April 19, 2011
Thank you, John, for that introduction. It’s great to be with you today. And it’s great to be back in Atlanta. From the CDC to a growing health IT industry, Atlanta plays such an important role in keeping America healthy, and I’m pleased to be back here for the sixth time since I became Secretary.
Today, I want to talk about a question that affects Americans in every big city and small town across the country. Over the last few weeks, I’m sure many of you have followed the very passionate debate in Washington about the federal deficit. As a parent and a patriot, I believe this is one of the most important conversations we can have.
I was fortunate enough to grow up in an America that had the strongest, most innovative economy in the world – the America of the Apollo project, Silicon Valley, and the world’s best colleges and universities. I was also fortunate enough to grow up in an America that provided basic security, including health care, for seniors and our most vulnerable citizens – the America of Medicare, Medicaid, and Social Security.
In my lifetime, this formula has helped America thrive. Wise investments in innovation, education and infrastructure – combined with protection against bad luck and the inequities of life – have helped America remain the world’s leading economic power, while banishing the days when seniors had to sell their homes and empty their savings to avoid going bankrupt.
But in order for our children to grow up with these same advantages, we need to be able to pay for them. And to do that, we need to address the long-term deficit left by a decade of unfunded spending and tax cuts and a historic economic crisis.
In the past months, several plans have been put forward. One thing they all have in common, including the President’s plan and the House Republicans’ plan, is recognizing that you can’t address the long-term federal deficit without also addressing rising costs in Medicare.
And with Medicare spending expected to rise 91 percent over the next decade, there’s no doubt we need to do something.
But two very different paths for lowering Medicare costs have been proposed. And the path we choose will have a huge effect not only on the future of Medicare, but also on the future of our entire health care system.
President Obama’s plan starts with the fact that we don’t have a Medicare problem; we have a health care problem. In fact, Medicare spending per beneficiary has consistently risen more slowly than private insurance premiums over the years.
There are two reasons Medicare costs are still going up too fast. One is that America is getting older. But the main reason Medicare’s budget is rising so quickly is the same reason budgets are rising for private insurers and everyone else: the underlying growth in the cost of health care.
So President Obama’s plan starts by identifying the correct problem, which is the rising cost of care. Next, he asks: what can we do about this? And the answer is: we can improve care.
I admit, this sounds suspicious. Better care and lower costs. It sounds too good to be true.
But when you look at other fields, you find that doing it right often costs less than doing it wrong.
Think about computers. In 1972, you could buy a pocket calculator from HP for $495, about $2,600 in today’s dollars. Today, you can buy a calculator that is many times more powerful for a dollar.
That’s the power of innovation. And if you know where to look, you can see the same results in health care.
In Denver, Colorado, they’re working to make sure patients get seamless care from hospital to home. They’ve cut hospital readmissions for Medicare patients by nearly ten percent. And it’s part of a fourteen city pilot project that has already saved $100 million.
In Michigan, a coalition of hospitals began using a simple checklist that reminded doctors and nurses to take simple steps like washing their hands before procedures. In just 18 months, they saved 1,500 lives by reducing infections and cut costs by $200 million.
What these communities are finding is that it pays to deliver care right. So why haven’t these models spread the way cheap calculators have?
One reason I hear when I talk to business and health care leaders is that Medicare has often been a follower, not a leader. Employers and hospitals have worked to make care more effective, but with the biggest and most influential player dragging behind, progress has been slow.
President Obama’s plan is to speed up innovation by making Medicare a force for improving health care. And last Wednesday, he proposed several new steps to do that that will save hundreds of billions of dollars in Medicare and Medicaid over the next decade.
But this isn’t a new focus the President or for this Administration. In fact, you don’t have to look far to see an example of how Medicare can bring down costs by improving care. Just look at the Affordable Care Act, a bill that will reduce Medicare costs by $500 billion without taking away a single guaranteed benefit.
For one example of how this is happening, consider the story of Gail Richardson from Stone Mountain, Georgia. A few years ago, Gail broke her ankle. She went into the hospital for a surgery to fix it. But two years later, she noticed something wrong.
There was a lump filled with pus under the skin on her ankle. And when she went to the doctor, they discovered she had gotten an infection during the surgery.
So two years after a simple operation, Gail had to go back to the hospital to have another surgery to remove the screws they had put in her ankle. Then she needed a catheter inserted into her body so she could take IV antibiotics at home. And then she had to get weekly visits from a home health nurse and additional treatments at a doctor’s office to make sure the infection went away. With every extra treatment, it meant another expensive bill.
