May 11 (Bloomberg) -- President Barack Obama, in what he called a “watershed event,” received pledges today from drugmakers, hospitals, insurers and other related groups to slow health-care spending by 1.5 percent a year over the next decade.

The promise from groups representing the insurance industry, hospitals, pharmaceutical companies, doctors and a union representing about 1 million workers would save the U.S. $2 trillion, Obama said. It’s a crucial step toward getting Congress to pass legislation this year to overhaul a “broken” health-care system that is one of the nation’s biggest fiscal challenges, he said.

“When it comes to health-care spending, we are on an unsustainable course that threatens the financial stability of families, businesses and government itself,” Obama said after meeting with members of the newly formed coalition at the White House.

Health-care spending under the current structure is set to rise about 6.2 percent a year in the next 10 years, according to the Department of Health and Human Services.

Obama said any health-care legislation that the Democratic-controlled Congress sends him must reduce health-care costs, give Americans a choice of doctors and medical coverage, and provide affordable care for everyone. The cost-cutting pledges announced today will be compatible with what lawmakers craft on Capitol Hill, the Democratic president said.

Next Step

The coalition’s promise “will help us take the next and most important step: comprehensive health care reform,” he said.

While the coalition’s pledge to curb costs and spending may put more pressure on members of Congress to finish legislation, there is no mechanism to enforce the commitment.

White House press secretary Robert Gibbs, asked whether the cuts might be made mandatory, said Obama made clear to the industry representatives today that he expects results.

“He said to this group: ‘You’ve made a commitment, we expect you to keep it,’” Gibbs said.

The cost-containment efforts -- through greater efficiency, coordination and better technology -- would be worth an average of $2,500 annually for a family of four after about five years, according to the administration.

Putting Into Practice

“It’s great to see folks intending to work together to control costs, but the success will depend on actual implementation,” said Richard Kirsch, director of Health Care for America Now, a Washington-based group that is lobbying for Obama’s health plan and is supported by groups including the AFL-CIO, a labor federation representing about 11 million workers.

Backing cost-cutting doesn’t mean insurers won’t fight Obama’s proposal to create a government-run health plan that would compete with private insurers, he said.

“There are major features that powerful groups have said they oppose, and these will be issues Congress has to continue to wrestle with,” Kirsch said.

The groups making the pledge were the American Medical Association, the biggest professional association for doctors in the world, the American Hospital Association, the Advanced Medical Technology Association, America’s Health Insurance Plans, which represents insurers, the Pharmaceutical Research and Manufacturers of America and the 2.1 million-member Service Employees International Union, the country’s largest union of health-care workers.

CEOs Present

Also at the White House were Richard Clark, chairman and chief executive of Whitehouse Station, New Jersey-based drugmaker Merck & Co. and Michael Mussallem, CEO of Irvine, California-based Edwards Lifesciences Corp., the world’s largest maker of artificial heart valves.

“This is a historic day, a watershed event in the long and elusive quest for health-care reform,” Obama said.

He said fixing health care system can’t be delayed, yet the question of how to pay for the overhaul is one of the thorniest spending issues the president faces as he grapples with a growing federal deficit. The administration today projected the deficit would hit a record $1.84 trillion this year and $1.26 trillion in fiscal 2010.

Controlling health-care costs is “essential” to getting the deficit under control, Obama said.

White House Budget Director Peter Orszag said in a Bloomberg Television interview that reducing the growth of health-care costs “would virtually eliminate the nation’s long- term fiscal gap.”

Down Payment

Obama’s fiscal 2010 budget proposes spending $634 billion over 10 years as down payment on overhauling the health-care system. The amount would be financed by increasing taxes on wealthy Americans and cutting spending growth on government payments to doctors and drugmakers.

A revised budget summary released by the administration today proposes raising $58 billion over 10 years by increasing taxes on securities dealers, life insurers, and changing the tax rules of wealthy Americans with valuable estates. The increase is sought, Orszag said, because the plan to pay for a health - care overhaul limited some deductions for high-income households is projected to fall short.

Administration officials and some lawmakers have said they are working closely with health-care provider organizations in attempting to build support for Obama’s plans to revamp the system, hoping to head off the type of attacks that sank then- President Bill Clinton’s health-care plan in the 1990s.

Industry Response

“Industry has been a lot more responsive, and a lot less adversarial, than it was 16 years ago, and that has to do with the recognition that things have gotten worse, that change is inevitable, and that it’s better to have a seat at the table than not,” said Les Funtleyder, a Miller Tabak & Co. health- care analyst in New York.

Some of the groups who met with Obama today helped scuttle Clinton’s initiative, the president said.

“They’ve now stepped forward and said they want to be a positive part of getting reform done this year,” he said. “They’re also the people who can bring about change in the health care system.”

Republican critics on Capitol Hill say Obama’s plan is misguided because it throws money into an already bloated medical system. The party has also targeted the president’s plan to provide government-backed medical coverage as an alternative for people who can’t obtain private insurance.

No Concession

There was no concession from the administration on that idea from the insurance industry as a result of the pledged cuts, administration officials said yesterday. They also said the groups came up with the plan themselves and didn’t ask the White House for anything in return for their support of Obama’s push for health-care overhaul this year.

Health experts including Paul Keckley, executive director of the Deloitte Center for Health Solutions in Washington, say while the goal of cost savings is impressive, questions remain about what a new national health-care system would look like.

“The part of the story about which we heard little today is how you would reduce costs and insure most of those 46 million without insurance,” said Keckley, whose group is part of the consulting firm Deloitte & Touche USA LLP.

“Some bill will be brought to the president this year. The question is, what’s in it? How far does it go, how fast is it implemented?” Keckley said. “We don’t have those details yet.”

To contact the reporters on this story: Kim Chipman in Washington at Kchipman@bloomberg.net; Aliza Marcus in Washington at amarcus8@bloomberg.net

Last Updated: May 11, 2009 18:47 EDT