Health-care reform, if enacted, is going to be expensive -- estimates range from around $1 trillion for a plan introduced by Sen. Ted Kennedy (D-Mass.) to $1.6 trillion or more for other proposals -- so the Obama Administration has come up with a list of $948 billion in savings it believes can be obtained by enacting such changes, with the goal of making any health-care reform legislation pay for itself.

The proposed savings include $309 billion in reduced costs from the Medicare and Medicaid programs and $326 billion in additional revenue that will come from such things as raising taxes on families earning more than $250,000 a year. The Medicare and Medicaid savings include such things as assumed improvements in patient care and reduced hospitalization rates, as well as reduced Medicare payments to private insurers and improved “payment accuracy.”

The Administration added to that an estimate of $313 billion more it feels can be saved through such things as productivity adjustments to Medicare and Medicaid, reduced hospital subsidies and by paying lower prices in Medicare Part D, the prescription-drug program. It also includes cuts in waste, fraud and abuse.

The trillion-dollar question is whether a government program would help promote efficient, quality care, thus realizing these savings estimates and perhaps more -- or whether it would simply be a giant mess of bureaucracy and inefficiency, possibly saving very little or even costing taxpayers billions of dollars more.

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“Number one, they are real -- and number two, they are achievable,” said Families USA Executive Director Ron Pollack of the savings projections. “That’s not to say it’s easy to achieve, because some groups associated with those savings are not happy about it.” Families USA is a liberal-leaning group that seeks “high-quality, affordable health care for all Americans,” according to its Web site.

Pollack said he thinks the final cost estimates of some of the health-care legislation could be lower than the initial figures indicate. For instance, he said the Kennedy bill was submitted to the Congressional Budget Office as a “very partial bill” with “placeholders” to allow for negotiation, and the cost will be lower once those details are in place.
“It’s clear they’re going to look a heck of a lot better than with this partial scoring,” Pollack said.

Republicans and conservative advocates are critical of the proposed savings, and indeed of most of the proposed reforms.

On Wednesday, amid discussions in the House about health-care reform, Ways and Means Committee Ranking Member Dave Camp (R-Mich.) highlighted a part of the House Democrats’ health-care proposal that said “other revenue raisers -- to be provided,” and said, “I think this picture is worth a couple trillion dollars.”

“They’re magical savings. No one believes they exist,” said Greg D’Angelo of the Heritage Foundation, a conservative, free-market-oriented think tank. He said such things as preventive care and innovations in health information technology “don’t save money -- or if they do, it may be somewhere in [future] years to some unknown extent.”

While health reform might bring down costs for some health-care consumers, D’Angelo said, “there’s a difference between savings for individuals and families, and savings for the government. It’s not clear to me how this would reduce costs to the federal budget.”

And John Goodman of the National Center for Policy Analysis, a free-market-oriented nonprofit research organization, wrote in a recent blog post: “Because this is a complex system, it is very hard to predict how all this new spending will affect the system as a whole. But we can be fairly confident total spending will rise -- and probably by a lot… No matter what else happens, if I and my doctors don't change what we are doing for me and you and your doctors don't change what is being done for you….. and so forth….. aggregate spending will not change.”

One thing the Administration hopes can make a difference: Key medical-industry groups have already said they’re on board, in a very general sense, with the idea of keeping costs in check.

“As restructuring takes hold and the population's health improves over the coming decade, we will do our part to achieve your Administration’s goal of decreasing by 1.5 percentage points the annual health care spending growth rate -- saving $2 trillion or more. This represents more than a 20% reduction in the projected rate of growth,” representatives of hospitals, doctors, insurers, drug companies, medical-device companies and unions told President Obama in an open letter last month. “We believe this approach can be highly successful and can help the nation to achieve the reform goals we all share.”

“There’s a real opportunity to reduce costs while improving quality,” said Robert Zirkelbach, a spokesman for health-insurer group America’s Health Insurance Plans. “We have to do cost, quality and access in tandem.”

Zirkelbach said the insurers see opportunities to reduce costs in the health-care system by building on what they’re already doing through the private sector. (Of course, the insurers would like to continue operating through the private sector, and oppose creation of a public health-insurance plan.)

Still, many of the skeptics are warning that with all the unknowns and all the changes, the cost of reform could be substantial.

“I would watch your wallet,” the Heritage Foundation’s D’Angelo said.