Private sector signs on for health care reform

• Jennifer Liberto, CNNMoney.com senior writer
• On Sunday May 10, 2009, 9:25 pm EDT

President Obama will announce Monday that he has secured the commitment of several industry groups to do their part to rein in the growth in health care costs.

This pledge from the private sector could reduce the growth in health care spending by 1.5 percentage points a year, for a savings of $2 trillion over 10 years, a letter from the groups will promise, according to a senior administration official. Overall, it could amount to a 20% reduction in the growth of health care spending.

Six trade associations representing unions, hospitals, insurers and the drug industry have signed on to the commitment.

However, the savings depend in part on Congress passing health care reform this year.

And it was not clear how these savings would be accomplished. An official pointed to possible savings from "administrative simplification," smarter care coordination, and changing incentives so providers are rewarded for providing "better" care, as opposed to "more" care. Hospitals are now "financially penalized for providing more efficient care by current law," the official said.

The official also said savings could come from the bundling of payments, in which hospitals, doctors, insurers and other health care companies would work together to bill one fee for one treatment.

The Obama administration is positioning health care reform as critical for getting the deficit under control; for freeing up resources for other initiatives, such as education; and for reducing the burden on American families.

Under the plan to be announced Monday, in five years, the average family of four could be saving $2,500 in health care costs annually, the official said.

Given the failed health care reform efforts of the 1990s, the White House's Monday press conference aims to get ahead of potential detractors.

"It is a recognition that the fictional television couple, Harry and Louise, who became the iconic faces of those who opposed health care reform in the '90s, desperately need health care reform in 2009. And so does America," Obama is expected to say Monday, according to excerpts of prepared remarks.

One official described the participation of the private sector as a "game changer" in the discussion of health care reform. "It makes it even clearer that it's going to happen this year in Congress."

A spokesman for AARP responded to news of Monday's planned announcement by saying, "AARP believes the agreement of providers to slow the skyrocketing cost of health care is critical for the health reform we are all working toward.

"Reducing the skyrocketing cost of health care is the only way to create a health care system that works for all Americans; after all, what good is access to a system that we can't afford?" said the spokesman, AARP Director of Public Policy John Rother.

-- CNN's Kate Bolduan contributed to this report.