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Health System Reform: Rhetoric vs. Reality

Monday, March 30, 2009

Federal Reserve Bank of Chicago and Detroit Regional Chamber of Commerce
Federal Reserve Bank – Detroit Branch Office
Detroit, Michigan

Joseph M. Heyman, MD
Chair, Board of Trustees
American Medical Association

Thank you for inviting me here tonight. And thank you for holding this conference. There is no question that reforming our nation’s health care system is a national priority; no question that if our nation is going to spend more than 2 trillion dollars on health care, we should be getting more for the buck.

Tonight, I want to try and cut through the rhetoric. I want to focus on what’s at stake – on what’s real; discuss what is happening from a physician’s perspective and from the perspective of a small business owner. I am like tens of thousands of other physicians who own their own business. Who – like me – have to make all the decisions regarding inventory, salaries, health care, and all the other decisions small business owners must make. You know what I’m talking about.

But I’m also the Chair of the AMA Board of Trustees. And that gives me a pretty unique and interesting perspective into the health care debate. Suffice to say – we’re taking a very active role in the national debate. A role that I think can be characterized by three main elements:

Collaboration – we may be the nation’s largest medical organization, but we know that reforming the health care system will take a combined effort from everyone – business, unions, insurance, those on the left, the right, and everyone else.

Change – as in the realization that reforming the nation’s health care system is desperately needed.

And the third element that you’ll hear throughout my talk – Commitment – that is, in order to effectively work together to reform the system, we must be committed to the big picture; to the realization that as an individual organization, we might not get everything we want, but we can’t let that stop our nation from doing what is urgently required.

I want to start by laying out some facts. If you only listen to the rhetoric, you might think the uninsured are poor; that they’re just looking for a government handout. But reality is far different.

The reality is that 4 out of 5 uninsured Americans live in a household where at least one person works. But that’s changing, isn’t it?
First, the latest data show that there are at least 46 million uninsured Americans. I say “at least” because that figure is from the U.S. Census Bureau back in August 2008. Since then, as you in Michigan know too well, hundreds of thousands of Americans have been losing their jobs every month.

Second, more than 60 percent of U.S. workers get their health insurance from employer-sponsored plans. But keep in mind two things:

First, that percentage has been decreasing for several years. And second, because millions more Americans are out of work today than they were a few years ago – even a few months ago – it’s very likely that the number of the uninsured might skyrocket the next time official figures are released. That’s just the reality.

Here in Michigan, it’s clear that people are suffering. According to a 2008 study by Families USA:

  • Health insurance premiums for Michigan’s working families skyrocketed over the last eight years, increasing by 78.2 percent from 2000 to 2007.
  • For family health coverage in Michigan, the average annual premium – employer and worker share of premiums combined – the average annual premium almost doubled.
  • Employers did not fare much better. For family health coverage in the state, the employer’s portion of annual premiums also nearly doubled; while the worker’s portion more than doubled.

Employers don’t want to cut benefits. But when it comes to a choice between closing the doors, something’s got to give.
It’s not just here in Michigan where American families are struggling. About 57 million Americans were in families that had problems paying medical bills in 2007.

That’s 2007. Slightly more than half of Americans say their household cut back on health care due to cost concerns in the past 12 months. Working mothers and fathers are putting off seeing the doctor and going to the dentist. Parents are being forced to decide between paying bills or filling prescriptions. Seniors are cutting pills in half or skipping doses to make a prescription last longer.

That’s not health care. That’s a prescription for disaster. And that’s just the reality.

There are more problems than just the uninsured. Some people suggest we need to spend more on health care. Keep in mind that our nation already spends more than 2 trillion dollars on health care.

By 2018 – without reform – our nation will spend 4 point 4 trillion dollars. Today, health care is 16 percent of GDP.

By 2018 – without putting the brakes on cost – health care will eat up more than 20 percent of GDP. That’s beyond un-sustainable by any measure. But it does raise the question: If we’re spending so much, what are we getting for our money?

Unfortunately, there’s no simple answer.

We have world-class innovation and some of the world’s finest hospitals and doctors. In 1900, life expectancy was 47 years. Today, it’s 78 and growing. We replace joints like it’s nothing special. I’m sure most – if not all of us in this room – know of at least one or two people who have had a knee or hip replaced. I’m sure that most – if not all of us know of someone who had arteries opened with a stent – or who had cancer detected with an MRI, CT or scope. We can detect and treat conditions today that would have been impossible only a few decades ago. Without question, modern medicine has improved countless lives and relieved suffering in more ways than ever before.

But we can do better. Research tells us that compared to other industrialized nations, we need to do a better job.

I’m an obstetrician-gynecologist. I’ve seen remarkable things in my career. We can keep premature babies alive today at 25 or 26 weeks. But infant mortality in this country has regressed. On the surface, you might think that means we’re getting worse. But keep in mind that the better the technology gets – the earlier we can deliver and try to keep a premature baby alive.

So are we getting “worse”?

It’s something to keep in mind when we read headlines how we spend more than twice as much as these other nations, but we trail in the rankings. I firmly believe that the U.S. health care system has the most talented professionals in the world. But that doesn’t mean we can’t do better.

Just as the AMA applauds President Obama’s commitment to science, our profession must take a hard look at our practices. We must continue to provide the right care, at the right time, in the right place. Sometimes it seems that the crises are just too much, doesn’t it? There are massive glaciers melting and the world is in a financial crisis of epic proportions. But health care is different than the global financial meltdown or global warming.

