First in an occasional series of posts to examine claims and calculations presented in the national debate over health reform.

By Alec MacGillis
In an interview today with Kaiser Health News, Richard Umbdenstock, head of the American Hospital Association, explained the group's opposition to the proposals announced by President Obama last weekend to save $313 billion over 10 years toward paying for universal health care reform.

The savings included two measures that would result in lower payments to hospitals: $110 billion saved by reforming Medicare payment rates to a system that is more results-based rather than quantity-based, and $106 billion saved by reducing the Medicaid payments that hospitals now get to pay for the care they provide to the uninsured, on the theory that hospitals will be seeing fewer uninsured patients as coverage expands.

Umbdenstock made clear in the interview, as other hospital lobby officials have all week, that the cuts are unacceptable. "Any sort of provider cuts has to be connected to or accompanied by changes that enable us to reorganize the delivery system and obtain efficiencies now not readily available in order to live with those cuts," he said. "Cuts are not reform. Reform really has to reshape the system."

But it was only one month ago that the hospital association and other health industry groups made a big show out of standing with Obama at the White House and saying that they would agree to unprecedented savings in health care spending, enough to slow the growth in health care costs by 1.5 percent per year. The industry officials were adamant in saying that they recognized that universal health care reform would require real sacrifices by all industry players.

In a conference calls with hospital executives two weeks after the agreement was reached, Umbdenstock told hospital executives on a conference call that they needed to attack a leading cost driver, hospital readmissions: "It's a vulnerability for us if we don't tackle it," he said, according to the Associated Press.

Now that Obama has actually proposed the kind of reforms intended to reduce spending on readmissions and other cost drivers, the promised agreement is missing. The Kaiser Health News interviewer challenged Umbdenstock on why it does not make sense to reduce payments to hospitals for the uninsured – dubbed “Disproportionate Share Payments” -- if there are going to be fewer uninsured.

Umbdenstock responded that hospitals worried that the number of uninsured would not drop as much as envisioned, leaving them with more uninsured patients but without the money to cover them. He noted that a few big Boston hospitals that care for indigent populations are complaining that they are still caring for many uninsured patients even under Massachusetts' new near-universal coverage system, and saying that they lack the funds to pay for them.

"As a general principle, we absolutely do think covering everyone will lead to savings. We just can’t project what those savings will be because we don’t know particulars," he said. “We accept the fact that coverage for more people will lead to more overall revenues for hospitals. We accept the fact that, in principle, that there will be less need for some portion of Disproportionate Share Payments under Medicaid, but we really do have to see what the details are and we have to see that payment does make its way to provider. . . . We could not accept putting DSH funds at risk up front on the hope or promise that money comes back. Those are extremely important funds to make up for Medicaid and Medicare shortfalls in addition to caring for the uninsured.”

Challenged again on whether hospitals are willing or not to accept lower government payments, he concluded: “Done right, done in collaboration, we are very willing to accept that. We know the payment system has to be realigned.”

But there is no sign that the White House and Congress are moving forward without collaboration or are freezing the hospitals out -- the White House has placed huge emphasis on getting consensus. Under pressure to show how it will pay for universal coverage, White House simply moved forward by indicating the kind of savings that could be found to pay for it – the kind of savings hospitals seemed to indicate a month ago they realized were necessary.

And despite what Umbdenstock said in the Kaiser interview, the proposed cuts were indeed premised on a reshaping of the system, and not mere slashing of payments -- the proposed Medicare savings, for instance, are premised on a complete overhaul of the way that medical treatments are valued and compensated.

On one level, the pushback is hardly surprising. It was the hospital association that declared, days after the announcement at the White House, that Obama had overstated the agreement by describing the commitment as an 1.5 percent annual reduction in spending growth, saying what had actually been agreed to was a 1.5 percent reduction in growth in cost over 10 years. The White House disputed this.

At the time of the announcement, Princeton health economist Uwe Reinhardt predicted just this kind of industry pushback when specific cost-control proposals actually were put on the table. “They’ll be right at the witness table arguing against it,” he said.

But the White House argued at the time that the announcement was real, and Obama would do his best to hold the industry players at the word. Said White House spokesman Robert Gibbs: “Before they went out, he said to this group, 'you've made a commitment; we expect you to keep it.’”

By Paul Volpe  |  June 19, 2009; 2:09 PM ET
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