Hospitals Take Pay Cut To Ease Health Bill Cost

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Joe Biden and Rich Umbdenstock i

Vice President Joe Biden speaks alongside Rich Umbdenstock, president of the American Hospital Association, about a White House deal with hospitals to help pay for a new health care system. AP hide caption

itoggle caption AP
Joe Biden and Rich Umbdenstock

Vice President Joe Biden speaks alongside Rich Umbdenstock, president of the American Hospital Association, about a White House deal with hospitals to help pay for a new health care system.


Groups representing the nation's hospitals have joined the drug industry in pledging billions of dollars in forgone profits to help finance a health system overhaul. But what are they getting in return?

Perhaps a little less pain, says Richard Kirsch of Health Care for America Now, a consumer group working for a health overhaul bill. "The thing we have to do with health care reform is lower health care costs, which means that drug companies and hospitals and others will have to make less money than they would have," says Kirsch. "And with these deals, they get a chance to say how they make less money, as opposed to Congress and the president basically shoving it down their throats."

The hospital deal, announced by Vice President Biden, will trim payments to hospitals by some $155 billion over the next 10 years if a health overhaul bill gets passed and signed into law.

"Today's announcement, I believe, represents the essential role hospitals play in making reform a reality," said Biden at an event where he was flanked by executives of the largest hospital industry groups. "And a reality it will be. We must enact this reform this year."

But are hospitals really giving up all that much? Maybe not.

A significant portion of the funds are currently for payments to help hospitals offset the cost of caring for patients who are uninsured. But in a newly reconfigured system, "there will be fewer uninsured," says Kirsch, "and it makes perfect sense that as the number of uninsured drop, that hospitals should get less money from the federal government for taking care of those people if they now are paying customers."

In other cases, industry groups may be using the deals they cut with one branch of government to play off against another. For example, last month, the drug industry group Pharmaceutical Research and Manufacturers of America, known as PhRMA, agreed with Senate Democrats and the White House to devote some $80 billion over the next decade to the overhaul effort.

Kirsch says the deal will actually benefit consumers, because PhRMA will use the money to cut prices on drugs for seniors on Medicare.

And PhRMA President and CEO Billy Tauzin, himself a former congressional committee chairman, says he was happy to be able to help structure the industry's contribution in a way drug companies could live with. "Pain is better than death — every day," joked Tauzin.

But now PhRMA is using its deal with the Senate to fend off efforts in the House to extract even larger discounts for low-income Medicare beneficiaries. What the industry has already pledged is "a big sum of money. It ought to be enough," Tauzin says.

Some Democrats say the industry groups are getting off too easy — that they will in fact make money on the overhaul effort, since they will get more paying customers when more people have insurance.

But Kirsch is taking a more philosophical view.

"In an ideal world, which didn't have 600 and umpteen drug company lobbyists, and all the lobbying and political clout of these interest groups, consumers could get a better deal," he says.

"But," he adds, "in the real world of American politics, to have interest groups come to the table and make an agreement that will lead to much more accessible, affordable health care for American consumers really is an accomplishment."

And, he adds, to have potentially powerful opponents not out running millions of dollars of advertisements or paying lobbyists to try to kill the overhaul effort is priceless.



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