Universal Health Care, Mark McClellan



– Good evening, ladies and gentlemen. I'm Andrew Samwick, the director of the Rockefeller
Center here at Dartmouth. It is my pleasure to welcome
you to this evening's Brooks Family Lecture
on Universal Healthcare, to be presented by Doctor Mark McClellan. The Brooks Family Lecture
Series was established in 1990 by Dexter Brooks of Westport, Connecticut. Mr. Brooks graduated
from Dartmouth in 1947 and the Amos Tuck School of Business in 1949. The Brooks Family Lecture Fund enables the Rockefeller Center to bring distinguished guests to campus, to foster a balanced discussion of national and international issues. This evening's lecture is
also the first in a series designed to commemorate the political and policy legacy of Nelson A. Rockefeller in the year that marks the
100th anniversary of his birth, and the 25th anniversary of this center named in his honor. Nelson Rockefeller was a member of the class of 1930 and became one of the leading
political figures of his era. His distinguished career in public service began with appointed positions in both the Truman and the
Eisenhower Administrations. Feeling the need to have an
election mandate behind him to get anything done, he left the federal government in 1956 and ran for governor of New York in 1958. He served as governor for 14 years before serving as Vice
President under Gerald Ford. It was in his capacity as governor that Nelson Rockefeller made his mark in a number of policy areas that are still very relevant today and that will be featured in
this Centennial Lecture Series. On the subject of healthcare
and in particular, tonight's subject of universal healthcare, he was truly a pioneer. The following is an
excerpt from Joe Persico's 1982 biography of Nelson Rockefeller, appropriately titled The
Imperial Rockefeller. This passage comes after a passage on his very conservative approach to welfare reform. "Nelson Rockefeller was
indisputably liberal "on one issue, healthcare. "The closest America has yet
come to socialized medicine "occurred briefly in New York state "during his tenure as governor. "In 1966, the federal
government passed legislation "providing medical assistance to the poor. "Rockefeller seized upon the federal plan "and then set a generous standard, "so generous that one in
every four New Yorkers "was eligible for free medical care. "A headline writer called
the New York program "'Medicaid,' and Washington
lawmakers began to wonder "what they had wrought. "Rockefeller never tired of
telling of a frantic call "from Senator Jacob Javits. "'My God, Nelson. At
the rate you're going, "'New York State will use
up all the Medicaid money "'that Congress appropriated
for the whole country.' "Later, reluctantly, Nelson
was forced to back down. "With federal aid reduced, "he had to drop more than
a million New Yorkers "formerly eligible for free medical care. "He then tried for five years in a row "to promote a state system of
universal health insurance. "But state business
interests, fearing the cost "of such a program, killed
the bill every year. "He was one of the few
major American politicians "and a rare Republican to
declare access to good healthcare "ought to be regarded
as a basic human right. "These were ideas that he had pioneered "as the first Undersecretary
of the Department of Health, "Education and Welfare
over a decade earlier, "and that he continued to press "through leadership in the
National Governors' Association." In doing my background research
for this Centennial Series, I came across the following
description of his plan from the May 11, 1970
issue of Time Magazine. "First proposed to the New
York legislature in 1967, "but pigeonholed in committee ever since, "recently resubmitted in modified form, "with a companion bill to
encourage the formation "of group practices, "would establish a set minimum benefits "to be bought from insurers: "one, 90 days of in-hospital,
including psychiatric care, "in a semi-private room. "Two, outpatient X-Ray, diagnostic "and other laboratory services, "emergency care and minor surgery, "physical therapy and
psychiatric evaluation. "Three, hospital or
physician maternity benefits "up to $150. "Four, hospital-managed or other sponsored "home care, up to 100 visits a year. "Patients would pay $2 in coinsurance "for virtually all doctors,
clinic and lab services. "The state would pay the premiums "for all with incomes under $5,000 a year, "split premiums in the $5-6,000 range, "while those earning more than $6,000 "would pay their own." To understand these numbers, $1 in 1970 is equal to about $5.34 today. So now we know where that $10
copay must have come from. I suppose it is very
interesting some 38 years later to see what has changed and what has not in the national debate
about universal healthcare. Tonight we are pleased to welcome one of the nation's foremost authorities on healthcare policy. Doctor Mark McClellan is a Senior Fellow, a Leonard D. Schaeffer chair
in Health Policy Studies, and a director of the Engelberg Center for Health Care Reform at
the Brookings Institution. In that capacity, he
oversees the study of ways to provide practical solutions for access, quality, and financing challenges facing the US healthcare system. He also co-directs an initiative to link the population-based research
programs at Brookings with those of the Dartmouth
Institute of Healthcare Policy and Clinical Practice. Doctor McClellan has a
highly distinguished record in public service and
in academic research. He was the administrator for the Centers for Medicare and Medicaid Services from 2004 to 2006, the Commissioner of the
Food and Drug Administration from 2002 to 2004, and a member of the President's Council of Economic Advisers and Senior Director for Healthcare
Policy at the White House from 2001 to 2002. In these positions, he
developed and implemented major reforms in health policy. He also served in the
Clinton Administration as a Deputy Assistant
Secretary of the Treasury for Economic Policy from 1998 to 1999, supervising economic analysis
and policy development on a range of domestic policy issues. During his government
service, he was on leave from his positions as Associate
Professor of Economics and Associate Professor of
Medicine at Stanford University, where he directed Stanford's program on health outcomes research. Ladies and Gentlemen, please join me in welcoming Doctor Mark McClellan. (applause) – [Mark] Thanks, Andrew. That was quite an introduction. Thank you. Andrew, thanks very much
for that introduction, and good evening to all of you, and happy Valentine's Day. For the students here, how many of you are here on a date? How many are here because
you couldn't get a date? (audience laughs) Yeah, as I was gonna say,
I see some hands going up. That's okay. I won't take it personally. Actually, it is a real
privilege to be here, and it's a special honor that you all did come out to hear from me this evening. Andrew didn't mention it, but he and I, and actually many of his
colleagues at Dartmouth on the faculty here, and I go way back. Andrew and I were office mates together when we were in graduate school in economics together, some years ago. I think Andrew was about 13 at the time. And who would have thought that just these many years later, we'd be here doing the Brooks Family Lecture for here at the Rockefeller Center. As Andrew told you, there
is a great tradition, from governance under Rockefeller himself and onward through the
activities here at the Center, in focusing on important
public policy issues, including universal
healthcare in particular. It's a real privilege for
me to be a part of that. Dartmouth has a great
tradition more generally in the medical college as well for making a difference in understanding what health policies are working and aren't working in this country. Andrew talked about my
affiliation now with Brookings after leaving government. But I'm also spending a
lot of time collaborating with some of the leading academic
researchers in the country on health policy issues, and
many of those researchers are right here at Dartmouth. So this is a very special
place to be talking about such an important topic
of universal healthcare. This challenge of universal healthcare, which is the title of the talk tonight, is typical of the way
that the public debate about the issues of healthcare
policy are discussed. Typically what we do is, have a debate about how and whether we should
get to universal coverage, universal health
insurance coverage, which, as you all know, is not the
same thing as universal access to high-quality, affordable
and innovative care at a cost that this nation can sustain. There's an important
difference between the two, universal high-quality healthcare access and universal health insurance coverage. And I wanna talk about that tonight. I wanna talk tonight about
not just expanding access to health insurance coverage, important as that is, but about achieving
real healthcare reform, getting to this bottom line
result of high quality, innovative care for all Americans. And what I wanna highlight is
that this is gonna take more than just coverage reform. Simply trying to buy
more people into anything like our current healthcare system and current health insurance system that is too expensive
and, more importantly, falls short on delivering
high quality care and improving health
nearly as much as it could, simply trying to do that
is not gonna be sufficient, is not gonna lead to
sustainable healthcare reform. So I wanna talk tonight
about real healthcare reform that gets to quality, efficient healthcare for everyone in this country. And in healthcare, perhaps
more than in any other part of our economy, it's important to think about innovation, as well. That's another theme I'm
gonna keep coming back to, innovation, about
improvements in knowledge about what works to keep us healthier, about improvements in medical treatments, medical technologies, and
improvements in understanding how to use this knowledge
and these treatments to help people stay healthier, to rightfully give us the expectation that healthcare and health tomorrow is gonna be better than it was today. For all the shortcomings that
our healthcare system has, and you've experienced many of them, the achievements, if you look
at just the overall statistics that have resulted from
progress in biomedical sciences are actually very impressive. And that's why I'm so
focused on innovation. If you look back over the last 50 years, the mortality rates from
cardiovascular disease have declined by more than 60%. And those rates are continuing to go down. In recent years, we've seen reductions in the mortality rates
