Private sector vows to rein in healthcare costs

Healthcare providers representing hospitals, health-insurance companies, doctors, drug makers and medical-device makers on Monday pledged their commitment to President Barack Obama to reduce cost increases in the U.S. healthcare system by $2 trillion over the next decade.

Currently, the U.S. spends more than $2 trillion a year on healthcare, which is at least 16 percent of gross domestic product. If the rate of growth can be kept in check--spending rose 6.1 percent in 2007--it would help prevent Medicare from draining the federal budget over the long term, according to the Wall Street Journal (WSJ).

A major challenge that Congress faces in trying to pass the President's healthcare legislation this summer is finding funding to support coverage expansion. The Senate is meeting this week to seek ways of paying for the plan.

President Obama praised health-industry groups for their commitment, saying at a news conference Monday, that it is the "first step in a broader effort to change the healthcare system, keep costs under control and provide health insurance for millions of Americans who do not now have it," reported the WSJ. While the groups' pledge is not a vow to cut spending overall, it is targeted at restraining its rate of growth. The groups promised to help reduce the growth of national healthcare spending by 1.5 percentage points in each of the next 10 years.

While officials said the savings could come from steps such as making payment systems more efficient and reducing administrative costs, critics say that the government would not be able to enforce such steps, and the cuts still hinge on whether Congress changes doctor and hospital reimbursements.

Bundling payments to healthcare providers is one example of how cost growth could be restrained -- a system that critics say will only encourage more care, rather than better care, reported the WSJ.

Health insurers, for instance, have made a series of concessions aimed in part at preventing the government from creating a public health-insurance plan for those not covered by Medicare and Medicaid. Insurers fear such a plan could drive them out of business.

The groups hope that payment cuts would be offset by new rules that would require all Americans to have health insurance. Even if the pledged cost cuts happen, the percentage of GDP spent on healthcare would still rise to 18 percent by 2019, which is slightly lower than the current project of 21 percent, according to officials said, according to the WSJ.