Detroit Regional Chamber of Commerce
Mackinaw Island, Michigan
June 4, 2010
Thank you, Representative Dingell, for that nice introduction.
There’s a saying that people mellow with age. I don’t think the person who coined that expression knew John Dingell. He was tenacious back when he served with my father in Congress and they helped pass Medicare. And he was just as tenacious over the last year as we worked together to expand access to affordable health care to all Americans. Over 55 years, he’s never stopped fighting for Michigan families.
I also want to acknowledge John’s colleague, Senator Debbie Stabenow, who’s here today. Over the last year, there was a lot of coverage about the politics of health insurance reform. A lot of vote counting. But the hardest work on this law went into the policy, not the politics. And Senator Stabenow was right in the middle of it.
She made sure the Affordable Care Act got the details right – that it significantly eased the burden on small businesses, that it made insurance truly affordable for working class families, that it gave women real protection from insurance discrimination. We wouldn’t have the law we have today without her.
Finally, I want to acknowledge your terrific governor, Governor Jennifer Granholm. Governor Granholm and I were elected together in 2002 and served together for more than six years. During that time, I saw her fight hard for Michigan families, investing in education, clean energy, and affordable health care to create jobs for the future.
It’s not easy to be a governor during an economic slump. In good times and bad, we have to balance a budget every year. And Michigan’s lucky to have a governor as smart and hard-working as Governor Granholm.
As Secretary of Health and Human Services, I’ve continued to be guided by my experience as a Governor. Back then, one of my biggest responsibilities was bringing jobs to Kansas and keeping them there.
So during my years as Governor, I spent a lot of time talking to business owners from farmers to technology CEOs. They didn’t always have much in common. One would want to know about a certain tax provision and the other would be interested in a certain training program. But when I asked them what their biggest concern was, they often gave the same answer: health care.
For small businesses, it was skyrocketing premiums. Your health care costs could go up 10, 15, 20 percent a year. And if you wanted to switch insurers, you might have one or maybe two other options – hardly the kind of competitive market most businesses are used to.
For our larger employers, rising costs were just as big a burden. Often, these companies were paying for the health insurance not just of current employees, but of past employees too. So when the cost of care went up, they paid twice.
When I’d talk to other governors including Governor Stabenow, they’d tell me the same thing was happening in their state.
Across America, the cost of health care was one of the biggest challenges of doing business.
It put American companies at a disadvantage against their foreign competitors. According to one study I saw, for every dollar per worker hour US manufacturing firms spent on health care, the average foreign firm spent forty cents. For some firms, it was much less.
For a lot of companies, trying to sell your products on the global market was like running a race with shoes made out of lead. You had a disadvantage from the start.
And what was scariest for the business owners I talked to was that there was no end in sight. According to a study by the Business Roundtable, employer-based health care costs were on pace to almost triple in the next ten years to $28,350 per employee.
So when we began to look at our health care system last year, we knew that in addition to expanding access to insurance, we had to do something to change this trend – to reduce the burden of health care costs not just on businesses, but also on families, states, and the federal government.
We also knew it wouldn’t be easy. Health care costs make up one sixth of our economy. As others have said, the challenge is more like turning around an ocean liner than a motorboat. Many of you have seen firsthand how difficult it can be to slow rising health care costs in your own businesses.
But that’s not an argument for doing nothing. It’s an argument for moving aggressively. And that’s what the Obama administration has done.
One thing that some people missed in this debate is that we actually got to work well before the Affordable Care Act passed.
Most of you know the Recovery Act as a jobs bill. And it was. Economists have found that it has saved or created millions of jobs.
But it was also one of the biggest health innovation bills in American history.
In particular, it set in motion two critical changes that will be necessary if we want to bring down costs over time: the transition from paper and pencil records to a robust national electronic health records system and the transition from a sick care system to a true health system.
