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REMARKS BY:	DONNA E. SHALALA, SECRETARY OF HEALTH AND HUMAN SERVICES
PLACE:		Grainger Business Ethics Symposium, University of Wisconsin, Madison Wisconsin
DATE:		March 25, 1998

Whenever I think of difficult choices, I'm reminded of something that Woody Allen once wrote for a commencement speech. He noted, "More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other to total extinctionYSo let's pray we have the wisdom to choose correctly." Unfortunately, whenever we discuss health care, too many people seem to believe that we're facing the exact same type of dismal, no-win, choice. That when it comes to health care, it's now: Care vs. Costs. Healing vs. savings. Patients vs. Profits. And we are told we must choose one or the other. But I believe that we don't have to make a choice.

I believe we have the ability, as your symposium title suggests, to "balance patient's health and corporate profits." After all, patients and profits aren=t diametrically opposed forcesCwithout patients there are no profits. And without profits, doctors cannot serve patients. What we need to do is institute real, or true, managed care. Notice I said "true." Let me be clear from the start, I was in a managed care plan over 25 years agoClong before most people even heard of the concept. When done right, managed care can provide a seamless system of care from prevention to primary care to patient management. The pioneers in managed care-Kaiser Health Plans, Group Health of Puget Sound, Harvard Pilgrim Health Plans, and Henry Ford Health Systems, understood this. They had strong prevention services, fully integrated delivery systems, and comprehensive care.

ButCfor the most partCthe system we have today is not really "managed care." What we have, instead, is Amanaged costs.@ To understand why, let me briefly discuss the managed care revolution. Many of you in the audience are well acquainted with the reasons why managed care emerged as the dominant force in health care over the last decade. Employers led the movement toward managed care as a way to constrain the costs of doing business. Large purchasers of care-private employers as well as the Federal and State public employee health programs and the programs we run, like Medicare and Medicaid-were alarmed by the double digit increases in insurance costs each and every year. Between 1988 and 1989, for example, insurance costs for private employers rose 14 percent. The cost of public programs like Medicare and Medicaid were also rising at double digit rates during this same period.

But spiraling costs were the only factor driving the growth of managed care. Employers and large purchasers genuinely believed that managed care could improve the quality of health care by providing comprehensive, coordinated care at a reasonable price. That's why, in 1988, about 71 percent of American workers were enrolled in traditional fee-for-service plans. But by 1998, the figure had dropped to 14 percent. Similarly, in 1987, only 5 percent of Medicare beneficiaries were in managed care plans. But a decade later the number had almost tripled.

And what have been the results of this fundamental shift in our health care landscape? Well, we've definitely seen managed costs. Managed care has acted responsibly to hold down costs, primarily by taking advantage of excesses in the system-excesses like too many hospital bed or too many specialists-to negotiate substantial discounts from providers. And in 1995, average premiums actually dropped by one-tenth of one percent.

But I want to caution that much of these savings may well be illusory-they resulted from deep discounts negotiated with doctors that can 't be replicated in the foreseeable future. In fact, premiums are expected to actually rise an average of seven to eight percent in 1999, with even larger increases for small employers.

Make no mistake, we've successfully advanced managed costs, but has the shift in our health care landscape also resulted in real managed care? Unfortunately, I believe the answer is no-for three reasons. First, too many managed care plans are simply not providing the comprehensive, coordinated service that is the hallmark of real managed care. These plans are really just discounted fee-for-service plans.

Second, real managed care would not put a strain on the most sacred bond in medicine: The doctor-patient relationship. Right now, too many doctors face a profound ethical dilemma. The Hippocratic Oath obligates them to always put their patients first.

But as gatekeepers, they may face strong financial incentives to deny access to a specialist or other needed service.

Third, the information systems needed to manage care effectively are not in place. In the early 1990s, a group of forward looking purchasers and plans developed a set of common standards, called "HEDIS,"-or Health Plan Employer Data Information Set-to measure quality of health plans. Unfortunately, last year we saw more plans than ever agree to provide HEDIS data to the responsible accrediting organization-but only on the condition that the data not be made public. Many other plans simply outright refuse to provide information on quality and outcomes. We're helping to put an information system into place by collecting and disseminating HEDIS information for all Medicare and Medicaid beneficiaries. But much more needs to be done.

In a new Progressive Policy Institute Report, Harvard Business Professor, Regina Herzlinger, suggest that a "truth agency"-or a Securities and Exchange Commission for health care needs to be established. Such an agency could simultaneously make health care more reliable, improve the fairness of insurance policy prices, and help consumers redirect their money from bad health plans to good plans. The approach recognizes that true managed care requires adequate information systems-so consumers can judge which plans are providing adequate, comprehensive care. Because even though our health care system is the best in the world-it's certainly not the best for every American.every day.everywhere.

But what's the answer?

The answer, as I said earlier, is to institute true managed care-a seamless system from prevention to primary care to patient management. Above all, that means we first have to ensure quality. And that's exactly what our Patient's Bill of Rights is all about. Many-but certainly not all-managed care organizations have already stepped up to the plate to voluntarily provide the kind of protections contained in the Patient's Bill of Rights. What they understand is that every type of health insurance must deliver high quality health care for all of us. To support this premise, the Patient=s Bill of Rights lays out eight basic principles, which I=d like to briefly outlineCand which I know we=ll be examining further during the panel discussion.

First, consumers should have the information they need to make knowledgeable choices. They need to know what=s in a health plan and what=s excludedYwhich health professionals are in a plan=s networkY.how they can appeal a decision to deny coverageYand if a plan will restrict their access to certain drugs. Consumers also need information about the quality of the health plans, doctors, and hospitals that seek to serve them, so they can shop among plans armed with insights and knowledge.

