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Remarks Delivered by
U.S. Secretary of Labor Elaine L. Chao
ERISA Industry Committee Health Policy Conference 2006
Washington, D.C.
Tuesday, June 27, 2006
Thank you Scott [Macey, Vice President, Aon employee benefit consulting firm, luncheon sponsor] for that introduction. And let me thank all of you for coming to this very special event — the Health Policy Conference 2006.
I don't have to tell this audience that health care is an increasingly important issue for our workforce. New drugs and new medical techniques are extending lives and improving the quality of life, leading to a population that is growing older.
When Social Security was passed in the 1930's, the average American life expectancy was age 65. Today, it is more than 77 years. This is a wonderful gift. But it also places greater demands on a health care system, which is already struggling with increasing costs.
President Bush believes we must act now to deal with these rising costs. Our economy is strong, and growing stronger. Yet employers' costs and workers' pay are being heavily impacted by the rising costs of health care.
Three weeks ago, the Labor Department announced that the national unemployment rate had dropped to 4.6 percent, the lowest point in nearly five years. That's more than a full point lower than the average 5.7 percent unemployment rate of the 1990s. The U.S. has had 33 months of uninterrupted job growth with more than 5.3 million net new jobs created in the U.S. since August 2003. And the U.S. economy grew at a rate of 5.3 percent during the first quarter of 2006. Even core inflation, though slightly higher than we'd like, is still moderate by recent historical comparison.
Yet, despite this growth and the high productivity of our workforce, workers are being affected by rising health care costs. This is why creating affordable access to health care is one of this Administration's highest priorities. Every human resources manager in this room knows that spiraling health care costs are a major factor in hiring new workers. And that these concerns grow more significant with the aging of the workforce.
Recognizing that there is no "silver bullet" for our health care problems, the President has proposed a series of initiatives. Taken together, they will improve access to health coverage for workers and reduce the growth in costs for employers.
These initiatives include:
- Reforms in the healthcare market,
- Greater use of Health Savings Accounts (HSAs), and
- Allowing small businesses to join Association Health Plans (AHPs).
One of those reforms involves the legal system. Frivolous lawsuits are driving good doctors out of practice. Unnecessary defensive medicine practiced to avoid lawsuits costs our society an estimated $60-$100 billion annually.
The benefits of medical liability reform have already been proven. Several states have taken the lead in liability reform, and the results are worth taking note of.
During the three years prior to Texas' passage of liability reform, it experienced a net loss of 14 OB-GYNs. In the three years after passage, it has gained 84. Since passage of reform, the state has gained 3,000 new physicians, and malpractice insurance rates have declined. Prior to the reforms, statewide claims averaged close to 400 per month. After the reforms, claims have averaged about 200 per month.
As a result, the state's five largest insurers announced rate cuts last year, with an average premium reduction of 11.7 percent. These reductions produce roughly $48.6 million in annual premium savings. So medical liability reform is producing results.
Another Presidential initiative is to give more information to health care consumers. Patients, insurers, and employers all have an interest in ensuring that they are purchasing quality health care. It is very difficult, however, to measure the quality of the care that is purchased. It can be even more difficult for consumers to determine the overall value of the medical services that have been bought.
Many of you are actively engaged in finding ways to measure the quality of the care your employees receive and to assess the fees and rates you pay. To aid in these efforts, President Bush has directed the Department of Health and Human Services to make Medicare's price and quality data publicly available. He is also requiring insurance plans participating in federal programs, such as the military's Tricare system, to provide their data on medical care quality and outcomes.
Applying information technology to the health care system will help as well. Medicine today employs the most advanced technology of the 21st century. But many doctors still use last century's filing systems to manage medical records. A nationwide information network will protect the privacy of a patient's medical information while making health information available in real-time. We are making good progress toward the President's goal that most Americans will have an electronic health record by 2014.
Though this is a very complex area, these initiatives are a good start toward making the heath care marketplace function efficiently and transparently.
Now I'd like to focus on two other important strategies to increase access to health care: Health Savings Accounts and Association Health Plans. They directly address the accessibility and affordability of employer-provided health benefits.
Health Savings Accounts, or HSAs, are already providing tremendous new opportunities to both individuals and employers. Passed as part of the Medicare Prescription Drug legislation, HSAs immediately began to have an impact. In March, 2005, there were one million HSAs. By this January, this number had more than tripled to 3.2 million. And one-third of employers offering HSA plans previously did not offer their workers health coverage. So this is a real benefit for workers.
The benefits of HSAs are not limited to small firms and individuals. Large employers and their workers are finding HSAs valuable, as well. A well-known fast food business reported that in the five years before it adopted HSAs, health care costs rose each year by double digit figures. A year ago, it made HSAs available to its employees. With nearly a quarter enrolled in HSA plans, medical costs rose by only 1 percent last year. And half of the enrolled employees actually ended the year with positive balances in their HSA accounts. That's money they own and can carry forward on a tax-preferred basis to cover future health expenses. As President Bush has said, HSAs work for employers as well as employees.
The next step is to improve the effectiveness of HSAs. The President has proposed increasing the contribution limits for HSAs. He has also proposed giving $3,000 tax credits for low-income persons who purchase HSA-compatible health insurance. These will help increase participation in HSAs, and bring more uninsured workers into the system. The President also wants HSAs to be truly portable. Currently the HSA account is portable, but the corresponding health insurance policy is not.
If these proposals are adopted, this Administration believes that the number of Americans covered by HSA policies will significantly increase. The Department of Treasury estimates that by 2010, 20 to 30 million Americans will be covered by 14 million policies. Under the President's proposals, that number would nearly double.
In addition to HSAs, the President is a strong supporter of Association Health Plans (AHPs). AHPs would allow employers to band together across state lines through bona fide trade and professional associations. Through AHPs, these employers could offer health benefits to their workers by buying insurance of by self-insuring.
While the House of Representatives has passed AHP legislation on a bipartisan basis, the Senate has not yet taken up the measure. American workers will benefit from this proposal. As many as two million currently uninsured persons could gain coverage according to the Congressional Budget Office.
In the Senate, Chairman Enzi tried very hard to address the accessibility and affordability of health coverage through his health insurance reform proposal. Though Chairman Enzi's legislation is different from the AHP legislation endorsed by the Administration, it would also expand health coverage options for workers and employers.
The Administration supported Chairman Enzi's attempt to move his bill through the Senate. We looked forward to working with him and his colleagues in the House and Senate to develop a final health reform bill. Unfortunately, party-line, procedural votes in the Senate brought this process to halt.
We are disappointed that progress on health reform legislation has stalled. The status quo is not the solution. The millions of Americans without health insurance need affordable, quality health coverage from a system rooted in freedom and choice. They need good, common-sense solutions, like AHPs and HSAs, which make health care more accessible and more affordable.
I know you share our deep concern about this issue. So, thank you for everything you are doing to help close the health care gap. Your work is vital in ensuring that our nation's workers and their families have access to quality, affordable care.
Thank you.
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