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Remarks as prepared to the Republican National Lawyers AssociationGood day. Thank you for that warm introduction. I'm delighted to be here to talk with you about what President Bush and Secretary Mike Leavitt are doing to transform our health care system. America has the greatest health care in the world. We have the best hospitals, doctors, and researchers. We lead the world in the development of new medicines, devices, and procedures. Our health care companies have the freedom to compete. But our health care system can be even better if we make it more affordable and more accessible. Look at the price of health care. Americans currently spend about $1.9 trillion on health care. That's 16% of our G.D.P. What is problematic about this is that health care spending is growing at a rate that poses challenges to the rest of our economy. It is growing more rapidly than the general rate of inflation, for reasons that we think are not intrinsically related to the value delivered by the system. In nominal terms, health care spending is growing three times faster than wages, for example. And by 2015, it looks as though we will be spending 20% of our G.D.P. on health care. Medicare alone is projected to consume 11% of the G.D.P. by 2080. While the percentage of economy spent on health care is an arbitrary number - who knows if it would be the amount people would choose to spend in a completely free economy - what matters is what kind of value we are actually getting for our dollars. That is why we need to ensure that every American has access to basic health insurance at an affordable price - which would be good value. In America today, 45 million Americans lack health insurance. This group is composed of several categories. For example, millions of the uninsured are eligible for Medicaid but have not enrolled. Millions more could obtain coverage through employer sponsored plans if they chose to participate. Many people are uninsured for short periods in between jobs. But millions of Americans lack insurance because heavy regulation simply makes health insurance too expensive for them. There are two broad competing philosophies on how to insure those Americans who cannot afford health insurance. One philosophy would have the government insure health care and run the system. This would mean few choices, long waits, low satisfaction, and high taxes. The other philosophy would allow the market to cut costs through competition to make health care more affordable for all. And if we have learned anything from the twentieth century, it is that the marketplace beats government in delivering goods and services. Though many people forget this, health care is also composed of goods and services. There is no better example of how effective competition in health care can be than in Medicare Part D, which gets seniors the life-saving drugs they need. Part D has been criticized by some for the prominent role competition plays in the program. For many people in this debate, health care is a unique good. They try to avoid the marketplace by claiming that health care is an example of market failure - that health care goods are unique and the need for them so intense that the market cannot balance supply and demand. Yet even for prescription drugs, we have found no evidence of so-called market failure. On the contrary, through implementing competition among Part D plans, we have shown that the marketplace works, even in the area of providing life-saving drugs. Part D's auction process has worked well in its first two years to lower the costs per plan. When the program began last year, actuaries estimated that premiums would cost about $38 per month. But plans competed with each other, offering incentives to increase their market share. They offered lower premiums and extended coverage. The result was that the average premium fell to $25 per month. This year, premiums have fallen again to about $22 per month. Seniors are also saving an average of $1,200 per year from what they were paying before Part D was implemented. Now, more than 75% of seniors tell us they are happy with their plans - high praise indeed for any government program. Some have complained of complexity in the plan offerings. Even Saturday Night Live humorously mocked the Part D enrollment system. But is the simplest solution the best solution? Some think the government should offer a single plan. This is very simple, of course. But while a single, one-size-fits-all, government-run drug plan would be the simplest solution, it would also be the least flexible. For example, Congress specified a basic plan to be offered as part of Part D. And less than 10% of Part D enrollees have chosen plans that meet only those basic Part D requirements. If Congress had allowed only their plan, 90% of seniors' preferences would not have been served, and we would have never known. Instead, we allowed competition, and those 90% chose other plans with other options, such as lower deductibles and extended coverage to meet their needs. The result is that the ten-year cost estimate for the program has fallen by almost $200 billion since its passage in 2003. The Medicare Advantage program also shows how competition adds value. Medicare Advantage plans allow participants to opt for private insurance over Medicare's basic fee-for-service structure. If they choose expensive plans, they pay the cost above Medicare's benchmark rate. If they choose less expensive plans, they save money. And even though they are saving money, Medicare Advantage enrollees are often getting better benefits - and the benefits they want - at lower prices than those offered under Medicare's fee-for-service. More and more Medicare beneficiaries like having that choice. Since Congress revitalized Medicare in 2003, membership in Medicare Advantage has jumped from 4.7 million enrollees to 8.3 million. In rural areas, enrollments grew fourfold. The program has proven especially attractive to low-income and minority enrollees, thanks to its more affordable costs and better benefits. Something many have thought unlikely is actually happening: Consumers are becoming active participants in their health care as they