The benefits of electronic health records have been shown time and time again. When used effectively, they can eliminate paperwork, facilitate coordinated care, and cut costs. Whenever I talk to doctors who use electronic health records, they all say the same thing: they’d never go back.
Yet today, only 20 percent of doctors and 10 percent of hospitals have even basic electronic health records.
So as part of the Affordable Care Act, we’ve made the biggest investment in American history to help this technology spread.
We’re creating regional extension centers to help doctors to learn how to use electronic records, establishing frameworks that make it easier for patients to safely share their information with different providers, and investing in the health care workforce of the future. Starting next year, there will be incentive payments for doctors and hospitals that use this technology to improve the quality of care.
As more health care providers adopt electronic records, we’re going to have much better data on health outcomes.
That information will be critical as we work to improve our health care system
Health IT won’t bring down costs dramatically on its own. But it’s hard to imagine bringing those costs down without it. And now, after years of sputtering progress, we have a national plan for implementing it across the country.
You can say the same thing about the other big investment we made as part of the Recovery Act, which was in prevention.
America’s employers were some of the first to see that we were underinvested in prevention. You saw the costs of chronic disease first hand in sick days and missed shifts. According to one estimate, we lose $1 trillion in lost productivity due to our high levels of chronic disease.
That’s not surprising considering that seventy-five cents out of every health care dollar today goes to chronic disease and just four cents go to the kind of preventive care that can keep you from developing diabetes or heart disease in the first place.
So you’ve led the way with company policies that reward employees for joining gyms or provide healthy foods in the workplace. When they’re designed correctly, you’ve seen these programs can lead to significant improvements in health.
What we’re doing as part of the Recovery Act is promoting some of these same effective strategies in communities across the country. We’ve identified some of the most promising community programs for promoting healthy lifestyles and reducing chronic disease around the country. And we’re giving them additional funding to create models that can be replicated in cities and towns across the country.
These investments are going to shift the foundation of our health care system.
Twenty years from now, we’ll wonder how we ever dealt with a system where a patient’s health care information was scattered between files in a dozen doctors’ offices and it was often easier to get paid for a $30,000 bypass operation than for a $30 diet consultation.
Over time, they’re going be push us towards a health care system where we’re more likely to get the right care at the right time at the right price.
But with health care costs eating America’s competitiveness like a tapeworm as Warren Buffet put it, we knew we couldn’t just rely on these two changes. We needed to take an all-of-the-above approach.
And that’s where the Affordable Care Act comes in.
Now, there’s been a lot said and written about this law. There’s been a lot of speculation. But one of the nice things about these debates is that when they’re over and a law passes, you don’t have to rely on speculation any more. You can look at the results.
And right now, the results Americans are seeing are giving them a lot of hope. After years of feeling like their health care was slipping out of their control, they’re getting some good news for a change.
In the last two months, small businesses in Michigan have been alerted that they may be eligible for a tax credit to help them cover their employees.
Parents at college graduations in Lansing and Ann Arbor now know that they can soon cover their adult children on their insurance policies.
Seniors who have hit the prescription drug donut hole will start getting $250 rebate checks next week to help them afford their medications.
And many of the businesses in this room will benefit from a temporary reinsurance program for companies that cover the health care expenses of their early retirees that began that program earlier this week, almost three weeks ahead of schedule.
Understandably, these parts of the law – the coverage reforms – have gotten a lot of attention. Expanding access to affordable insurance will help tens of millions of families get the medical care they need and give every American peace of mind.
But we knew that no health reform would be complete without also addressing rising health care costs that are steadily making care less affordable for all of us.
And here’s something else that hasn’t gotten much media attention, but the Affordable Care Act is actually the broadest health care cost-cutting law in American history.
Over the last year, a lot of ideas for cutting health care costs were proposed. Democrats had ideas. Republicans had ideas. They all got added to this law.
In fact, one analysis in the Wall Street Journal found that the new law contained every major cost-cutting idea that had been suggested over the past year except one: the public option.
