Big impact from small health savings: White House

A healthcare overhaul that achieves small cost savings each year could have a big impact on the U.S. economy and federal budget in the long run, White House budget director Peter Orszag told Congress on Tuesday.

Orszag told the Senate Finance Committee that lawmakers need to focus on cutting health costs as they begin writing legislation to overhaul the $2.5 trillion U.S. healthcare system and cover an estimated 46 million uninsured Americans.

"If we could reduce the rate of health care spending growth by 1 percent a year ... the power of compound interest is so strong that, after 50 years, we would reduce health care spending as a share of the economy by 20 percent or so," he said.

Health care costs are rising much faster than the overall rate of inflation, leading to higher insurance premiums and putting financial pressure on consumers as well as employers who provide healthcare coverage to their workers.

President Barack Obama has made overhauling the system a top legislative goal this year and senior lawmakers said on Tuesday they expected to meet that challenge.

"We should put a health care bill on the president's desk by July 4," Senate Finance Committee Chairman Max Baucus said.

House Energy and Commerce Committee Chairman Henry Waxman said the House of Representatives would likely act on legislation by August.

Orszag promised the Finance Committee that the administration would find compromise. "Everything is on the table," Orszag repeatedly told the panel.

PUBLIC OR PRIVATE

Waxman, who will play a major role in writing the legislation, told an American Medical Association meeting that he wants a government insurance program to be part of the mix of plans available to consumers.

"Give people a place to go to get good accessible affordable and regulated coverage through a private plan or, if they prefer, through a public alternative," Waxman said. "The choice would be theirs."

Missouri Representative Roy Blunt, a leading House Republican voice on healthcare policy, expressed doubts about a new government insurance program. One similar to the Medicare program for ages 65 and up that would cover people below that age would have unfair advantages over private insurers to the point that they would be unable to compete, Blunt said.

For their part, employers asked that they not be forced to provide insurance.

"Even in the best of times we have wafer-thin profit margins," Neil Trautwein of the National Retail Federation told a House of Representatives Education and Labor Committee hearing. Forcing all employers to provide insurance would lower wages and force job cuts, he said.

"We would urge consideration instead of an individual mandate to secure health insurance coverage," Trautwein said.

The cost of healthcare for large employers has doubled since 2001 to $8,863 per employee per year in 2009 and will rise $13,326 per employee by 2014, James Winkler of consultants Hewitt Associates, told the House hearing.

John Sheridan, chief executive officer of Cooper University Hospital in Camden, New Jersey, said employers are paying now for people without insurance.

"The uninsured typically use hospitals for less-acute primary care-type services," Sheridan told the House hearing.

His hospital shifts those expenses to people with health insurance, so that patients with employer-sponsored insurance make up 30 percent of those getting treatments and incur 30 percent of costs to the hospital, but provide 40 percent of the revenue, he said.

(additional reporting by Will Dunham and Maggie Fox; Editing by Cynthia Osterman)