from many common cancers. Over the last 20 years, HIV/AIDS has gone from a death sentence to, for many people, a chronic illness that you can live with year after year after year. And for many of the other
debilitating medical conditions, arthritis, other types of health problems that may not be fatal,
autoimmune diseases, we've seen real progress
in biomedical science that has led to significant improvements and measurable improvements
in the quality of life of millions of Americans. In fact, there have been
a number of economists who don't specialize in healthcare, macroeconomists who look at the big overall economic picture, who have looked at what's
happened in this country in terms of increases
in healthcare spending, which have been substantial, they've been running a
couple, three percent ahead of the growth rate in the economy for now 50 years and counting, and looked also at the
improvements in health that we've seen in this country. And according to all of these studies, which were by Nobel
Prize-winning economists like Gary Becker and
Bob Coppell at Chicago and Bill Nordhaus at Yale, David Cutler at Harvard,
one of my collaborators, the conclusion is that, while we've spent, we're spending a lot more
than we used to on healthcare, not only has the spending been worth it in terms of the improvements
in life expectancy and the improvements in quality of life that have taken place in this country, in fact, the increases in productivity s reflected in the value
of longer, healthier lives, is worth more than all the
improvements in productivity in every other sector of our economy over the last 50 years, combined. So yes, iPods, jet travel,
all that stuff is great. But what's really great is
having more time to enjoy it, and not only to enjoy those things but more time to enjoy
your family and friends and sunsets on the nice
snow out here at Dartmouth. So, although we've seen
some tremendous improvements over the last 50 years, if you
look at biomedical science, we're really poised for potentially even more significant
progress in the years ahead. If you think about it,
new sciences like genomics and nanotechnology and
stem cell technologies, and good applications of
health information technology, these are things that
people are talking about that you read about in the headlines, but that haven't actually
had much of an impact on medical care yet. The potential is there for healthcare that's going to be even better, that's going to do a much
better job of preventing and preempting diseases
and their complications, that's gonna do a much
better job of tailoring its abilities, its capabilities,
to your healthcare needs, to your preferences, to help you live even longer and better, an
even longer and better life. But if you take a step back again and look at the public reaction to all
of this, what's the reaction? Is it optimism? Are people
pleased that we've got such a great and positive progress in our medical technologies? Well, not exactly, right? I mean, many of you have seen how much of, with the primary that was
through here earlier this year and everything, you've
seen how much concern, how much anxiety, how much anger there is about healthcare in this country today. And it's anger that, you know, even if these better
treatments are coming along, even the treatments that
are available today, people are worried that they won't be able to take advantage of them
because they can't afford it. This is a leading domestic policy concern heading into the 2008 election. And, as those of us who've been involved in health policy know, as you
all probably know as well, when we can't find any
more effective ways, so these problems of rising
cost, and these problems of getting access to quality care, one of the things that tends to happen in government policy making is short-term efforts to
try to keep costs down. And these short-term
efforts can focus in areas like price controls or restricting access to new technologies,
or even rationing care. In fact, this is front and
center in Washington right now, in the Medicare program,
the statute that determines what doctors are paid every year, has built into it an automatic formula that basically works like
this: if costs go up, the payment rates of the doctors go down. That's written into the statute. And so what we keep seeing
is efforts by Congress and efforts by physicians
to try to head off these automatic spending reductions that are just built into the law. And Medicare, as well,
is behind on covering new types of care, preventive
care, electronic healthcare. And until recently, until
just a few years ago, even prescription drugs, because cost of simply adding coverage
for these new kinds of medical treatments,
these new innovations, would add significantly
to the cost of coverage in the existing system. Now, you heard about Medicaid
from Andrew's introduction. I'm sure Mr. Rockefeller,
if he were alive today, would be glad to know that
New York is still number one by far in per capita, or
per beneficiary, spending on the Medicaid program. And yet Medicaid programs
around the country, state programs around the
country, are facing real problems of access to care even within Medicaid because the payment rates
have been set so low in an effort to try to
control cost in the short run, that many providers don't even participate and many beneficiaries have real problems with access to care. And in some ways, the
problems aren't any better on the private health insurance side. What many of the private health plans do is sort of follow the lead
of Medicare and Medicaid and try in their own way to
negotiate lower payment rates with providers, to take steps
to try to get prices down or to restrict access to
services, like the whole era of managed care, really
managed costs, in the 1990s. So these are a lot of
steps, a lot of efforts, increasingly intense
efforts, with all the anger and public concern about these issues to try to get some short-term
cost savings in healthcare. But they're really not getting
at the underlying problem. These steps to bring down the
prices or to restrict access don't do anything directly
to improve quality and may actually reduce it. Lowering prices across
the board or imposing some broad restrictions on access
to certain kinds of treatments in what should be an
increasingly personalized and prevention-oriented healthcare system, well, that doesn't do much
about the fundamental problems in the way that we're delivering
healthcare in this country. Another way of seeing this problem, and another way of seeing why
we need a broader approach to thinking about how to
get to universal healthcare is to remember that spending on healthcare is prices, what we're paying for services, times the quantities of those services. Prices times quantities. And our biggest problem,
I'd submit to you, is not that our prices are too high, though there's certainly some
more work that we could do on many of those prices, it's getting the right
treatments, it's getting the right quantities to
the people who need it. Now, let me give you
some examples of this. And I wanna start with
the path breaking work done right here at Dartmouth. Since the 1970s, Dartmouth researchers led by Jack Wennberg and more recently people like Elliott
Fisher and Jon Skinner, have done studies showing big variations, from area to area around the country, in the use of healthcare services and the cost of those healthcare services, with no clear relation
to outcomes for patients. Cost may vary in Medicare
from area to area by 50 or 100% or more, and by hospital treating similar problems,
by 50 to 100% or more, with no clear relationship
to health outcomes. That's overuse of medical treatments. Not only that, we have a
tremendous amount of under use of effective medical care
in this country, as well. This particularly includes
our country's poor record of treating chronic diseases. Chronic diseases in this
country, diseases like heart disease, heart
failure, chronic lung disease and diabetes account for 75% of all healthcare cost
in the United States. You know what our track
record is of treatment? It's not very good. Studies by the Rand Corporation
and others have shown that the treatments that we know work, where we have clear evidence of benefits from using drugs or
other types of treatments to manage these chronic diseases are only applied effectively
about 50% of the time. Long term compliance with many drugs that can treat conditions
like high blood pressure or high cholesterol for seniors,
even with drug coverage, run only around 20 or 30%. So under use of medical technologies. And this particularly goes for prevention. One of the big trends in this
country, as you all know, has been a trend towards
increasing obesity over time. The obesity rate in the
United States has gone from about 17% in 1990 to about 33%, one in
three Americans, today. The average difference in
healthcare cost per person for someone with and without the diabetes is 20 to 25%. What's actually impressive
is that, over that time, we're living longer, our
overall life expectancy and functional impairment
measures have been getting better. It's just a very expensive
way to go about doing it, rather than preventing the health problems in the first place. So under use of many types
of medical treatments and other approaches, innovative
ways of staying healthier, that could keep our healthcare costs down. Now I'm sure many of you are familiar with the problems of misuse
of medical technologies in our country, as well. A new report was out
today, suggesting that in the Boston area, one in 10 patients who are hospitalized,
and they have important medical errors occur during their stay. And this is after years of attention to the problems of medical errors. Focusing on short-term
cost reductions alone hasn't worked to address these huge gaps between what we could
achieve in terms of quality and efficiency in
healthcare and better health and what we are actually achieving. And this is not surprising. If the focus is just on controlling prices or short-term cost cutting, well, that doesn't work in any industry. For those of you who are economists here, that doesn't work in any industry to get much better quality or value. And these kinds of blunt
instrument approaches are increasingly bad fits
in a rapidly changing, personalized industry
with a lot of innovation, one where there are an increasing array of complex treatments
that may be very valuable to some patients, but not
valuable at all to others. And the challenge is
getting the right treatment to the right patient,
getting the right quantities, as we keep innovating in healthcare. So what's the alternative?
