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Remarks as Delivered by the Honorable Mike Leavitt Secretary of Health and Human Services Commonwealth Club of CaliforniaI'm delighted to have been invited to such a distinguished setting to deliver some remarks. About a year ago this spring, I was invited by the White House to speak on behalf of the President of the United States at the �EER.� I asked to my assistant to tell him that I'd do it, but could you please find out a little about the EER. I was thinking it must be the European Economic something or other, and I had visions of airplanes. My assistant came in and said that I wouldn't have to worry about air travel because, �I found out that the EER is the Easter Egg Roll.� But I made the President proud there. It was a delightful event. But today I am here to talk something about health care. A young couple I know with a small baby had an experience that I think is common to most parents. As it was said in the introduction, my wife Jackie and I have five kids, and I think we've been through every stage [of life] with them. This couple had a little boy, and they had that awful experience that just about every parent has. Their little boy developed that awful cough and the wheezy, labored breathing that accompanies it. It's so frightening for a parent to see their small child struggling to breathe. But they were parents on a mission for a solution. They found it, in an oxygen tent at a community hospital. They had no health insurance, but the scene could have been from a commercial for a credit card: �Night in an emergency room: $2,000; knowing that your baby can breathe: Priceless.� Any serious conversation about health care costs needs to be started in this context. We need to acknowledge that, in health care, there are times when life trumps supply and demand. But in health care, the things we hold as priceless are not price free. If I were to give a title to my remarks today, it would be, �Making peace between priceless and pricey.� That's the dilemma. The price of health care is growing at such a staggering rate that it is beginning to challenge many of the other things that we value. A recent edition of Health Affairs journal reported that the $1.9 trillion we are spending on health care is 16 percent of the Gross Domestic Product. That is to say, of all the goods and services that happen in the entire economy, 16 percent of them are health care. It went on to project that by 2015, healthcare will consume 20 percent of the Gross Domestic Product, with no end in sight. Medicare, our national program of health care for the elderly and disabled, now consumes 3.4 percent of the Gross Domestic Product. One program. The Health Affairs article projected that, if Medicare is allowed to continue on its current course, it will consume 8.1 percent by 2040, and 14 percent by 2070. Now, like you, I myself am quite skeptical of those kinds of logarithmic projections of trends. In this particular case, I am somewhat skeptical for this reason: It can't be allowed to happen; it won't happen. The system will either change or we will be eliminated from economic competition, because there is no place on earth, or at least there is no place on the economic leaderboard, for a nation that devotes that much of its economy to one sector. The economic and political reality is that we have to get better, or we will get beat. Obviously, this is felt most acutely at the breadwinner level. The cost of health insurance is eroding the power to purchase anything else. There are 45 million Americans who don't have health insurance. That number is increasing because employers can't pay the higher costs and compete with nations that spend dramatically less. Many factors contribute to the skyrocketing costs of health insurance, and health care generally. We have an epidemic of chronic disease that now accounts for 75 percent of health care spending. We currently have three times the number of children between the ages of six and eighteen who are obese and overweight than we did in just 1980. That will lead to inevitable consequences, for diabetes, for heart disease, and for health care costs. Health care is also saturated with inefficiency, and with, frankly, poorly aligned incentives. I've learned over time that it's not a case I have to make because everyone has had their own experiences. They've been to the emergency room for a $2,000 visit; or they've purchased a medical device that was outrageously pricey; or they had some other experience that persuaded them of the inefficiency of the system. I've found that it takes one such story at a dinner party to spark an entire evening of anecdotes. Much has been said, and much more will be said, about the disconnection between those consuming health care and those who are paying for it. This is a fundamental problem. Not only is there a disconnection of incentive, but also people have no way of knowing what they are going to be charged or who offers the best quality. In fact, our medical financing system routinely hides the ball from consumers. People don't have a clue what they are paying and have no way of knowing how it compares to what the person in the next room is paying, let alone in the next hospital. People deserve to know. People have a right to know the quality of care they are receiving and its cost. Every consumer should have a reason to look for the best value. None of that is true right now! Years of working on this have helped me understand that changing the health care system is a politically difficult task. People talk about political will, and they suggest that there is a shortage of it. I offer you a different take. There is no shortage of political will: There is an abundance of it. The problem is that every time a proposal of change enters the political system, all the political will of the various interests gets aimed at each other and it creates a standoff. Occasionally something will happen. But, by the time it has made its way into legislation, it has been reduced to the lowest common denominator and so little is accomplished. An urgent need exists to unite a powerful change movement in health care. For that to occur, a new kind of public leadership must emerge: Leadership that can only come from one source, those who pay for it�Payer Power. Large employers have rallied together for many years because they feel the weight of costs. They've been agitating for change, but they have been missing a significant component in the mix. That's the federal government. Medicare, Medicaid, the Department of Defense, the Office of Personnel Management, the Veterans Administration, and other public payers make up 46 percent of the entire payer market. But they have not been participants. So, the idea of being able to move the market by simply changing one part of it has resulted in a lack of critical mass. That needs to change. And it will. The President has asked the providers of health care nationwide to disclose their walk-in prices to Americans, in their facilities and on the Internet. He is asking insurance companies to disclose their negotiated prices with plan enrollees. That alone will have a significant benefit. Last night I stayed at a hotel here in San Francisco. There was a small sign on the back of the door that said the price of the room was $449. Taxpayers will be relieved to know that I didn't pay $449. I paid $130. My actual bill was slipped under the door during the night. I paid $130 instead of $449 because the government has negotiated special prices. It's quite possible that under the right conditions, I could have gone online to an auction site and found the room for even less. At least there is a way for me to find out. My young friends who took their baby to the hospital without insurance were charged $2,000. If they had had insurance, the cost would have been closer to $500. People need to know--they have a right to know--the cost of their care and