The second principle is that consumers should have greater choice in health care. Too many Americans actually have fewer and fewer choicesYchoice of doctors has been reducedYand many people with acute or chronic conditions have difficulty gaining access to specialists. It seems that the spirit of the assembly line may be haunting some aspects of health care. When Henry Ford was first making his model T, he remarked, AA customer can have a car painted any color he wantsCso long as it=s black.@ Lack of choice in cars is inconvenientCbut lack of choice in health care is inexcusable. Among its provisions, the Patient=s Bill of Rights also says that people with chronic or severe conditions should have direct access to specialistsYAnd women should have the choice of going directly to an obstetrician/gynecologist for routine and preventive service.

The third principle of the Patient=s Bill of Rights says consumers have a right to emergency care whenever and wherever the need arises. You and I know that if you=re experiencing severe chest pains, you should go to the nearest hospital emergency room. But too many health plans were denying claims for emergency care when the chest pains turned out to be a false alarm. If we want to improve our nation=s health, then people can=t be reluctant to enter a hospitalCsimply because they=re afraid they won=t be able to afford the admission price.

The fourth principle is that patients and doctors must be able to communicate freely. Patients need all the available information about treatment options, alternatives, risks, benefits, and consequences. The Patient=s Bill of Rights says there should be no gag rules. There should be no contractual agreements to hamper the flow of information between doctors and nurses and their patients. And there should be full disclosure of any financial factors that might color a doctor=s advice to a patient. In an effort to protect the industry's ability to restrict what contracted doctors could advise their patients, the industry opposed efforts to ban gag rules.

Fifth, the Patient=s Bill of Rights states that there must be an environment of mutual respect and nondiscrimination in the health care industry and in insurance enrollmentCregardless of race, sex, age, sexual orientation, genetic make-up or other factors.

The sixth principle in our Patients= Bill of Rights states that a patient=s health records must be kept confidential. Today, information is being shared by whole networks of providers and insurers. Unbelievably, today we have federal laws that protect the privacy of our motor vehicle records, our credit card records and even our video store recordsCbut not our health care records.

The seventh principle says that consumers must have recourse to challenge decisions made about their care. Consumers should be able to appeal those decisions to an external group of experts who are independent of their health care plan, and who had nothing to do with the original decision to deny coverage.

Finally, the Patient=s Bill of Rights says that along with rights come responsibilities. These include taking personal responsibility for exercising; for not smoking; for working with your doctor to make decisions; and for making a good faith effort to pay medical bills.

That's our Patient=s Bill of RightsYeight basic principlesYeight straightforward proposalsYeight common sense remedies for what ails our health care system. It=s a giant booster shot for managed careCbecause it will protect what works in the systemCand change what doesn=t.

Last year, the President issued an executive memorandum that guarantees that everyone enrolled in Medicare, Medicaid, veterans health care systems and other federal plansCone third of all AmericansC enjoys the benefits of the Patient=s Bill of Rights. And being protected by the Patient=s Bill of Rights may explain why consumer satisfaction surveys show that most Medicare beneficiaries in managed care are happy with the care they=re receiving. With this single stroke of a pen, the President changed the face of health care in America forever. We must now guarantee these protections to every American. And it's now up to Congress to finish the job, by extending the protections of the Bill to the remaining two-thirds of our citizens.

It's important to remember that virtually every one of these provisions has been adopted by one or more states. Medicare+Choice plans have also been able to incorporate the Patient Bill of Rights' requirements into their programs without difficulty. And even with some plan withdrawals last year, we continue to see more than 50,000 Medicare beneficiaries, per month, switch to Medicare+Choice plans. Medicare beneficiaries select HMOs and other Medicare+Choice plans because, through them, they are able to obtain additional benefits- particularly prescription drugs-that are not included in the statutorily defined set of Medicare benefits.

In fact, many of the tools used by managed care plans need to be included in the original Medicare fee-for- service program.

But it's not only Medicare. Because of managed care=s efficiencies, and its success in making the health care dollar go further, many states have been actually able to cover more lower income people through Medicaid. But despite all the success, we all know that managed care has not yet achieved its full potential-and that effects each and every one of us.

That's why building real managed care, in essence, ensuring the highest quality health care for every American, isn=t a job for government aloneCit=s a challenge for all of us. I applaud the fact that some of the smartest purchasers, including Chris Queram of the Employer Health Care Alliance Cooperative have been demanding better quality for the money they spend. Unfortunately, voluntary efforts to provide patient protections are far from universal, and too many purchasers are still looking for the cheapest priceCand just hoping that quality doesn=t suffer. We especially need every member of the health care community-every doctor, nurse, administrator, and policy makerCto bring their intellect and imagination...their compassion and commitment...their ethics and experience to the task.

Rather than fighting managed care's existence, all of us must work towards improving itCand instituting true managed care that provides a seamless system of care at a reasonable cost. The choice is ours. We stand at the crossroads. The great sage, Yogi Berra, advised all of us that when we come to a fork in the roadCtake it. We don't have that luxuryCthis time we must choose. Our choice is to return to the days of spiraling health cost and fragmented health care. Or to invest in the promise and potential of true managed care. To paraphrase Woody Allen, if we have the wisdom to choose wisely, then I know we=ll be able to balance patient health and corporate profitsYTo always put the patient firstYYAnd to ensure that managed care will truly be able to manage both costs and care.