they now have. Those working for big companies probably would not see major changes. 

But the self-employed and those working for small businesses would be able to get coverage through a new kind of insurance purchasing pool. Called an "exchange," the pool would offer stable rates and predictable benefits. Plans in the exchange wouldn't be able to deny coverage to those who are sick and would have to follow other new consumer protection rules. 

Lawmakers in Congress are generally following Obama's outline, but the Senate plan is likely to go further by requiring all Americans to carry health insurance, much as states now require motorists to carry auto coverage. Democrats hope to get legislation to the floor this summer.

The Associated Press contributed to this report.