the quality of the care. In coming months, as Secretary of Health and Human Services, I am going to launch with others actions that are designed to systemically bring this nation's health care payers together to lead toward change, a change that will create real transparency in quality and price. I am announcing today that for the first time, Medicare, Medicaid, the Department of Defense (VA and OPM/FEHBP), and the Office of Personnel Management will compile non-personalized claims information and release the information in sufficient detail that a statistically reliable foundation of transparent price and quality data will be available for each hospital and doctor. We will start with a few of the most common procedures and expand as quickly as possible. This is a very important policy change because it begins to move us toward people knowing what they pay and knowing the quality of what they are receiving. The American health care system is actually a network of local and regional systems. Change will begin to occur when those who pay for health care in each market area insist that their insurers, and their providers, commit to transparent measurement of quality and price. Over the next several months, we will be analyzing metropolitan markets. Then, as Secretary of Health and Human Services, I'm going to go to those markets and ask the largest and most influential employers in a formal declaration of direction. Those who commit to participate will be asked to join with public payers in using their payer power to lead on four very significant initiatives. The first initiative is Quality Transparency. We will ask public and private payers to make a condition of their business with insurers, third-party administrators and providers, the provision of claims information and the adoption of AQA and HQA standards (the AQA and HQA are groups that have come together to create standards on quality). We will first start off with the 20 most frequently used procedures, as well as measures of patient satisfaction with their care, and go from there. The second initiative is Price Transparency. We will ask again as a condition of doing business, that insurers and third-party administrators disclose their prices on the most frequent medical procedures. To be most useful, consumers need a clear picture of the overall cost, not just the procedure, but all of the cost, when they choose a specific doctor or hospital. The vision here is for consumers to know what they are paying of and have the quality of it. I'm talking about the kind of information consumers expect to have for virtually any other purchase. Take hip replacement surgery, for example. It would change the health care world if people could know, before their operation, what the overall package price is going to be, including lab tests, anesthesia, rehab costs, as well as specific information on quality, such as complication rates and patient satisfaction. That information puts the incentives in the right place. It gives incentives to reduce the cost and improve the quality. Let me repeat. People need to know--they have a right to know--the cost of their care and the quality of the care. Competition and transparency will make the system better. The third initiative is Health Information Technology. As first steps toward full electronic health records, insurers, administrators, and providers will be asked to use an interoperable electronic registration system that will do away with the medical clipboard as we know it. How many times have we walked into a clinic or a doctor's office or any other place where health care is handled and we write down our name, our address, our phone number, our insurance number, and other pieces of information, not once but several different times? Now in the information age, there ought to be a way to improve that. With Payer Power, we will move forward collectively to ask those who are insurers and providers to adopt standards that are being developed over the course of time. It will be an important step forward. The fourth and last initiative is a Consumer-Oriented System. We would like payers to make health savings accounts a voluntary option on their menu of health insurance plans. That will be a very important and a powerful step forward. There are currently 3.5 million people who have adopted health savings accounts and that trend will grow. It will grow for a number of reasons. One is that more people will buy insurance when it is $300 a month than when it is $600 a month. It's as simple as that. It will also resolve a very important inequity in the system. People shouldn't have to pay taxes on the money they spend for health care. Those who don't have employer-provided insurance are discriminated against. That needs to change. This is just one step, but an important one in making peace between the priceless value of our health care and the pricey reality of economic competitiveness. Medicare It is important that this is viewed in the context of a reform. For the last 40 years, Medicare has been paying for heart operations that cost $100,000 or more, but we've been unable to pay the $1,000 in prescription drugs that would have prevented it in the first place. This is a profoundly important change, the biggest change in health care in 40 years. There are roughly 1.1 million Californians who have not yet enrolled. They have until May 15 to enroll without additional premium charges. If you are there, and listening to me, and are 65 years of age or older, and you are qualified because of Medicare, I simply want to say that this is a good deal. If you will spend about an hour in figuring out the best place to send your prescription drug bills, Part D will pay at least half, and perhaps more, for the rest of your life. That's a good deal for seniors. Pandemic Influenza I spent weeks after Katrina going through medical shelters in the Gulf Region. I learned that there are some very important differences in the way we manage a pandemic than any other natural disaster. Katrina was a devastating natural disaster that affected major parts of Mississippi, Alabama, and virtually all of Louisiana. But at least it was confined to that area. A pandemic would be happening in Seattle, and Santa Fe, and Sarasota, and San Francisco, all at the same time. It may be happening in as many as 5,000 communities all at the same time. Any community that fails to prepare with the expectation that the federal government will be able to step in and save them at the last moment will be sadly disappointed. It is not because we lack will, and not because we lack wallet, but rather because we lack a way. There is no way that any government or agency will be able to reach out to every community at the same time. Local preparedness is the foundation of preparation for a pandemic. The second difference is the timeframe. A pandemic occurs over a year or a year and a half. Most of the natural disasters we prepare for happen over a period of three or four days, and then we move into recovery. Life must go on. What that means is that to be a prepared nation, every federal agency, every county, every state, every tribe, every city, every county, every business, every school and college, every hospital and clinic, every church, and every household, needs to be thinking on how they would deal in a pandemic situation. Pandemics happen. They have happened for centuries in the past, and there is no reason to believe that the 21st century will be any different. So today as I close, let me just remind you that our task is to reconcile and to bring peace between the priceless value of life, and the pricey reality of our economic competitiveness. By approaching price transparency, by finding quality transparency, by turning the incentives of the market in ways that will create favor, we can move forward. I look forward to your questions. Thank you. Last revised: March 17, 2006 |
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