Obama hails plan to cut healthcare bill

Barack Obama on Monday welcomed proposals by the US healthcare industry to reduce costs by $2,000bn during the next 10 years, as efforts to overhaul the health system gathered pace in Washington.

The US president hailed the voluntary cuts as a “watershed event” in the path towards healthcare reform as his administration tries to expand coverage to the 46m Americans without health insurance without adding to the soaring budget deficit.

Under the agreement, all big stakeholders in the industry, such as insurers, hospitals, doctors and drug makers, would aim to reduce growth in healthcare costs by 1.5 percentage points each year. This would create breathing room for increased government spending on coverage for the uninsured.

The president announced the target after meeting with industry leaders at the White House, hours after the administration increased its official projection for the budget deficit to $1,841bn (£1,218bn) this fiscal year – up from the $1,752bn it predicted in February.

The Office of Management and Budget predicted the figure would fall to $1,258bn next year, higher than the previous estimate of $1,171bn.

The changes reflect revised tax and spending projections as the economy has continued to worsen but the White House said it remained committed to its target of halving the deficit inherited from President George W. Bush by 2013.

Mr Obama said controlling healthcare spending was crucial to restoring fiscal discipline, with current projections showing costs increasing by 7 per cent annually. “When it comes to healthcare spending, we are on an unsustainable course that threatens the financial stability of families, businesses and government itself,” he said.

The US spends $2,200bn a year on medical care, representing about 16 per cent of gross domestic product – greater than any other industrialised economy.

Even after the announced proposed savings, the ratio would increase to 18 per cent by 2019, compared with 21 per cent without the savings.

The cost-cutting agreement represented a concession by industry groups at a moment when the push for healthcare reform is accelerating on Capitol Hill. The Senate finance committee is scheduled to hold a round-table discussion on Tuesday on options for funding universal healthcare.

Experts said the cost saving pledge represented an attempt by the industry to increase its bargaining power as legislation is drawn up.

Healthcare groups want any government insurance plan limited in scope so it does not draw middle-class families away from the private system, while drug makers and doctors are concerned by the prospect of greater regulation and possible price controls.

Administration officials said the voluntary measures demonstrated industry’s willingness to co-operate with reform.