Well, that's what I wanna spend the rest of my time on. It's policy reforms that promote
real reforms in healthcare, not just trying to pay a bit
less for the same services that we've been getting, but instead, putting a focus on increasing value, helping us get more for the money we spend by getting the treatments right. Looking ahead, based on
what we are spending today and the spending projections going out, of increasing spending
in Medicare, Medicaid and private health insurance and increasing out-of-pocket spending, I think this is the only way, only way, to get affordable healthcare to everyone. And it's not just me
saying this these days. If you listen carefully to
the presidential candidates, every single one of them
is saying it, as well. This backdrop of rising
unsustainable costs, due in large part to big gaps between what our healthcare system
could do and what it is doing, is changing the way that
presidential candidates are talking about healthcare reform. For those of you who've
been paying attention to elections for a while,
you know that traditionally what you're gonna see from
a presidential candidate is a proposal to cover the uninsured and bring down costs for
people who have insurance. Republicans would typically propose something like tax credits. That's what President
Bush did in 2000 and 2004. He proposed a $20 billion,
$25 billion a year program for new assistance with costs for people who couldn't get good
coverage through their job. And then the Democrats would
propose something bigger, a broader, more expansive proposal that would get more people covered. But there's no longer much
money available to do this. And again, if you listen
carefully to the candidates, this is what they're telling you. On the Democratic side, Senator Obama and Senator Clinton both have
proposals that they believe will get to universal
health insurance coverage. And if you look closely
at that proposal, though, one of the main sources
of funding for it is what? Is to roll back the tax
cuts that were implemented in 2001 and 2003 for
the very wealthy, right? Well, if you listen to
the campaigns themselves about what they think
their proposal would cost in something like our
current healthcare system, the number they tend to come up with is something like $100 billion a year. You know how much money you get from rolling back the
tax cuts for the wealthy? About $40, 50 billion dollars
a year. Right, Andrew? You probably know the
numbers better than I do. Let's say $50 billion a year. But keep in mind several other things. First, those tax cuts are
scheduled to expire anyway under current law in 2010. So from the standpoint
of the, quote unquote, "official scoring" of health
insurance reform proposals, that's not new money that you can use for new government spending. It's money that's not in the
government's budget baseline. In fact, the big fight
in 2009 is going to be between Republicans calling
Democrats "tax increasers" because they, some of
them will want to vote against extending all
of the Bush tax cuts. In addition, even if there
is some new revenue available from tax reforms, like imposing
new taxes on the wealthy or some other steps, there
are some very important other priorities in federal tax
policy that are going to be, I'll tell you, are going
to be addressed first. Some of you probably heard of
the Alternative Minimum Tax and how it's reaching
many, many more households than it used to. Fixing the Alternative
Minimum Tax problem itself costs over $50 billion per year. So not enough money there to begin with, and money that probably
is gonna be spoken for for other federal policy priorities. And if you wanna know just
how tight the budget is, many people don't agree
with it, but just look at President Bush's budget
that he proposed recently. Not only is there no new
money in there for healthcare. There are real cuts in federal non-defense discretionary programs, as well, the kind of money you like
to find to fund programs like health insurance expansions, just to get to a balanced budget in 2012. And that budget doesn't even include all of the war costs for
Iraq and Afghanistan. Money is gonna be very tight. Also new this year, now
looking at the Republican side, is that there is no proposal
for new net spending on healthcare, and that's something new for Republicans, too. Again, last couple of elections, Bush had a significant expansion proposal. If you listen to Senator McCain or any other Republican
that was running before, none of them were proposing
new spending expansions. They were proposing steps like reforming the tax treatment of health insurance, to try to get the federal
dollars that are being spent, through tax expenditures or
other means, to go further, to cover more people. But they weren't supporting an expansion of federal spending. And that's understandable
from a Republican standpoint because the federal government,
if you add it all up, between Medicare and Medicaid and the tax expenditures
on health insurance for people with
employer-provided coverage, that's more than $1 trillion per year in federal spending now,
and growing very rapidly. In fact, according to
most budget projections, the increases in spending
for Medicare, Medicaid and the tax expenditures
for health insurance account for most of the increases in federal government spending overall over the next five and
10 years and beyond. So there will be an opportunity. I think the good news in all of this is that there will be an
opportunity if and when we get nominees for both parties … I though it was gonna
be over by now, but … If and when we get nominees
from both of the parties, to have a healthcare reform
debate that, for the first time, for the first time is really gonna be about reforming healthcare, not just about buying more people into our
current health insurance system, because we can't afford to do it, but about reforming the way
that healthcare is provided. And it's time for this change
in how we think and talk about coverage reforms because
there is growing evidence, practical evidence, that we can take steps to spend the money much
better in healthcare. Not only are there all those
gaps and overuse and under use and misuse of medical treatments that I talked about before,
but there are programs around the country, healthcare
providers and patients working together, who are doing it right, who are doing better, who
are putting more emphasis on preventive care and wellness and heading off costs and
complications before they happen. More emphasis on coordinating care for people with chronic
diseases, who typically see multiple specialists and may be on multiple kinds of medications or getting multiple
different medical treatments, that in the past have not
been well coordinated. New steps to help patients navigate our whole complex healthcare system, to have patient-centered healthcare that's focused on the
needs of the patients, not the needs of all the
providers that are treating them. These kinds of steps are what I mean by real healthcare reform. This is what our healthcare
system should be driven every day to achieve, and should
be supported in achieving. But as those of you who are
involved in healthcare know, I know there are a lot of medical professionals here tonight, and also those of you who have encountered our healthcare system know, progress towards much more efficient ways of delivering healthcare in this country has been anything but rapid. And this is where healthcare
policies and policy reform, I think, really comes in. In contrast to most other industries, if you take steps in
healthcare to improve quality and lower costs, steps that
create more value for Americans, these steps don't pay off
because our healthcare policies are generally not focused on supporting the best care at the lowest cost. They're focused on something else. And usually, it's more volume
and more intensity of services regardless of their quality or their impact on patient health. And that kind of a financing environment and that kind of a regulatory environment, the real reforms in
healthcare that we need don't come very easily. I had an example of this. Soon after I went into government
and this administration was still working over the White House, I heard from a group of surgeons, thoracic surgeons who had
what sounded to me like, when I talked to them, a very good idea. What they wanted to do
was, coordinate the care that they were providing
for bypass surgery and other elective heart
surgeries in a new way. They wanted to have teams
of doctors, of surgeons, working with nurses and
anesthesiologists together. They would have standard
operating procedures. They wanted to use electronic records to do handoffs to the
post-acute care team. You know, after you get
discharged from the hospital, there's a lot of recovery
time after major surgery, like heart surgery, to
get you back on your feet, and a lot of things can go wrong in that recovery time, as well. They wanted to implement
steps that they had shown could reduce infections and so forth. And they had piloted these programs in a few hospitals, mainly in Virginia. And what they had found was that, when they took all these
steps, several things happened. One, patients got better outcomes. They had lower complication
rates, shorter length of stay, they had better functional
outcomes, as well. Two, cost of the Medicare
program went down. The problem was that they
had to make some investment in things like coordinating the care teams and investing in
electronic medical records and communicating effectively with the post-acute care
providers, that cost money. But under the Medicare
reimbursement system, where you get paid more when you have more hospitalizations and more imaging and longer rehab stays,
they lost money when … The hospital and the physicians lost money when they took these kinds of steps. They had what seemed like
a pretty simple idea. They wanted to get paid
in a different way where, if they documented that they
were actually improving quality and lowering overall costs to Medicare, all they wanted to do was
share in some of those savings. Well, it seemed like a nice idea to me. Unfortunately, when I
talked to the lawyers, they told me it was illegal. The way that Medicare pays is
based on volume and intensity. In fact, there's specific
rules that the Stark and Anti-Kickback
regulations that prohibit any kinds of sharing of funds like that between the hospitals and
the doctors, you know, the other kinds of providers involved. Well, that's an indication that
something needed to change. And over the last few
years, there has been some very important progress towards getting to a healthcare financing system and getting the healthcare policy reforms that really support value,
that really support steps like what those thoracic
surgeons wanted to do, to get to better care at a lower cost. And there are several
key steps in doing this that I wanna spend a
little bit of time on. The first is measuring
what we really want, not how many services a patient received, not simply how long they
stayed in the hospital or how many costly complications they had, but what their results were. Measuring quality and measuring
the efficiency of care. A lot of what are going on here and elsewhere around
the country to develop measures of quality of
care, including measures of evidence-based process
of care, best practices, but more importantly,
measures of the outcomes that patients experience, whether they have important complications, whether their chronic diseases are actually under good control
so that they can stay well, and, very importantly, patient satisfaction measures, as well. There are public and private
efforts under way now. In fact, at the Brookings
Institution, we're coordinating an effort across a number
of quality alliances for hospitals, for ambulatory
care, for pharmacies, to try to do a better job of measuring the quality and the cost of care. It's very important to keep
the focus on the patient in these activities,
not just hospital care or physician care, not just
particular processes of care, but the overall results
that the patients receive. Not only do we need to
measure results better, quality and cost of care,
but we also need to then take steps to change our payment systems, change our regulatory systems, to support these kinds of reforms. And this is starting to happen, as well. Medicare now has what's
called Pay for Reporting for hospitals and for some
physician measures of quality. These are just some initial steps, but they're steps that we can build on. There are pilot programs under way now in government and in the private sector, through business collaboratives
like the Leapfrog Group, to start paying more for
better results on quality. Not just paying for
reporting on these kinds of quality and cost
measures that I mentioned, but if healthcare providers
or physicians or a hospital do better on some of these
process of care measures, they get a little bit of
an additional payment. It's called Pay for
Performance, and it's a step in the direction of
providing better support for value in healthcare. The problem with many of
these Pay for Performance efforts that are underway
now is that they amount to just incremental changes on top of a fundamentally misdirected system for supporting true quality
and efficiency in healthcare. And so, when you make
these incremental changes, you tend to see incremental effects. Pay a little bit more for
doctors to do a better job of keeping patients on
the right prescriptions for their chronic diseases, and you'll see a measured improvement in the use of those chronic
disease medications, but it comes at an additional cost. You got to pay more for
the payment incentives. It's not a fundamental change
in the kinds of incentives and support that providers receive for delivering quality of care. But it is possible to
go further than that, and that is through steps like was I was talking about earlier, with what the thoracic surgeons
wanted a few years ago. It's the idea of shared savings,
and it's not that far off. Under this kind of payment system, instead of paying more
simply for more services and more intensity of
care and maybe tweaking a little bit on the margin
for quality measures, for a limited number of quality measures, this kind of system offers a
different deal to providers. And the idea is, the
providers can document that they're getting
better overall results for their patients at
a lower overall cost, and they can share in most
of the savings provided. Again, Dartmouth is leading
the way in these efforts. Medicare, while I was CMS Administrator, started a demonstration program at 10 multi-specialty group
practices around the country, including the Dartmouth Hitchcock Clinic right here at Dartmouth, to
provide this kind of system. And under this approach, Dartmouth Hitchcock and the
other participating groups report on how their patient population, that their multi-specialty
group practice treats, is doing in terms of a range
of preventive care measures, like using flu vaccines
effectively for patients where it's indicated, using preventive tests
for cancer effectively, and also measures of quality of care for the six or seven chronic diseases that account for most Medicare costs. It's not that complicated.
