WASHINGTON, D.C. — President Obama’s campaign to cut health costs by $2 trillion over the next decade, announced with fanfare two weeks ago, may have hit another snag: the nation’s antitrust laws.
Antitrust lawyers say doctors, hospitals, insurance companies and drug makers will be running huge legal risks if they get together and agree on a strategy to hold down prices and reduce the growth of health spending.
Robert F. Leibenluft, a former official at the Federal Trade Commission, said, “Any agreement among competitors with regard to prices or price increases — even if they set a maximum — would raise legal concerns.”
Already, some leaders of the health care industry who appeared at the White House on May 11 say the president may have overstated their cost-control commitment. Three days after the gathering, hospital executives said that they had agreed to help save $2 trillion by gradually slowing the growth of health spending, but that they did not commit to cutting the growth rate by 1.5 percentage points each year for 10 years.
White House officials say even the more limited commitment is significant. Under current law, federal officials predict that health spending will grow an average of 6.2 percent a year, to $4.4 trillion in 2018.
Mr. Obama is asking the industry for detailed proposals to control costs. But so far the administration has not offered the industry any relief from antitrust laws and has, in fact, vowed to step up enforcement.
As a presidential candidate, Mr. Obama said consumers had suffered because of “lax enforcement” of antitrust laws in many health insurance markets.
In 1993, when President Bill Clinton made the last major effort to overhaul the health care system, the lobby for the drug industry, then known as the Pharmaceutical Manufacturers Association, devised a voluntary cost-control plan. Under it, each drug company offered to limit the annual increase in the average price of its prescription drug products to the increase in the Consumer Price Index.
The Justice Department rejected the proposal, saying it would violate antitrust laws. In blocking the proposal, the department said the Supreme Court had made clear that agreements setting maximum prices were just as illegal as agreements that set minimum ones.
“Such maximum price-fixing agreements create the risk that the maximum prices will become minimum or uniform prices,” the department said in a business review letter signed Oct. 1, 1993, by Anne K. Bingaman, then the assistant attorney general in charge of the antitrust division.
In 1978, hospitals also asked the Justice Department for an assurance they would not be charged with antitrust violations when they undertook a “voluntary effort” to curb costs as an alternative to legislation proposed by President Jimmy Carter. The department would not provide such an assurance.
Many savings now envisioned by the health care industry would require much closer cooperation by independent doctors and hospitals, taking them into a gray area of the law where federal agencies have not provided clear guidance.
In a recent letter to the Senate Finance Committee, the American Hospital Association said uncertainty about enforcement of the antitrust laws “makes it difficult for a hospital and doctors to collaborate to improve care” and lower costs.
Doctors often want to collaborate and share information about prices without sharing financial risk or fully merging their office practices. The American Medical Association has asked Congress to revise antitrust laws so doctors can collectively negotiate with insurers over fees and other issues.
The Federal Trade Commission has repeatedly challenged such collective action as illegal price-fixing, even though doctors say they are at a severe disadvantage in trying to negotiate with giant insurance companies.
A new study by an economist at Northwestern University, Leemore S. Dafny, finds that a growing number of geographic markets are dominated by a handful of insurance companies, and that the decline in competition may contribute to higher prices.
Among the groups that say they have joined together to rein in health costs, besides the hospital and medical associations, are America’s Health Insurance Plans and the Pharmaceutical Research and Manufacturers of America.
Jamie Court, the president of Consumer Watchdog, an advocacy group, said he was wary of such joint efforts.
“When companies that control the health care system get together to change it, there is a serious risk that they are doing it to stifle competition at the expense of consumers,” Mr. Court said.
The Federal Trade Commission says that while cooperation among health care providers can benefit consumers, it can also increase the bargaining power of hospitals and doctors, making it easier for them to set prices and eliminate competition.