National Opinions

Krugman: Letter a ray of hope for health care

Is this the end for Harry and Louise? Harry and Louise were the fictional couple who appeared in advertisements run by the insurance industry in 1993, fretting about what would happen if "government bureaucrats" started making health care decisions. The ads helped kill the Clinton health care plan, and have stood, ever since, as a symbol of the ability of powerful special interests to block health care reform.

But on Saturday, excited administration officials called me to say that this time the medical-industrial complex (their term) is offering to be helpful.

Six major industry players -- including America's Health Insurance Plans, a descendant of the lobbying group that spawned Harry and Louise -- have sent a letter to President Barack Obama sketching out a plan to control health care costs. What's more, the letter endorses much of what administration officials have been saying about health economics.

Are there reasons to be suspicious? You bet, and I'll get to that in a bit. But on the face of it, this is tremendously good news.

The letter's signatories say they're developing proposals to help the administration achieve its goal of shaving 1.5 percentage points off the growth rate of health care spending. It may not sound like much, but it's huge: Achieving that goal would save $2 trillion over the next decade.

How are costs to be contained? There are few details, but the industry clearly has been reading Peter Orszag, the budget director.

In his previous job, as the director of the Congressional Budget Office, Orszag argued that America spends far too much on some types of health care with little or no medical benefit, even as it spends too little on other types of care, like prevention and treatment of chronic conditions. Putting these together, he concluded that "substantial opportunities exist to reduce costs without harming health overall."

Sure enough, the health industry letter talks of "reducing over-use and under-use of health care by aligning quality and efficiency incentives." It also picks up a related Orszag theme, calling for "adherence to evidence-based best practices and therapies."

Before we start celebrating, we have to ask the obvious. Is this gift a Trojan horse? Several of the organizations that sent that letter have been major health care policy villains. I've mentioned AHIP. There's also the Pharmaceutical Research and Manufacturers of America, the lobbying group that helped push through the Medicare Modernization Act of 2003, a bill that prevented Medicare from bargaining over drug prices and locked in huge overpayments to private insurers. One of the new letter's signatories is former U.S. Rep. Billy Tauzin, who shepherded that bill through Congress, then left public office to become PhRMA's lavishly paid president.

The point is that there's every reason to be cynical. Remember that what the rest of us call health care costs, they call income.

What's presumably going on here is that key interest groups have realized that health care reform is going to happen no matter what they do, and that aligning themselves with the Party of No will just deny them a seat at the table. I would strongly urge the Obama administration to hang tough in the bargaining ahead. In particular, AHIP will surely try to use the goodwill created by its stance on cost control to kill an important part of health reform: Giving Americans the choice of buying into a public insurance plan. The administration should not give in on this point.

But let me not be too negative. That the medical-industrial complex is trying to shape heath care reform rather than block it is a tremendously good omen. It looks as if America may finally get what every other advanced country has: a system that guarantees essential health care to all its citizens. Serious cost control would change everything, not just for health care, but for America's fiscal future.

I still won't count my health care chickens until they're hatched. But this is some of the best policy news I've heard in a long time.