These are conditions like heart failure and diabetes
and chronic lung disease that account for most
Medicare expenditures. And the groups are
reporting not only on those so-called process of care measures, but also on outcomes for the patients with these chronic conditions, and also on some standardized
patient satisfaction measures. And if they document improvements in most of these measures of quality, Medicare is also tracking the overall cost that Medicare is paying for their care. And if they document improvements and reductions in the overall
cost trend in Medicare, they get to keep a significant
part of the savings above a threshold. So I hope you can see
that this changes the way that support for efforts,
like those thoracic surgeons that I mentioned earlier,
this changes the way that support for their efforts works. Now, under this kind of
system, if you take steps like investing in
electronic record systems so that you don't have to
order so many lab tests and you don't have to see
your patients so often, maybe you can keep them
out of the hospital or even out of your office, or if you invest or if you
hire a nurse practitioner to help your most challenging patients with chronic diseases stay well
and head off complications, well, now it actually makes
financial sense in Medicare. Under the old system,
all that would happen is that you would have fewer visits, you would have fewer lab tests, Medicare would pay you
less and it would be harder to make ends meet in your practice. Now it makes financial
sense because you can share in the savings from
those kinds of reforms. So my hope is that, by building
on these kinds of efforts and payment reform in Medicare and also some private sector
payors are doing this, as well, we can provide a much better support for the kinds of healthcare
reforms that we really need. We also need to take steps
to develop more evidence on what works to help
drive better care decisions by healthcare providers. As many of you know, since
Dartmouth has led the way in these kinds of studies, as well, more than half of all medical practices according to many estimates
are not evidence-based, particularly those practices that account for the big variations in
the use of medical services that researchers right here
at Dartmouth have identified. Unfortunately, it's hard to
study these kinds of variations in practice in traditional
randomized control trials. Typically, the reason that
practices and utilization varies from area to area is not because of any one specific intensive procedure or any one specific brand
name versus generic drug, it's because of different
styles of practice. For people with chronic diseases, there are big differences
around the country in how often physicians see
those patients themselves, how often they refer them to specialists, how often they do a range of
supporting laboratory tests and imaging procedures, how often minor surgical
procedures are performed. It's not any one particular
treatment decision. It's a pattern of care. And we haven't done a very good job of generating good evidence on the impact of these differences in patterns of care, and especially on the
impact of different kinds of healthcare policies in influencing care in a way that may lead to better results at a lower overall cost. There is new momentum coming for generating better evidence
on what works, though, from a variety of sources. Last year, major reform
legislation for the FDA was enacted by Congress and
signed by the President. This legislation envisioned creating a new active surveillance system in
this country for drug safety. So that by using data from
electronic record systems on prescriptions that are filled and complications that patients have, we would have a much more automatic way than we've seen in the
past of learning about adverse events that, in the past, have taken many years to find out about because we haven't had this
kind of system in place. There also is more support
for developing evidence on what's working in
actual healthcare delivery, through policies like coverage
with evidence development in Medicare and in
private healthcare plans. So more evidence to support
these good practice decisions and these financing reforms
is coming along as well. A final powerful factor
that I wanna mention is changes in the way that health
insurance benefits work. These are changes that are
focused not just on providers and giving them the support
they need to implement effective reforms in medical practice, but reforms that can enable
patients to save money when they take steps to get the care that they need at a lower cost. And one of the things that I got do to while I was in government was implement the new Medicare Part D regulation. That came out, that new benefit came in while I was at CMS. And one nice thing about
starting a program like that, I came to CMS just after
the law was passed was, you always wanna start a job
with low expectations, right? So, if you all remember, back then, when the benefit was enacted, the expectation was that
it wasn't gonna work, that prescription drug-only
insurance couldn't work, that the costs were gonna be much higher than people had projected, and that no one was actually gonna sign up because it was too confusing. Now, this was a challenging
program to implement, and it was one that, compared
to just having the government define one benefit and
give it to all seniors, that would have been much easier for seniors to participate in. On the other hand, we had three main goals when we were implementing the program. One was to make sure people
could find out about it so that, if they wanted
to sign up, they could. And, at this point, there is enrollment of more than 90% of people with Medicare in prescription drug coverage. A second is to have a
benefit that would work for most people, and
the satisfaction rates, I know it's been
frustrating for many people, but the satisfaction
rates with the coverage have been quite high. There are close to 90% of people who are fully or partly
satisfied with the coverage. And we also wanted to bring it in at lower than expected cost. And the costs right now in the program are running about 40% below
the initial budget projections for what this program was gonna cost before it was implemented in 2006. A very important reason for that is that almost no one, no one, is
in the standard drug benefit that was in that law that
was designed by Congress. The standard drug benefit
was, it had a deductible, then 25% coinsurance,
then catastrophic coverage on the back end, in between that there was the famous donut hole. You guys remember that, if
familiar with the program? By the way, if the people had now the budget estimates, the
cost estimates had been the cost estimates that we have now, there wouldn't be much
if any of a donut hole because the costs have turned out so much lower than expected. But the Congressional Budget
Office doesn't let you go back and adjust like that. Usually, the healthcare cost estimate's going the other direction, they
turn out to be a lot higher than what had been projected. There are a number of reasons
why costs have turned out to be much lower than expected. But one very important
reason was that people chose a different benefit design than what Congress had envisioned. Almost no one is on that standard benefit that I just described. What people have overwhelmingly chosen is what's called tiered benefit where, if you use a generic drug for
treating your health problem, it may cost you a dollar or two, some plans have them available for free, you pay almost nothing. If you use one of the so-called
preferred brand name drugs, where the plan has
negotiated a lower price on the medication in
the class, and there are about 11 classes of medicines that account for most prescription drug
spending among seniors, most outpatient prescription
drug spending on seniors, well, that preferred
brand name drug will cost, you have a flat $20 or $25 a month. And most other drugs are covered, but people pay a significantly
larger part of the cost for them, they're on a
higher tier in the plan. And what happened in the
implementation of the benefit was two things. One is that people overwhelmingly chose this benefit design
that had lower premiums and lower cost per person, and then two, people switched drugs. The use rate of generic drugs
amongst senior in this country is now, in Part D, is up to about 65%, almost two out of three
of all prescriptions. That's much higher than it was in 2005. The other end, in Medicaid,
today, generic drug use rates are running about 50, 55%. Now, there's been a lot of discussion about getting the prices down
for Medicare Part D drugs, and there probably is, there may be some more
steps that we can take, and we should keep looking
closely about whether good ways to do that further. But when you switch from a
brand name to a generic drug, you don't save five or 10%
more in additional discount, you save 70 to 80% off
the cost of medicines. When you switch from a non-preferred to a preferred brand name drug, savings are typically 20 or 30% or more. So by switching the drugs,
the cost of the program turned out to be much lower than expected. And this was driven by patients. This was driven by patients
given personalized information about how they could save
money by switching medicines, and by having the
opportunity to actually save because they were in
benefits that enabled them to capture those savings themselves. They weren't saving saving
that went somewhere else in the system, they went
right back to patients. So there are some very
important steps, as well, in implementing this kind
of choice-based system. You need to pay a lot of
attention to making sure that people who are at
higher risk have access to adequate coverage,
and we try to do that through steps like risk adjustment and other types of government oversight. You need to pay a lot of attention to making sure good information gets out. And there is certainly
more that could be done to help people be informed
consumers about their healthcare and make this easier for them. But patients, consumers, are
an extremely powerful force in getting the quantities
right and finding better ways to help people meet their medical needs, their increasingly
personalized medical needs, at a much lower cost. So, all of this is to
come back to this question of where I started, on getting
affordable coverage for all. We need to build on steps like the ones I've just talked about to get more value, to measure quality and costs,
to promote payment reforms and benefit reforms and other policies that support better healthcare quality and lower overall cost. And this can fit into the
debates that we're having about coverage, as well. They shouldn't be separate.