As more than 40 economists, including three Nobel laureates, put it in a letter: “these measures are a serious, multi-faceted initiative to improve the quality and efficiency of American medical care, rein in the fastest growing portion of government and private budgets and provide a valuable platform for future cost-control efforts.”
So I want to quickly go through a few of the biggest steps this law will take to bring down cost and improve quality.
First, we’re going to make Medicare a leader for improving our health care system, not a follower. Medicare touches every hospital system in the country and almost every provider. It covers nearly $1.5 billion of health care a day.
That can be a $1.5 billion a day force for maintaining the status quo. It can be a $1.5 billion force for incremental change. Or it can be a $1.5 billion force for transforming our health care system to keep patients healthier and save money.
We want to make Medicare a force for health care improvement.
So for example: today, one out of five Medicare patients who leaves a hospital is back within 30 days. Often, this is because they didn’t get the right follow-up care: they didn’t eat the right diet or take the right medicines or get the right wound care.
We know that one solution to this problem is bundling payments: saying to hospitals, providers, and the facilities that provide follow-up care, “here’s one payment for your patient. If you can coordinate care and keep your patients healthy, you’re going to reap the benefits.” So we’re funding demonstration projects for bundling.
The Affordable Care Act also provides unprecedented support for coordinated care models like Accountable Care Organizations and medical homes. We’ve seen examples from across the country of how health care providers can deliver better care with lower costs when they work in teams.
Yesterday, I visited two hospital systems – the Mayo Clinic in Minnesota and Gunderson Lutheran in Wisconsin – that are using these models successfully to provide better care at lower costs. This new law will give us a chance to show that those models can work on a larger scale.
The Affordable Care Act establishes an Independent Payment Advisory Board, a group of nonpolitical experts who will provide advice to Congress on where to find savings in our health care system.
It will create a Patient-Centered Outcomes Research Institute to provide information to doctors and patients about which treatments are most effective. Today, we have 6,000 different drugs and more than 4,000 procedures for 68,000 diagnoses. No single person can keep up with the latest news on all of them. So we’re creating a center where doctors and patients can find evidence to help them make the best decision.
And the new law will also establish an Innovation Center at the Centers for Medicare and Medicaid Services to develop additional models for patient-centered care that we can introduce in the years to come.
These changes are all happening in Medicare. But history shows that when Medicare leads the rest of the country follows.
For example, when Medicare stopped paying for so-called “never-events” – medical errors that should never happen like operating on the wrong body part – other payers stopped paying for these too. The result was that hospitals across the country were pushed to deliver better care.
These reforms are why the Congressional Budget Office estimates the plan will reduce the deficit by $100 billion over the next ten years and $1 trillion in the ten years after that.
It’s why the Business Roundtable estimated that under the new law, health care costs for the average employee will be $3,000 lower by 2019.
And remember: these numbers don’t even include some of the most transformative changes in the Affordable Care Act and Recovery Act.
For years, America’s businesses have led the way on reducing health care costs. Many of our biggest innovations for saving money on health care started with you.
With the investments we’ve made over the last year and a half, we want to join you in leading the transformation of our health care system.
It’s not like we have to discover or invent smarter ways of delivering health care. I saw them yesterday at Mayo and Gunderson. We have them in pockets of excellence scattered across the country.
President Obama and I see our job as helping these models spread, whether it’s by supporting their work or creating incentives for other hospital systems to follow their example or just highlighting their best practices.
We shouldn’t be naïve. Health care costs will remain a challenge for American businesses for years to come. But after years of saying we need to do something about health care, we finally have a plan. After years of costs rising with no end in sight, we finally have a vision for a better future.
As we move forward, more changes will be necessary. And we look forward to working closely with partners across the health care system – with employers, with insurance companies, with providers – to make additional improvements.
But we are headed in the right direction, moving closer to the day when software companies can worry about software and car companies can worry about cars and our health care system is an advantage for American businesses, not a burden.