We’d like to believe that what happened to Gail is rare, but it’s not. One recent study found that as many as one in three people who are hospitalized are harmed by their care. One in three. And these mistakes add billions of dollars a year to our national health care bill.
So one of the steps we’ve taken under the health care law is forming an unprecedented coalition for reducing medical injuries. We call it the Partnership for Patients.
It brings together Medicare with government partners like the Defense Department and the VA; employers like Motorola and Johnson and Johnson; provider groups like American Academy of Family Physicians; and hospital organizations like HCA and Tenet, each of which run several hospitals right here in Georgia.
Altogether, we have more than 1,100 partners already signed up, including more than 500 hospitals, and that number will continue to grow. And we’re backing it with $1 billion in Medicare funding from the health care law.
We know these injuries are not the fault of our doctors and nurses. We have the best trained and best-equipped health care workforce in the world.
Instead, good people get trapped in bad systems with too much complexity and fragmentation.
So we’re bringing all the players together to work to improve these systems with two goals for the next three years: reducing preventable injuries in hospitals by 40 percent and cutting hospital readmissions by 20 percent.
If we achieve these reachable goals, we’ll save 60,000 lives and prevent hundreds of thousands of complications. And we’ll also reduce costs by $50 billion in Medicare over ten years and tens of billions more across our health care system.
We believe this partnership is a terrific model for how improving care can save money not only for Medicare, but also for families and businesses across our health care system.
But given the size of the challenge we face, we can’t rely on any one strategy. So under the health care law, we’re also taking several promoting innovation in other ways.
For example, we’re now working to establish a very novel principle in our health care system, which is that we should reward the care that’s most effective.
To do that, we’re helping groups of hospitals and doctors form what are called accountable care organizations where they share the savings if they keep their patients healthy and out of the hospital. And we’re tying Medicare payments for hospitals to the quality of the care they provide. Referring to some of these changes, one Georgia hospital CEO said: “It isn't just good to do quality. It is going to be necessary to do quality.” We hope that attitude keeps spreading.
We’ve also created a new Innovation Center in Medicare and Medicaid that is charged with developing and testing new models for improving care.
And this is all part of a broader effort to improve our health care system that includes a historic investment in electronic health records, a new national focus on prevention, and the insurance reforms in the Affordable Care Act which will give every American access to affordable health coverage for the first time.
We believe the best way to put Medicare’s finances on a more stable path is by making Medicare a full partner of the doctors and nurses who are working to improve care across the country.
If we can do this, we could set in motion a transformation that would benefit all Americans. That’s why employers are so enthusiastic about the new patient safety partnership. They know that improvements that start with Medicare will spread across the health care system, bringing their insurance costs down too while keeping their employees healthier.
As the CEO of Honeywell, one of our partners, told me the other day: his company has seen innovation drive down costs in almost every area of their business. Now, they hope the same thing will happen with health care.
This is the path towards reducing Medicare costs that we’ve taken under the Affordable Care Act and President Obama’s deficit plan. It’s a path that focuses on addressing the underlying rise in health care costs by working with doctors and nurses to improve care.
But there is another path, which is simply to cut Medicare. This is the approach taken by the Republican budget.
Its solution for rising costs in Medicare is to turn it into a voucher program and have the size of those vouchers grow more slowly than the cost of care. The result is that ten years from now, a 65-year-old who’s eligible for Medicare will have to pay nearly $6,400 more for coverage than they would today.
This is a blunt approach. And it does have one advantage: it’s simple. With a few pen strokes in Washington, it shifts responsibility for dealing with rising Medicare costs from the federal government to Medicare beneficiaries. It takes a shortfall in the federal budget and turns it into shortfalls in the household budgets of seniors and the disabled.
The problem with this approach is that it does nothing to address what’s really driving up Medicare costs, which is the growing cost of health care generally. It does nothing for Gail and the millions of other Americans who are harmed in our health care system each year. And it does nothing for all the families and businesses in the private health insurance system who are also struggling with growing health insurance bills.
If we want to address our budget deficit, we need to address Medicare costs. And we have two paths for how to get there. We can choose to innovate and improve and move forward towards a future with better care for all Americans. Or we can choose to cut and move backwards to a past when seniors had to worry about going bankrupt if they got sick.
The first path is the one that got America to where we are today. And that’s the path that will allow us to leave a healthier, more prosperous America to our children.