They should be combined. This past year, there
was a big battle over children's health insurance
in Washington, right? You all followed the Estrip debate? And for most people
who are following this, where that ended up didn't
give people a lot of optimism that we're on a path
towards a broad consensus about health insurance coverage reform. But I think that was in part
a reflection of how the debate was cast in Congress this past year. There were two alternatives presented. One was basically an expansion
of the kinds of programs, the Medicaid and Estrip programs,
that have worked very well for families and children with incomes under 200% of poverty. The other was basically not
expanding those programs at all. Now I wanna contrast that
with what's happening in state capitol after state
capitol around the country, where Democrats and Republicans
have gotten together, if not to enact coverage reforms, at least to take steps towards doing so. Massachusetts did it,
California came close, other states that have
not gotten as much press because they weren't going to universal health insurance coverage
but were still doing significant coverage expansions
over the last couple years, like Arkansas and Montana and many others, did this as well. What they did was something in between those two alternatives
that I just outlined. They didn't just say that, you
know, the government can't, government programs are only for people with incomes of under 200% of poverty, only for the poor and nobody else. They said that, "Look, at higher
income levels, people need "some help with affording
health insurance today. "Maybe they don't need 90% or 95% "of their healthcare costs
paid, like is the case "for people with incomes
100, 200% of poverty. "But they need some real help. "40%, 50%, subsidies up
to 300% of poverty or so," that's what happened in Massachusetts. That's how they got a compromise there. People have a choice of health plans, but they get help, you know,
help on a sliding scale. Employers contribute something, individuals contribute
something more than they do at low income levels, and the government helps, as well. That's a more sustainable model. At least many of these
states that were enacting bipartisan reforms found
it's a more sustainable model than either of those two alternatives that were discussed
primarily in Washington. And if you combine those kinds of steps with steps to get patients involved and steps to reform payment
systems as I've just described, well, then you're on a path to getting more affordable coverage for everyone. How can you do this with money as tight as I was just describing
it earlier this evening, with the budget being as
tight as it is in 2009? Well, one place to go is something that both Republicans and Democrats have now put on the table
for health insurance reform, and that's for changing the way that our government
health insurance subsidy for private employer-provided
coverage works. For those of you who
have been following this, you know that health
insurance, if you get it through your job, is
entirely tax excluded. That doesn't count for your income at all. That is actually by far
the largest tax expenditure in the federal tax code. A lot of people think the
biggest tax expenditure is for the home mortgage deduction. You know, it's something that
most people take advantage of. And that's a big deduction. It's worth about $70 billion per year. You know how much we spend
on the health insurance tax exclusion? You got federal taxes and social security and
Medicare tax exclusions? It's about $240 billion. And you know how regressive it is? More money from this
exclusion goes to families with incomes over $100,000 than goes to the much
larger number of families with incomes under $50,000. So it is not surprising
in this era of very tight fiscal concerns and very big concerns about rising health care costs that Republicans and even some Democrats have put on the table reforming this health insurance exclusion, not taking it away from
people with employer coverage, but maybe putting a limit on it and using some of the
savings to make healthcare more affordable for
people with lower incomes. Combine that with the kinds of reforms that I was just talking
about at the state level that have already gotten
bipartisan support, and the steps towards
paying more for better care and involving patients more in their care through choices that let people save money when they meet their medical
needs at a lower cost, and you're well on your way to providing universal coverage and
universal health care access that really is to quality affordable care. Now, none of this is gonna be easy, and efforts to find common ground, like the ones that I've talked about, to refocus on value and more
targeted, efficient care, are going to be challenging. But I'm optimistic because
there is too much at stake, there are too many
opportunities coming along for more personalized, more integrated, high quality healthcare
that can help people live even longer and better lives
than we're experiencing today. So I think the fundamentals are good for healthcare delivery system reforms, for real healthcare reforms that move towards patient-centered care, towards this focus on
getting much more value, especially if we can help
hasten these efforts along through the kinds of
healthcare policy reforms that I've just described. I think the time is now to have
a new kind of public dialog about real healthcare reform. We're primed to do it in
this presidential election, and we're primed to act on it
in 2009. Let's make it happen. Thank you all very much
for the opportunity to be with you tonight. Thank you. Thank you. (applause) And we've got some ti-,
yeah, I can take questions. I don't know if there's roving microphone, so gonna start over here. – [Voiceover] You did mention
the idea of prevention. And it seems to me where
the prevention can really be started is getting all
children having healthcare. – Health insurance, you mean?
– [Voiceover] Yeah, the CHIP program that you mentioned. – Right. – [Voiceover] And it's been cut. That budget has been cut
in the federal budget that just came out. There's not enough emphasis on that stage. If you get the kids started early, you're not gonna have some of those other
things happening later. So, I really think that that's where one of the major things has to come. The other place where
medical costs are so high is that 30% in the cost of figuring out insurance forms, the hospitals and the physicians spend 30% of their time doing that. And by having multiple
health insurance programs, don't seem to do the job. Their profit's the main thing
that they're worried about. – Well, let me, let me
comment on that point about administrative costs. I'm not sure they're
quite 30% of the costs in our healthcare system,
but they're a lot. And they're a lot higher
than they could be. And I think there are some real benefits to having choices of
insurance plans around. If we didn't have choices
of insurance plans, we wouldn't have gotten
to a lot of the steps that have now been proven to work for better coordinated care for
people with chronic diseases and for new kinds of wellness programs. Those kinds of programs were
not stared in, you know, the traditional Medicare program or traditional Medicaid programs, which were much more of
the fee-for-service variety that I was talking about
earlier in my remarks. But there is, I think, a
lot more that we can do to prevent all of the
additional administrative costs from non-standardized forms and the like. There have been some
federal efforts underway to try to get to standardized
ways of sharing information about patients, you know,
basic information on care. And the other big place where
a lot of these costs comes in are related to underwriting
costs, where plans are competing not by offering better care
at a lower cost for people who are healthy and for
people with chronic diseases, but by trying to offer plans that focus just on the healthier
people and trying to avoid those with pre-existing conditions. A lot of the reforms that
have been talked about, and some that have been
implemented already, in places like Medicare
and in Medicare Part D, prohibit any kind of underwriting based on pre-existing conditions. You can't just prohibit it,
though, because that creates some other problems in
health insurance markets. People who have high
co- people tend to wait until they have higher
costs to get insurance. But there are other steps that
can be taken to address it, like paying plans more if
they are able to attract and keep happy people who
have chronic diseases, who have the most to gain from those kinds of coordinated care steps. So there are some reforms
that could be implemented to get, I think, those
administrative costs way down. And I totally agree with you,
that's gotta be a big part of our solution to the
healthcare coverage problems in this country. Sam, not sure where you wanna go next. There's, way down, down here in front. – [Voiceover] (too soft to make out) – Okay. I think they want your
voice for posterity, though. – [Voiceover] So you've talked about, you started off talking
about some of the problems with the American healthcare system, and there, you know, I'm sure
there are lots of statistics for how our population
outcomes, like infant mortality, are really slipping compared
to Western European countries. And you've talked about a
lot of problems in programs to change funding, with group
practices that can really both improve access and reduce costs. But there, I mean, you also mentioned that the Dartmouth research
showing the fragmentation of the American healthcare system. At what point should we still
be talking about reform, and at what point should
we be talking about how our system is, you know,
where do we draw the line when our system's no longer working and it's not any more a
question of reforming things but a question of creating
a new healthcare system? – Well, I think that … I don't know that you need to draw a line. I think the question
is, how can we make our, how we get better results
for our population as effectively as possible. And I think, you know, your question actually opens up a whole new area. One area is making our
healthcare systems work better. And, you know, as I tried
to talk about tonight, we're getting what we pay for. And if we pay more for more complications, we pay more in these areas
where Dartmouth has found costs to be higher. And then, you know, the
Dartmouth researchers, they're great, they've
been documenting this for 30 years now. And it just keeps getting bigger. And if we keep paying more for that, then of course that's
what we're gonna get. In contrast, if we pay more for
better care at a lower cost, better results at a lower cost, I think, there's some growing evidence that that's what we'll get, as well. But a lot of the kind of statistics that you're talking about,
like infant mortality and overall population mortality
rates, for that matter, really are driven by things
that go way beyond healthcare. And it's not healthcare
differences that account for that. I think, according to one of the studies published in JAMA last year, some of the wealthiest
groups of Americans, who don't seem to have
much trouble with access to healthcare at all,
have worse health outcomes than middle class or even
lower middle class people in other countries. And this is driven by other things. While it's been hard to
get a handle on that things like education and personal
preferences about risk and other types of personal behaviors, environmental factors, things that go way beyond
our healthcare system are primarily responsible. The Robert Wood Johnson
Foundation is about to launch a new Commission, week after
next, which I'm a part of, that is going to try to
put a much bigger spotlight on these non-healthcare
factors that seem to be playing a big role in the worst overall health outcomes in this country, and particularly the worst
health outcomes for groups of lower socioeconomic
status in the United States. These things are driven
by factors that I think go way beyond healthcare. And one additional advantage of putting much more of a focus on getting to better health outcomes in our healthcare system, as
I was talking about tonight, is that it would make it
easier for bringing in policy initiatives from other areas, from public health, from education, from environmental policies, from transportation policies and so forth that probably, if you think about it, are going to have more bang for the buck in terms of federal
spending on health outcomes than some healthcare initiatives might. Yeah. You all wanna just go … , like, anybody's fine. Who's
the lucky next person? And if you want to, just,
go to a next question, or so we can go right to
them after this one's done. So go right ahead. – [Voiceover] Yeah. I'd
like to talk about the idea of universal healthcare for a
while, socialized healthcare. – Universal health insurance? – [Voiceover] Yeah, universal health– – Not the same thing as
universal healthcare. I hope I was clear about that. – [Voiceover] Right, right. Sorry. One of the main arguments that opponents of universal socialized
healthcare, I'm talking about now, I'm talking about similar
to the systems they have in France and in England. One of the main arguments that
opponents present is that, if you socialize healthcare, something that'll disappear is the competitive technological edge that America hold in the
traditional community. – [Mark] The innovation?
