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REMARKS BY:

Michael  Leavitt, Secretary

PLACE:

Washington, D.C.

DATE:

Monday, January 29, 2007

Remarks as Prepared for Delivery at the Detroit Economic Club


I was born in 1951. That year, health care occupied four percent of the total economy. When my son was born in 1978, the percentage had doubled to eight percent. This year, my son and his wife presented us with a granddaughter and health care is 16 percent of our economy. Double again.

When our granddaughter enters the third grade in 2015, health care will surpass 20 percent of the economy.

Families see the effect in their paycheck. Businesses want to provide health insurance, but struggle under the cost. The medical family worries about the future of their practices.

Our goal is: better health, lower costs, for all Americans. Today, I want to talk about specific things each of us can do to get there.

Let's start with an acknowledgement that this isn't just about changing the health-care system. It also requires change of self.

The best way to reduce health-care costs is to stay healthy. We can all do a better job of taking care of ourselves. I'm talking about diet, exercise, and our personal behaviors.

More than 75 percent of all medical costs come from chronic disease. Most chronic diseases can be prevented or managed.

Better health; lower costs; all Americans.

We commonly use the word system when we describe health care. We don't actually have a health-care system. What we have is a large, robust, rapidly growing health-care sector.

Millions of Americans provide direct health-care services to you and me. Millions more work in related businesses. But nothing connects them into a system.

This is more than a play on words; it is a critical part of the cost problem.

We are surrounded by economic systems that make costs lower: a telephone system, an airline system, a bank system, the internet. In each of these systems, there is aggressive competition for our business. In each, the entrants have adopted common standards to optimize value to customers.

Not many years ago, transactions with a bank required a teller to write with a ballpoint pen in a paper bank book that we carried into the bank. Now, we use ATMs or computers any place in the world because banks agreed on common standards. Banks compete with interest rates and services so you will carry their card, but all the cards work because they use the same system. This optimizes value to all of us.

Let me paint a picture of what a health-care system would look like.

Doctors, hospitals, pharmacies and labs connected electronically. The medical clip board you are handed every time you walk in to see a doctor gone forever. Patients able to consult with their doctor on email if they choose. Patients and others they permit able to access their medical records in a convenient way. They would fill out less paperwork, have a better idea of how they were managing their health conditions and get automatic reminders when it was time for a follow-up appointment or to refill their prescription. Prescriptions going electronically to the drugstore. Doctors, hospitals, pharmacies and labs connected electronically. You can book an airline reservation and pick your seat assignment online--shouldn't you be able to do the same at your doctor's office?

Connected information would be gathered anonymously so patients could receive cost and quality comparisons on doctors and hospitals they were considering. Quality comparisons would be based on standards developed by the medical family. Doctors and hospitals would be rewarded for the quality of their care, not just the quantity. Patients would save money if they made wise decisions about their health.

I'm describing good ole fashioned competition. Competition based on value in health care the best quality at the lowest price.

Competition doesn't just lower price; it also increases consumers' options. The Medicare drug benefit is a clear demonstration. Instead of restricting choice to one government benefit, Congress allowed choices and competition. The market responded with innovative ideas and choices.

After just a year, ninety percent of those eligible for the benefit now have drug coverage. Eighty percent are happy with their plan.

The cost?

Initially, actuaries estimated the average cost of a drug plan would be $37 a month. After a year of competition, the cost is $22 a month. Hundreds of billions of dollars saved for consumers and taxpayers. Why the drop? Competition.

A system of competition based on value is built on four cornerstones. My description today will be brief, but detailed plans can be found at www.hhs.gov.

  • The first cornerstone: Electronic health records. In the next three to five years, every doctor, hospital, pharmacy and lab needs to adopt an electronic medical records system.

    These systems need be compatible so information can be accessed and appropriately shared.

  • The second cornerstone is quality measures. Every patient deserves to have an independent assessment of the quality of care different doctors and hospitals provide. A patient deserves to know beforehand if more people get infections at one hospital than another. We deserve to know what experience a doctor has with a particular kind of procedure.

    This information has to be reliable. It needs to be based on standards experts in the field agree on. Quality reports help everybody improve.

    An alliance of doctors, hospitals, insurance companies, and the federal government are developing these standards and quality measures. Collaborations are forming in communities all over America and are working to implement these measures.

  • The third cornerstone is comparable prices. Price isn't given the consideration it should in health care. That's a big, big problem.

    People who have health insurance often don't care about price. People who don't have health-care insurance can't find out the price even if they ask. Hospitals and doctors are simply unprepared to answer the question: how much will this cost? Medical bills aren't understandable. Medical pricing is a mystery to everybody.

    Competition on value requires the ability to not only know the cost, but to compare the cost. Understandable, standard methods of grouping medical charges are being devised. The groupings are known as episodes of care buckets of care that you can compare.

    When cost is understood, it allows consumers to compare the cost and quality. An episode of care system will also give physicians and hospitals important information. Without consciousness of the entire cost of a medical episode, practitioners lose site of value.

  • The fourth cornerstone is proper incentives. People deserve to know that everyone in the health-care system has the incentive to increase quality and keep costs low. And that needs to include the patient. Transparent quality and price information makes that possible.

    Consumers should benefit when they chose high quality and lower cost. They should share in the cost, if they choose otherwise. Doctors and hospitals should be rewarded for providing high quality and lower costs. Patients need to know if they aren't.

    If you're interested in the way we think incentives would work in a system of value-based competition, look on our website at www.hhs.gov.

Changing the health-care sector has proven to be hard. In fact, many people believe that there simply isn't enough political will to change health care. In fact, the opposite is true.

