Remarks as Prepared to America's Health Insurance Plans (AHIP)

Thank you, Karen [Ignagni, President and CEO, AHIP]. It's a pleasure to be here with you today.

When we met last March, the Medicare Prescription Drug Benefit was less than three months old. We were in the midst of a heavy lift, but collectively - we got it done.

It was a great American success. Children helped parents. Churches helped parishioners - senior centers, libraries, shopping centers, hospitals, pharmacies and doctors' offices - all became enrollment centers.

I came to realize that Part D was much more than a new federal program. A grassroots outreach effort came together around Part D to help seniors enroll. It was a truly American moment.

Many of you were very directly involved in that. Our meeting last January was a memorable and important milestone.

Your insights at that meeting helped me to get a better grip of the early problems we faced with the program.

When we spoke last year, competition among plans had driven average monthly premiums down from an expected $38 per month to about $25 per month.

Since then, competition has continued to drive costs down and satisfaction up.

Today, premiums are even lower than last year. They average around $22 per month. Beneficiaries are saving an average of $1,200 per year, in part, because plans are negotiating rates.

For the same reason, taxpayers will save about $113 billion over the next 10 years.

What's more, surveys have found that at least three out of four beneficiaries enrolled are happy with their plan.

It's clear that competition is working.

This should come as no surprise. In every industry, free-market competition drives costs down and value up.

We have also seen this kind of result in another important program: Medicare Advantage.

As you know, Medicare Advantage plans allow beneficiaries to receive their benefits through private insurance companies rather than through the usual fee-for-service structure.

The program reimburses plans through a competitive bidding process. It relies on the power of the marketplace rather than bureaucratic government rate-setting.

These plans have been a tremendous success, particularly among low-income, minority, and rural consumers.

That's because plans are competing to attract business. Most of them are offering more coverage than fee-for-service plans. For example:

• More than half of Advantage plans cover eye glasses;
• More than three fourths of plans cover eye exams and extra days in the hospital; and
• 90 percent extend coverage for stays in skilled-nursing facilities.

These additional benefits add up to around $86 per month in extra value to seniors.

Consumers are responding. In 2003, Congress revitalized the program with the MMA after several years of decline in membership. Then, Medicare Advantage plans had 4.7 million enrollees. Today, that enrollment has grown to 8.3 million people. That's over 20% of the Medicare population who have enrolled in private plans.

Something many have called impossible is taking place: Consumers are beginning to look for value in health care, just as they look for value in other goods.

Saving money is a good thing, but these plans carry an even more important health benefit. Because they make health-care services more affordable for seniors, more seniors are getting the care they need.

For example, when you compare Medicare Advantage enrollees to those with a fee-for-service plan without supplemental coverage, you find that -

• Those covered by the fee-for-service plan were twice as likely to have trouble getting care,
• They were three times as likely to delay seeking care because of costs, and
• They were five times as likely to have no regular source of care.

And Medicare Advantage enrollees were more likely to receive preventive health-care services like flu shots and cancer screenings.

These types of services are especially important for low-income, minority and rural consumers.

Surveys have found that -

• 57 percent of Medicare Advantage enrollees earn between $10,000 and $30,000, compared to 45 percent in fee-for-service plans.
• 27 percent of those covered by Medicare Advantage plans are minorities, compared to 20 percent in fee-for-service plans.

I read your organization's report showing that nearly 70 percent of all Medicare Advantage minority enrollees had incomes below $20,000.

These plans are very popular in rural areas as well. Since 2003, rural enrollments grew fourfold.

Competition is working in Medicare Advantage to provide better care for needy Americans.

But some members of Congress want to change that. They want to cut funding for Medicare Advantage. Their goal is to force more Americans onto the government-run fee-for-service plan.

There are two competing models for health care in America. One is to have a government run system. The other is to allow competition in an organized marketplace to cut costs and add value to health care for consumers.

The President and I are for competition.

If the world has learned anything from the 20^th century, it is that the marketplace beats government at controlling costs and delivering value.

A competitive market for prescription drugs has made Part D a success. And a competitive market for health plans has made Medicare Advantage a success.

Still there are those who want the government to do the market's job. They want to steer more Americans into a government-run, one-size-fits-all health plan.

They want to expand the State Child Health Insurance Plan to cover more middle-income adults.

They want to cut funding Medicare Advantage.

And they want the Federal Government to set prices and choose formularies for Part D.

In fact, Part D does offer a single, one-size-fits-all drug plan that saves seniors from having to make their own choices.

But less than 10 percent of enrollees have chosen it. The other 90 percent have chosen other options, often with lower deductibles and extended coverage to meet their needs.

Our experience with Medicare Advantage confirms the same principles. Health-care consumers know value when they see it, and they will make the right choice for themselves when we let them.

That is why the President has said that he will veto any bill that would get government into the business of setting prices in Part D. Part D is working, and we need to allow it to continue to work.

Medicare Advantage is also working. We are committed to making sure it remains available to those who want it-especially low-income and minority individuals who rely on it. Let's work together to make sure Congress understands the value of continuing the Medicare Advantage program.

Instead of moving toward more government, we need to be moving toward a more Value-Driven Health Care system.

Many of your companies have already signed on to the principles of the President's Value-Driven Health Care initiative. The four cornerstones are - health information technology, quality measurement, cost transparency, and market incentives.

These are critically important components to get us where we are all trying to go in health care.

I appreciate your support for this initiative.

And I want to encourage all of you to make sure you offer products that incorporate the four cornerstones.

I have been traveling all around the country talking to small and large purchasers of health care. I'm pleased to announce that, to date, more than 700 of these purchasers-covering over 100 million lives-have also signed on.

This momentum is growing. Change is coming, and I would like to encourage those of you who have not yet signed on to visit our web site and do so. The address is hhs.gov/transparency.

Together, we can provide better care, at lower cost to all Americans.

I look forward to hearing your thoughts on these topics. So I would like to open things to a discussion at this point, and I would be happy to take your questions.

Last revised: March 13, 2008