– [Voiceover] Exactly. Innovation will decrease. And that makes a lot of sense. You know, you have the
Capitalist system now competing, and they're developing new technologies in order to increase business. So I'm wondering if you
could speak to that, if that claim is well-founded, if there will be other balancing factors that will develop if
healthcare is socialized. And my second quick question is, what did you think of
Michael Moore's movie, Sicko. – (chuckles) It's quite a movie. I think some people thought he went over, you know, kind of over the line in suggesting that the
Cuban healthcare system might be better than ours. But he certainly pointed
out a lot of cases where, for people with, you know, sort of the run-of-the-mill
health problems that account for most healthcare
spending and account for most of the burden of
disease and disability, care is more straightforward in many of those other country systems. And that's sort of a
very attractive feature of systems with central planning and budgets that are awarded. And by the way, these
countries are quite different. You know, France is not
the same as England. There is different financing mechanisms, different role for individual
choice and the like. What I find interesting, though, is that, if you go abroad, that
the general trend there is kind of the reverse of the trend here. Here, over the past couple
of decades, we've seen a steady increase in the
federal and government spending as a portion of total healthcare spending. And while there's still
a lot of patient choice in the system, there's
certainly getting to be a much bigger role for
government than there was, say, 20 or 30 years ago. The trend is upward. In most other countries
that you were talking about, like France and England,
the trend is the reverse. Actually, the extent of
private choice is increasing. In Britain, there's now much larger … it's not even a fringe any
more, but a much larger private hospital system, even private healthcare delivery system. There now are plans that people can buy that give them, through their employer, that give them access to all the drugs that the National Health
Service doesn't cover for certain indications and the like. And that's actually growing. The Netherlands, Germany,
many other countries are now moving towards more patient choice in deciding how healthcare
dollars are spent, and even more private spending on top of the public spending before. And what that suggests to
me is that there's clearly a role for both, government
involvement to help make sure that we're competing and
people are making choices based on the right kinds of things, but also a role for private
choice and involvement. And the reason that most
of these other countries are doing it is not because they feel a compelling need to
become more competitive. It's because their
systems were having gaps. They're not having gaps in the same places that ours is. But they were having gaps in access to some innovative treatments and reforms in the way
that care is delivered, to put a greater emphasis
on care coordination for chronic diseases, like
I was talking about before. So I think the, you know, if you look 20 or 30 years down the road, there's probably going to be
a good deal more convergence across international healthcare
systems than we see today, and certainly a role both for choice and rewards for innovation,
like you can get in a system that doesn't just have
strict government budgeting, but also a role for the
government to help promote competition that's on the
right kinds of factors to help make sure that
people, especially those with limited means and
high healthcare needs, have access to good coverage. And hopefully we can find
ways to get it right. I don't think it's an either/or
solution down the road. Yeah. – [Voiceover] This is
along the same lines, about single payer and also, I know you've been speaking to this, but why you don't think
a single payer non-profit system in each state would not work. Wouldn't they be more likely
to adopt the kinds of programs that you were speaking
about in the beginning, the standard procedures and all kinds of things like that, if it was just one payer
that you're talking about instead of trying to convince
how many insurance companies to adopt those programs? Look how long it took the
private insurance companies to adopt any preventive care at all. It's, they seemed to work
in the opposite direction of what you're thinking. And do really think that
healthcare in this country should be a commodity and
a profit-making business? I mean, that's what it is. And the people who can
afford it get the best care, and those who can't, the
people who don't have business-covered employment, and we have a lot of small
businesses in this country and self-employed people who don't have business-sponsored,
employer-sponsored health insurance. They don't benefit from that $240 billion that you're talking about. They have to pay–
– [Mark] Yeah, you know– – [Voiceover] Out of pocket
post-, after tax, dollars for their private insurance. It's not fair. It is not equitable. And I think some of the
things that you're saying aren't bringing us towards
a more equitable system. Isn't that important? – Well, I think … Let me talk about this point about equity and then maybe get to the
bigger philosophical issues. If I wasn't clear, let me be clear. I think our healthcare
financing system today is very inequitable. If you think about where
the subsidies are going, that one trillion dollars plus that the federal government's already spending on healthcare, it is not, you know, if you
just grab someone on the street, maybe you, I don't know if
you'll agree with this or not, but, you know, when I talk to
students or other colleagues, you know, the first thing that, and these are people who don't
specialize in healthcare, who don't think about it every day, The first thing is, you know, what should the federal
government be concentrating its money and its efforts on? It's first and foremost on
people with limited means who have the most trouble
getting access to care and affording it on their own, and people with chronic diseases, people with high healthcare
needs who are gonna face very high costs if they don't get help. That is not where the federal subsidies are concentrated in our system today. As I talked about earlier, particularly the tax
subsidies, but not only that. The Medicare subsidies
as well, as Jon Skinner, he's in the audience,
knows, tends to go to people who are higher income, who live longer, and who have access, even
within a government-run health insurance program,
to more intensive, costly approaches to treating some of the conditions that they have. So absolutely I agree with you
that we should be reforming the way that the federal
government subsidizes healthcare, to first and foremost
concentrate our limited resources on the people who need it the most. Now, there are these big
philosophical questions about whether we should be
doing that in the context of a single payer, government-run system or a competitive system. And maybe I've been in
Washington too long, but the focus there, I have to tell you, is that no one in Congress
expects to bring up to a vote in the next year, the next
five years, the next 10 years, a single payer system or a across-the-board competitive system. Yes, there is proposals
out there on both extremes. But nobody expects that that's gonna be what happens any time soon. Where a lot of the attention is focused is on more incremental
steps that could lead to more fundamental improvements in the way that healthcare is delivered, starting with the people
like you were talking about, who are working for small employers that aren't lucky enough to
get health insurance on the job and who are getting absolutely no help in subsidies for their
coverage or in access to a low-cost system for
choosing their coverage. And so that's where a lot of the efforts are being concentrated right now, to try to improve access to care. And with respect to the
question of, you know, philosophically which of
these approaches is better, well, you know, besides the
fact that we're not likely to get an opportunity to test
out one extreme or the other in the next few years,
I think the evidence kind of suggests to me that
both have their drawbacks and both have opportunities
to do a much better job than we're doing today of making affordable coverage available. You mentioned that some
private health plans haven't done a good
job of providing access to innovative benefits. Well, certainly the
same thing could be said for the largest government-run healthcare program in the
world, which is Medicare. Medicare didn't cover drugs
until a few years ago. It's still behind on preventive services. It doesn't cover any kinds
of electronic healthcare, doesn't, as a general matter, cover care coordination
services for chronic diseases. And these are all steps
that we know done right can lead to better outcomes and lower costs in all of those areas. And it's actually the private
health insurance plans that have been ahead, in part
because people can choose to go to a plan that offers
these kinds of benefits if the plan that they're
in now doesn't have it. You know, until recently
recently, people in Medicare didn't have that kind of choice. On the flip side, it's
absolutely true that there are things that you can do
through large programs, large government-supported
programs like Medicare, that are harder to do in any
single private insurance plan. Some of the steps that I talked about, like paying those
thoracic surgeons better, couldn't have been done just by the private sector by itself. Too much of the care that
those surgeons are providing is paid for by Medicare. So if any individual private
plan wanted to do it, even if they wanted to, they couldn't have enough of an impact on care delivery by themselves to change things. So, suggests to me that
both of these systems have something to offer
and that there are steps that we can take to make
both private insurance and public insurance work better, and maybe over the next few
years it'll become clear that one system works
better than the other. I think it's unlikely that we're gonna see that kind of fundamental
reform in this country. But I absolutely think
there are a lot of things that we can do now to make
both private insurance and public insurance work much better, and I think there's some bipartisan ways to move forward on that that
I hope we'll do real soon, starting hopefully next
year, after the election. And next. – [Voiceover] Oh, hi. There's this talk about healthcare reform income stream and money, and yet, there's no talk about
the pharmaceutical companies. They make billions and
billions of dollars, but none of that money goes back into the healthcare reform. So is there, like, a aspect
where they're gonna try to get that money to go
into the healthcare reform and help pay for all these
insurance and stuff like that, because, again, the
pharmaceutical companies don't put any money back in there. But yet they make so much money. – There are high profit rates among pharmaceutical companies, just like there are among a lot of other kinds of private companies. And one of the challenges that we've had, just kind of building on the
talk that was already given, is that, you know, in a healthcare system where we tend to pay more
for more intensive services, even if they're not
really worth a lot more, it does tend to create
incentives for private companies to try to deliver products
or deliver services that may not be really focused on adding value for patients
as much as, you know, being a me, too drug
or something like that. But I think if you really
wanna solve this problem and get more medical innovation, from pharmaceutical companies or others, that truly adds value, you need to go back to the kinds of steps that
I was talking about today. If health plans and if