When a meaningful change is proposed in the health-care system, everyone un-holsters their political will and points at each other. It is a perpetual standoff of economic interests.

The only force strong enough to change the course of health care is a market based on consumer value.

Large payers of health care have attempted to introduce market power into health care before. Success has been limited. One of the most important reasons is that the largest single health-care payer, the federal government, has not been part of the effort.

The Federal Government pays for 40 percent of all health care in America. Without federal leadership, it is simply impossible to achieve critical mass in an effort to change the system.

Last year, on August 22, President Bush signed an Executive Order changing that. He directed federal agencies to make the four cornerstones a major priority in they way they buy and organize health care. Others are doing the same thing.

Today, several companies in the Detroit area, including the Big Three auto makers, joined with the federal government in adopting the four cornerstones of value-driven health care. All together, these companies cover nearly 2 million lives.

Earlier today, we also designated the Greater Detroit Area Health Council, or GDAHC, one of the first community leaders in the nation. This also signals that they are on a path toward quality measurement and improvement for the citizens of Southeast Michigan.

GDAHC brought more than 100 Michigan organizations in the public and private sectors together in its Save Lives, Save Dollars program. Together, they intend to save the Southeast Michigan community $500 million over three years by implementing evidence-based health-care guidelines.

I would also like to recognize the Michigan State Medical Society on their Future of Medicine initiative.

By spring, in addition to the federal government, employers all over America will formally commit to join this effort. When payers put out their requests for proposals for 2008, our goal is to have one hundred million Americans covered by health-care plans that include the four cornerstones as a significant part of their criteria.

The health-care marketplace has begun to respond:

  • Electronic health record vendors are adapting their products to meet interoperability standards.
  • The medical community has organized to measure and report quality.
  • Insurance companies are preparing to begin pooling claims data in episodes of care.
  • The federal government and other payers are standardizing incentives for patients and providers to pursue value.

Within two years, competition based on value will begin to happen in selected communities on a few procedures and conditions.

Within five years, the word value will be a standard part of the medical lexicon.

In a decade, it will be ubiquitous.

Better health, lower cost for all Americans.

Let's talk for a moment about all Americans.

All Americans need access to a basic health insurance policy at an affordable rate.

Too many people don't have it. There are two distinctly different approaches emerging.

One approach is for the federal government to insure everybody one plan for everyone, run out of Washington, DC. The result is predictable: Less choice, long waits, lower satisfaction, higher taxes.

The alternative is not only better, but also far more likely to be accepted by Americans who don't want to have the government making decisions about their health.

To solve the problem of the uninsured, we need a partnership between government and the private sector each doing what they do best.

Here's the proposition: we are a compassionate nation. If you are poor and elderly, disabled, a pregnant mother, or a child needing protection government will provide health insurance and pay for most of it through Medicare, Medicaid or SCHIP.

For everyone else: state government, with help from the federal government, will organize the marketplace so every person has a choice of plans they can afford either through their employer or as an individual.

Extra help will be provided for those who still can't afford a basic plan. Again, the results are predictable: more choices, higher satisfaction, lower costs, competition based on value.

Better health, lower costs for all Americans.

In his State of the Union Address, the President proposed new tools to help states willing to take this on, including a solution to one of the most difficult issues the unequal tax treatment of those who have to buy insurance as an individual.

Most Americans buy their health insurance through their workplace, and the government helps them with a tax break. That needs to continue.

Millions of others can't get insurance through work and are faced with buying it on their own. I am talking about a waitress, a construction worker, a student, a day care worker, or a self-employed entrepreneur.

As things stand today, not only do they pay higher rates, they get no tax break. Most of the time these are the people who need help the most.

The President's proposal would ensure that whether you buy health insurance through your workplace, or buy it on your own, you get the same tax break.

It is indefensible that a person who buys insurance individually is treated differently than a person who buys it through an employer. The President's proposal would level the playing field.

We need to rethink how we pay for medical treatment for the uninsured. The principle is simple. Our country spends more than $30 billion every year perpetually paying the medical bills of those who are uninsured. Doesn't it make more sense for states to use some of this money to help the uninsured buy health insurance?

Access to health insurance is at the top of state legislative agendas all over the country. More than a dozen states are exploring significant efforts to expand access to health insurance. Partnerships led by states involving federal resources, private sector innovation and the medical communities are needed.

It's the best way to meet this nation's aspiration of every American having access to a basic insurance policy at an affordable price.

Over the next 100 days I will be in most of the states meeting with governors, state legislators, the medical community and members of Congress. In fact, last month, I met with Governor Granholm to talk about the Michigan First Plan. The plan proposes ways to help 550,000 people in Michigan buy a basic, affordable policy.

So this afternoon, the Governor and I will be meeting with members of the Michigan State Legislature to discuss how we can get the tools and the resources needed to implement the State's plan. There is a strong desire, and building momentum, to fix the problem of the uninsured.

This momentum will continue to grow because anxiety is growing. As the debate on access to health care unfolds we need to keep our eye focused on one word: Value.

There are many opinions on how to best finance a system of health insurance. There is a large land of agreement on the need for the four cornerstones of value based competition.

We need electronic medical records; every patient, doctor and hospital needs independent assessments of quality.

People need to know the cost of services in advance.

We all deserve to know the incentives in the health-care system reward high quality at the lowest cost.

In conclusion, let me acknowledge that getting to better health, lower costs, for all Americans, will require change. In a global economy, change is inevitable. There are three ways we could handle it.

  • We can fight change and fail.
  • We can accept change and survive;
  • Or, we can lead change and prosper.

This is the United States of America.

We have become the strongest and most influential force in human history because we have been willing to lead.

And lead, we will.

Last revised: March 13, 2008