shop around for the best value. They are comparing costs and weighing benefits. But in spite of the manifest successes of Part D competition and Medicare Advantage plans, some in Congress still want the government to replace the market. They want bureaucrats to make decisions for consumers, all of whom have different wants and needs. They want the federal government to set prices and choose formularies in Medicare Part D. They want to cut funding for Medicare Advantage. They also want to expand the State Children's Health Insurance Program to mandate covering children with families earning more than $80,000 year as well as adults, even childless adults. Spending by some states on middle-income Americans is already draining SCHIP of the funds it needs to help low-income children. The solution is not more government. The solution is not a more enlightened bureaucracy. The solution is not some new, improved, government-run plan. The solution is simply more competition. Only competition will lower costs and thereby enable us to ensure access for all Americans. In his State of the Union Address, the President outlined several proposals to do just that: continued support for entitlement programs, affordable choices for health insurance, and a standard deduction for health insurance. First, we must continue support of programs that care for seniors, children, and the disabled. This means keeping Medicare and Medicaid sustainable and reauthorizing SCHIP for the people it was meant to serve - low-income children. Second, the federal government should support states' efforts to make basic health insurance available at affordable prices. Each year in America, we spend more than $30 billion in Medicare and Medicaid funds paying the medical bills of the uninsured. Some estimates place this number as high as $100 billion, which represents the total cost of medical care for the uninsured and includes uncompensated care costs, out-of-pocket spending, and free market and government insurance coverage. Those who are uninsured over an entire year consume on average about $1,500 worth of care per person per year. For the most part, these large payments go directly to institutions that care for the uninsured, through a complex, inefficient, and patient-blind system of subsidies and payments. We propose allowing the states and the federal government to use some of this money in the form of grants to help the uninsured, particularly those with lower incomes, buy their own coverage - thus enabling a competitive marketplace to develop for those who cannot currently afford health insurance. In essence, we already send the money to institutions. Instead, we want to send it to the patients. Through the President's Affordable Health Choices proposal, we want to provide states with incentives to make basic, affordable private health insurance policies available to their citizens. Secretary Leavitt has been traveling across the country, meeting with governors, and working with them and Congress to help states develop the innovative measures needed. For uninsured Americans who are below a certain income level - as would be defined by the states - but are not eligible for Medicaid, new waiver authority would help finance a subsidy to help individuals purchase a basic health plan. State participation would be voluntary, and states would design their own programs. As States make efforts to improve their markets to make basic health coverage affordable, they could utilize an Affordable Health Choices Grant to help facilitate the ability of individuals and small businesses to buy coverage. For instance, they could offer direct premium assistance to hard-to-insure populations to purchase private health insurance, or establish or expand existing high risk pools, for high-risk individuals who are deemed uninsurable in the non-group market. The third part of the President's proposal would level the playing field for health insurance purchasers. It would rectify a structural problem in our health care system by eliminating the half-century old distortion in the tax code that keeps those who purchase health insurance on their own rather than as part of a group from claiming a standard deduction. Right now, most Americans buy their health insurance through their workplace, and the government helps them with a tax break. Those tax breaks need to continue. The older tax breaks have enabled the development of a private health insurance market in this country that provides good coverage to the majority of Americans. That is a good thing, and certainly is preferable to the alternative of government-run health care that so many other countries have embraced. But we are faced with a problem. Millions of others can't get insurance through their employer and are faced with buying it on their own - these people are waitresses and construction workers, students and day care workers, small business owners and self-employed entrepreneurs. It is indefensible that a person who buys insurance through an employer is treated better than a person who buys as an individual. 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 fair tax treatment. Specifically, the President's proposal would eliminate taxes on the first $15,000 earned by families - and $7,500 for individuals - who buy insurance. These proposals would help millions of Americans purchase basic, affordable health insurance without the government making decisions about people's health and put pressure on States to reform their markets to make them more competitive. And when those people are covered by free market health insurance, they will consume less government-provided health care. Therefore, these proposals would also extend our ability to cover those in need by keeping the taxpayer-funded cost of health care low. While all of these proposals would work as standalone reforms, taken together and with Congressional support, they have the potential to enable access to basic and affordable health insurance for every American. Thank you. ### Note: All speeches from the Office of the Deputy Secretary are available at http://www.hhs.gov/agencies/depsecspeeches.html. Last revised: April 23, 2007 |
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