Medicare didn't pay more for a drug simply because it was new, but instead because it
made a bigger difference in the health outcomes for a patient, I think you'd see a different
kind of medical innovation than we're seeing now, medical innovation that would do a much better
job of helping people live longer, at a lower overall cost, consistent with the goal that
I was talking about before. But without any kind of
financial support for innovation, I think it is less likely
that we're gonna see quite as much innovation. And there is a tremendous potential for new kinds of genomic therapy, stem cell therapies and so forth that we don't provide
financial support for that, we're not gonna see as rapid improvements in health as we could. I would just like to see
those kinds of reforms supported by a much greater
emphasis on treatments that actually make a
difference in patient health. – [Voiceover] I work in
the imaging industry, and we had to do the Pay for Performance. And I do think it's a
little incremental step, but it is going in the right way. And evidence-based medicine
clearly has to come in. But there are two issues that came to mind when you were speaking. One of them is, there's a zero sum game, really, when it comes,
right now with Medicare and then the payments they've been making. When people come, allowed to invest in MRCTs and to get money from that
when they send patients to them and go around the Stark
laws in a roundabout way, and they're basically making money the more people they're referring. – When they own their own–
– [Voiceover] When they own their own equipment, and your abuses our there. And you see this over
and over and over again. And I can tell you, I
heard the comment that, when people said, you know, they're gonna decrease the amount of reimbursement, you only can reset those every so often. – Right. – [Voiceover] Their
salary's not gonna go down, so in their mind, they're
just gonna order more, right? I mean, it's almost, it's
a Catch-22, it just is– – But that's exactly what's been happening in recent years with Medicare
physician payment system, is that, you know, physicians are paid based on volume and
intensity in their procedures like these imaging procedures, that are sort of high margin procedures. So when the payment rates
get cut across the board, it's not surprising you see, you know, more time and effort on these kinds of high margin services, and
the payments get cut again and,you know, the cycle kinda repeats. – [Voiceover] There are
multiple issues there. One of them is seeing what radiation does to a patient, number one. Number two is, they're
citing multi-patients that usually have the ability to pay for even the non-paying
patients for the hospitals or others to take care of. And it seems like that
would be a temporary thing, that they could at least close, I know it's just a Band-Aid situation, or take away the incentive completely, which is what you're referring to with the thoracic surgeons is, you know, get the evidence-based medicine in there and get the results in. But in the meantime, they could be shutting the door on some of those abuses. And the other one is, you see a lot of, you see an awful lot of imaging studies that are all being ordered specifically just to avoid lawsuits. And I don't know how people
could just stop that. I mean, those two things
right there would, even though they're only temporary, would really change the amount of money that would be going out the door– – Yeah, I–
– [Voiceover] While you're trying to implement the other processes. – I think those are all good points. I think they all go back to, though, the root cause of the problem here is that we're not paying for what we want, we're paying for more imaging
procedures at a high margin rather than paying for the better results for patients who are getting
the imaging procedures that would help doctors
do what they'd like to do, which is, I think, deliver
care more efficiently and only do the imaging where
it's really gonna be helpful. It's hard to do that under
our current financing rules. I think this, you know,
more attention to outcomes and doing a better job
of confidently saying, "Okay, this is the best treatment for you, "and people like you
who are treated this way "have better results," that's gotta help with the liability pressures, too. I mean, right now, a lot
of the lawsuits are driven by bad outcomes that may or
may not be related causally to the treatment that was provided. If we did a better job of connecting the treatments with the results, then seems like there'd be less pressure on physicians there, as well. Yeah. – [Voiceover] Thank you. I
just have a quick question. I enjoyed the direction that you took your discussion tonight. It is a, it's a fresh discussion to hear. My question is, coming from a family that has a physician in it, what can physicians do to help? Because right now, my mom's looking at just discharging all of her Medicare patients
and not seeing them anymore. And that's a painful thing for her to do because they're her favorite patients. Is there something she can do to help the process move forward? – Yeah, I think there absolutely is. And we gotta have a better
answer for physicians like your, dedicated
physicians like your mother, than just, you know,
"Hang in there, (chuckles) "and we'll get around to this sometime." It's a, you just can't … We're getting to the point where the, or these physicians can't
even make ends meet. One of the things that I've
noticed over the last few years is that the organized medicine groups, and I'm not sure, If you don't mind my asking,
what specialty is she in? Family practice. So the
family practice doctors have been, in the last few
years, completely out front on reforms in our payment
systems and coverage systems along the lines that
I've been talking about. The American Academy of Family Physicians has developed a proposal
called the Medical Home concept where, instead of having internists paid based on all the lab tests
and getting paid more when they buy a CT scan for their office and start scanning all their patients, give them a payment for
coordinating the overall care for the patients that they're
primarily responsible for, and then give them additional payments if they're able to achieve improvements in coordination of care, the
results for those patients, or getting the overall cost of
care for those patients down. That's very consistent with what I've been talking about tonight. And to their credit, the
family practice groups have been out front on urging Congress to consider these kinds of changes every time these Medicare
payment issues come up. My hope is that, as the pressure mounts for getting away from this
current, unsustainable, vicious circle system where, you know, you lower the payment rates
and then you get more volume and you lower payment rates again, and the whole time quality's
going down, not up, as the pressure goes up there, and as there's more
evidence that these kinds of Medical Home payment
systems can really work, that we'll actually be
able to get it implemented. And this will be a
legislative issue this year. So, you know, it's very hard
for an individual physician to make a difference, I know, in these overall policy issues. But the family practice groups
have been coming together and, I think, are getting
pretty strong support now from their membership for exactly the kinds of payment reforms that I've been talking about tonight. – I just, this is sort of a follow-up on the previous question. I like what you say about
Pay for Performance, and I'm here at Dartmouth, right, so I agree with the model, you know, paying for higher value care and effective care, and
not just per volume. But when I hear the discussions
of Pay for Performance, if you just, sort of, closed your eyes and thought you were 15 years before, you just insert managed care there. And we had very similar discussions. You go back and read
the literature, right, we talked about it in the same way. This was going to be, you know, managed competition, and so you would have the providers sort of
competing about value and quality rather than
about cost or volume, you talked about capitation as just a similar kind of thing. And what I'd like to maybe
hear your comments on, might we do a better job now thinking about the potential
problems we might see in Pay for Performance
that we didn't see coming, or maybe some people
did, with managed care? Because when managed care was done right, it did all of these things. There was high quality care, better delivery, you know, bringing in patients– – There are some managed care plans that are doing a demonstrably
good job of this today. – [Voiceover] Still doing this today. And yet others, of course, started to compete more on costs and excluding people who
are high-risk patients and all of that. I mean, do we have risk of
that in Pay for Performance? And what might be the
things that we watch for as we try to implement
Pay for Performance? – Absolutely. It's a really good question, and, I guess, a couple points. But there are probably many. And this is exactly
what we should be doing as we implement any kind
of health policy reforms, particularly these that
can have potentially such a big effect on
the healthcare system. Remember, managed care
reforms 50 years ago, 15 years ago, weren't
really about managing care as much as they were managing cost. There's a lot of discussion
about managed competition. But back then, there were
hardly any good measures or good awareness of the public of differences in quality
among their health plans. And I'd submit that that's still
true for most people today. If you ask most people, "What's important to
you in a health plan?" It's not, you know, "I chose this plan "because it's clearly
superior in terms of getting "better outcomes for people
like me at a lower cost." They say, "No. I chose this
plan because my doctor's in it." So we still have a long
way to go on giving people confidence that they can make a choice about their coverage
based on something other than what, you know, their most trusted health professional recommends. And a good sign that we have gotten there in terms of valid measures of quality to go along with the emphasis on cost is that people will be more
willing to make decisions based on the information they get as opposed to just based
on what their doctor may be telling them. We're there in some areas already. I mentioned Part D earlier for a reason. People believe … most people in this country believe that if a generic drug is
available for their condition and it costs a lot less,
it's okay to switch because it's the same drug. And most people were willing, many people, it turns out, in Medicare, are willing to try a
preferred brand name drug that costs much less than the one that their doctor initially prescribed because they think it can do just about as good of a job for their health. People aren't there yet when it comes to, you know, picking their surgeon or picking their primary care doctor or picking a health plan. So we still got some more work to do on making these quality measures work. And when that happens, then you really have competition around quality and cost. That's one thing, is these better measures of quality and really
driving that forward. Second thing is, is this problem with adverse selection that I mentioned. And a lot of competition in the 1990s, and still too much competition today, is about avoiding people with high costs even though, you know, if you
think about the actual facts, it's those people with high
costs that have the most to gain from care coordination, from
all the kinds of services a good health plan ought
to be able to provide. And that's our fault, from
the policy making standpoint. If we set up a system where
you can make more money by competing on excluding
the chronically ill than you can by providing better care for the chronically ill, and there's tremendous
opportunities to do that. I gave you the statistics.
It's appalling how bad care and coordination for chronic
illness is in this country. There's tremendous opportunities to do much better than we're doing today. And there ought to be a
way to focus competition to make that happen better. In Medicare, a big step
over the last few years has been what's called risk
adjustment of payment systems. So now in both Medicare Part D and in the Medicare Advantage Plans, if you attract somebody into your plan who's 65 and healthy, that's great. But Medicare is gonna pay
you relatively less money. I mean, all of Medicare Advantage Plans are getting paid well today. That's another related topic
I'm happy to talk about. But relatively less money,
if you attract and keep somebody who's 65 and healthy. In contrast, if you
attract and keep somebody who's 85 and has four chronic diseases, or who has HIV/AIDS, Medicare will pay you 10, 12 times more. And there now are actually some plans, some private health plans in Medicare that are called Special
Needs Plans, that are sort of the reverse of the
traditional criticism of HMOs. These are only, these are
the plans that are only open to people with chronic illnesses. Why? Because they're
offering a lot of services like disease management programs and nurse practitioners
provide personalized care, that only make sense for someone who has high expected healthcare costs. You know, somebody
who's perfectly healthy, you can give him a nurse, you can give him a lot of personalize
attention, it's not gonna lower their healthcare costs very much. So these are plans that are specializing, they say that healthy
people need not apply. So this can be done. It's just a matter of setting
up the policies in a way that directly takes on the problem. Those are two, at least two, changes from what happened 15 ago that I think would make
a big difference today. Yeah. – [Voiceover] Bill Clinton
was here in December, stumping for Hillary. And he mentioned in one of his speeches that by applying
electronic medical record, that would cover the
cost of Hillary's plan and make coverage so
much closer to universal. And I'm interested in, kind
of, the applicability of that. Was that just rhetoric, or is that– – Well, no, it's what I said earlier. You're gonna hear that from every single one of the candidates. They wanna get to universal care, universal healthcare coverage, they don't have the money to pay for it in the current system, so
they have to start talking about things like quality improvement and preventing errors
and disease prevention and electronic health records. I think my main comment on that would be, again, you still get what you pay for. There's been a lot of
proposals to just add in to our current Medicare payment systems, or Medicaid payment systems, additional payments
for electronic records. And I worry that, unless we get the fundamental payment system right, that just doing everything electronically isn't gonna necessarily save us money. You heard a few minutes
ago about how, you know, a lot of doctors now have
strong financial pressures to buy a CT scanner of their own. Well, if we did this, they'd
have strong financial pressures to buy an electronic health
record system of their own. Is that by itself gonna lead
to better coordination of care? Well, maybe, but probably
not nearly as much as if we were doing something like these Medical Home payments that I talked about
earlier, where, you know, not only can you have financial support for your electronic records but you actually get paid
better when you take steps to keep your patients well and to keep their overall cost down. I think just adding in
payments for electronic records into our current payment system, which doesn't provide very
strong support for steps to keep people well and
coordinate their care well, by itself probably isn't
gonna save a lot of money. – Hi. Thank you for coming. You can pretty much answer this question, if I'm misinformed. But I've heard in the past
that there's a lot of fraud going on between the
financial transactions and insurers and doctors. And I've heard up to 30%. Now I know a way to tackle that would be to have this regulation
oversight of doctors. And I know doctors wouldn't
be very pleased about that. How would you have an oversight, you know, you've talked about databases. And this question is very
much related to this CT scans. How could you have an oversight where that would regulate
that without, you know, encroaching on the doctors' boundaries? If that makes sense.
– [Mark] Well, I mean, you could just go to, you know, this is sort of standard
rules and enforcement regimes. If you just make the penalty big enough, you know, if we just shoot the doctor when they're found guilty of doing this, they'll all probably stop doing it. But we probably won't go
to that extreme, either. I think the actual numbers of fraud, in all seriousness, are a
bit lower than what you said. But they're up there. In Medicare, when I started
in the program in 2004, we had about 10% of our payments that we thought were inappropriate, either fraud or abuse or it could be just very poorly documented care, but it just, stuff that looks
like on paper didn't add up and didn't look remotely like the right treatments for a patient. And there are steps that you can take, through better data systems and we're getting towards
more electronic healthcare and better monitoring systems. You know, by Medicare … One of the problems in
government-run programs like Medicare is, we have,
I mean too little money spent on administration, all right? Our administration, administrative costs are about three percent. And that's too low, because
we don't have enough people going back and checking
on inappropriate billing. So we do see a lot of these potentially fraudulent services. So there are steps that you can take to try to reduce fraud incrementally. But it does require
some kind of, you know, better investment in better data systems, better monitoring, or going to stronger penalties. A lot of the problem
in healthcare, though, and where the number, I
think, is 30% or higher, is in the use of services
that are at best questionable and probably don't have any
benefit for the patient. They're not out and out fraud. These are areas where, you know, we don't know that the
treatment works or not, but, you know, why not
go ahead and try it, or where, you know, lab tests are ordered or imaging is done that
may not be very harmful or very risky in itself, though every medical
procedure carries some risk, and maybe it tells you a
little bit more information but it's probably not
really worth anything. A lot of that goes on. And that's, I think, a
direct consequence of the way that the financial payment
systems work in healthcare. Again, we pay based on
volume and intensity. That's what you're gonna get, and so a lot of variations and a lot of potentially
inappropriate care. And the steps that I was
talking about earlier to try to do a better
job of measuring quality and measuring the impact on care and then paying based on that, I think, could indirectly
help significantly with fraud and then
this much bigger problem of potentially wasteful
or inappropriate services. Okay. – [Voiceover] I'm
interested in your comments about mental health services, particularly as they
apply to drug and alcohol problems, because it seems like there's a big bang for the buck
in prevention there and treatment there as
far as cost to society. And outcome analysis is more difficult, access is really problematic, quality assessment is really difficult in the current system. And, interested in your thoughts. – Yeah, those point are all true. You know, everything I said about the importance of measuring outcomes and measuring costs, and I said there were
challenges along the way but we're making real progress. Well, you know, in these
kinds of mental health services outcomes, those
problems are even bigger. And they go, a lot of
these cost savings occur not in our healthcare system but, you know, other parts of society, our government assistance costs, our prison systems, and so forth. And we're not even close to being able to measure those kinds of outcomes very effectively or systematically. You know, my hope is that over time, if we do a better job
of measuring outcomes within the healthcare
sphere, that we'll be able to extend these same kinds
of principles more broadly. In the meantime, there have been, I think as you implied, a number of innovative approaches to providing mental health services that clearly show beneficial results. And just because we don't
have good outcome measures inside health care
doesn't mean we shouldn't, you know, support good policy for other reason as well. And where we do have evidence some of these kinds of
mental health services can lead to better
outcomes for individuals and lead to other savings
in government programs and other benefits for society. Those are certainly good
arguments on their face for why we should support those kinds of programs. – [Voiceover] I'm sure
we could keep you here all evening, Doctor McClellan. But we'll have one more question. – Okay. – Hi. I'd just like to ask what your opinion would be. You're saying that we
need more primary care, we need more preventative care. We don't have enough
supply in this country of physicians– – Because we're not paying for that, we're paying–
– [Voiceover] Because we're not paying for it and people
are graduating medical school and going into fields that will be able to pay off their $200,000 of loans. How, do you have any ideas
on how that can change? – There are a number
of ideas for reforming graduate medical education. And, you know, I tend to come at this, like I told you, I went to
graduate school with Andrew. So I come at this from a perspective of an economist, as well. And I haven't really
talked about it tonight, but the way that the
federal government supports graduate medical education in this country is actually very much in
line with what I talked about for how the federal government supports the overall direction
of healthcare delivery, which is towards more
volume and intensity. Just like the Medicare payment system based on fee for service
and based on paying more for more and more intensive services, was set up in the mid-1960s, and that's the way, kind of, you know, insurance was then, and
private insurance was then. And, you know, it hasn't kept pace. Same thing with our system for paying for graduate medical education. That was set up in the 1960s, as well. And back then, medical education, like most of medical
care, was hospital-based, it wasn't centered on the patient, it wasn't about integrated
delivery systems. It was about, you know, spending all day and all night on the wards. And that's still how we pay for how we subsidize graduate medical
education in this country. It's based on your internal
resident to bed ratio and, kind of, how many interns you're serving in the hospital. And we tried really
hard while I was at CMS to push as hard as we could
to move away from that under current law, but
it's awfully difficult when the plain language
in the statute says that the payments to
the teaching hospitals are tied to how many
residents they're training in the inpatient hospital setting. So some things that we can
do to help with this are, you know, number one,
make the kinds of changes in reimbursement and support for real efficiency and
value in healthcare delivery that I was talking about today. If we have payment systems
that reward and support doctors who find better ways
that keep people healthy and keep them out of the hospital like good primary care doctors
are trying to do today, I think you'll see over time more people gravitating into primary care. And not only more physicians, but a lot of the healthcare
that's being provided for this kind of basic
coordination of care is increasingly done by
people other than physicians, by nurse practitioners,
by other non-traditional healthcare providers in non-traditional kinds of healthcare settings. That's great. You know,
we need more of that. If it's lower cost and it
delivers better results to augment this diminishing number of primary care physicians. And second is reforms in
the way that we finance graduate medical
education in this country. And this has been a very
hard topic to tackle because, you know, frankly, the medical education community, the teaching hospitals
and major medical centers in this country, are very nervous that if Congress goes
in and opens up the way that they finance graduate
medical education, they won't just get a reformed system, they'll get a system with a lot less financial support in the end. So it's been a very
difficult process to open up. But again, the pressure is building because we're getting
more and more disconnected between the way that our
payment systems are working and the way that healthcare needs to work. And sooner or later,
I think, there will be kind of a reckoning for
academic medical centers where we will find a way forward to refinance medical education and provide much better support for what many of the medical centers are trying to do now, to
get to more innovative ways of training physicians
for the 21st century, for coordinated care, for non-traditional kinds of
delivery systems and the like. It's just not, it's
something that they're doing in spite of, not because of, our financing mechanisms today. Well, thank you all very much. I hope you enjoyed your
Valentine's evening. Thank you.
(applause)

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