Yet, health care costs could easily be another fragile iceberg. Just because we understand the causes why our already-huge investment costs so much – part of the reform debate is about how to address those root causes. It’s won’t be easy, but it has to be done.

Health care dollars today are heavily concentrated on the terminally ill and the elderly. Medicaid dollars are primarily spent on long-term care. Addressing those costs raise issues of equity and fairness – issues easily twisted by rhetoric. But the reality is that we need find a better way to finance long-term care.

We also need to ensure that the most effective treatments are used whether you are in Boston, or Detroit, or any town or city in the country. Patients should be receiving the optimal treatment for conditions ranging from hypertension to hysterectomies.
But keep in mind that every patient is unique. We must perform at the highest levels – without question.

But the reality is much more complicated than simply applying the same treatment to every patient. We need to be open to new ideas – and we also need to look at the proverbial low-hanging fruit.

One place we can look at for savings are administration costs. The U.S. health care system definitely has its strengths, and the AMA is a firm believer in the benefits of competition in the private sector – but consider that in our system, we pay more for administrative costs than most other industrialized nations. There is definitely something to be said for reducing administrative costs that do nothing to improve our health.

Reform can be accomplished. In fact, there is a general consensus in Washington, D.C., that health system reform must be accomplished.

“We can no longer afford to put health care reform on hold.”
-President Barack Obama, Feb. 24, 2009

“Rising health costs undermine our strength in the global marketplace.”
-Sens. Baucus and Kennedy, Feb. 26, 2009 WSJ

“We can achieve health-care reform in America . . . if we do it in a truly bipartisan basis.”
-Sen. John McCain, Feb. 25, 2009, CNN

These quotes were from before the recent White House summit on health care – and the summit only reinforced the commitment by all sides to reform the system.

Some people might see the effort to reform the health care system as a search for the Holy Grail. Maybe that has some truth to it.
But this reform effort is going to require a lot of knights in shining armor who put the big picture above holding fast to individual wants and desires.

The reality is that the recent summit brought together more than 100 groups and individuals to create a framework to get this done.
It’s nothing short of remarkable that groups ranging from the AMA to major national health insurance groups to the Chamber of Commerce to patient advocates to national unions – all types, shapes and sizes of other interested parties sat down in the same room together.

I should note that Michigan was well-represented at the summit. Senator Debbie Stabenow and Representatives Dave Camp, John Dingell and John Conyers all participated. We look forward to working with them in the coming weeks and months.

What’s more – all the people and groups are all relatively on the same page. “Relatively on the same page” is actually really good. And, it’s the reality.

It’s reality, too, that the devil is always in the details. But consider that the last time a President tried to get major reform done –
many of the groups at the Summit, including the AMA, were not invited to the table. We were shut out because we wanted things our way or no way at all.

Guess what. This time, everyone is approaching the reform effort differently. If they don’t, they’ll get shut out.

Last time, the rhetoric of Harry and Louise wound up shaping the debate. Remember them? It was a powerful campaign to make sure nothing changed. It worked. And nothing really has been tried since then. But today, Harry and Louise might wind up smiling.

“You have our commitment to play, to contribute and to help pass health care reform this year.” That’s from the CEO of America’s Health Insurance Plans. She said that to President Obama at the March 5 White House Health Care Summit. Her commitment to reform is a far cry from the 1980s.

Today, they are AHIP. But in the 1980s, they were the Health Insurance Association of America – the same group that gave birth to Harry and Louise. We are very encouraged that AHIP and many others have committed to health system reform this time around. Today, the climate is ripe for reforming the health care system.

In the 2008 Presidential election campaign, all major candidates made a commitment to reform.
The AMA began talking with both the Obama and McCain campaigns last summer and fall. We continued talks with the Obama transition team after the election. And we’ve kept those talks ongoing.

We’re working closely with the major players in D.C. – and with our grassroots partners across the country.

Overall, the AMA has clear priorities for health system reform. We need health system reforms that include:

  • Covering the uninsured;
  • Improving quality and patient safety;
  • Ensuring the best value from health care spending; and
  • Focusing on keeping Americans healthy through preventive care and healthy lifestyles.

Many Americans need look no further than their own families, friends or neighbors to find someone without health insurance.
I mentioned earlier that there are at least 46 million uninsured Americans. That figure is bound to get larger.

That is a national disgrace.

If you are uninsured, you live sicker and die younger. That is unacceptable – and yet, that is our current situation.
As our nation’s economy continues to worsen; as health care costs continue to rise; there are fewer and fewer options for employers and employees.

And when it comes to health reform – the actual experience of putting a plan into practice, my home state – we call it the Commonwealth of Massachusetts – enacted reforms in 2006.

A few points about the legislation:

First, it was bipartisan.

Second, one of the goals was to create nearly universal coverage. There were various provisions for government assistance with connecting people to health care insurance providers, market reforms, subsidies to low-income residents of the Commonwealth, and more. Remember – even though you might want a goal of 100 percent coverage, there will always be some who will not participate.

That said – we’ve seen a 10 percent decrease in the number of uninsured.

More people today have access to a primary care physician. More people today are having their unmet needs actually met.
Overall, access to care is improving for many segments of the population.

In our legislation, there was an employer mandate.

Employers with 11 or more employees would have to pay a “Fair Share” contribution annually per employee to the state.
What we’ve seen is that while the rest of the country’s employers offering insurance continue to decrease, Massachusetts employers have held steady – even slightly increasing.

Another very positive sign was that in 2007, the financial performance of hospitals, health centers, and health plans was positive.
And while performance in early 2008 looked positive, the economic downturn will likely have an undesirable effect.
Like Michigan, Massachusetts has a diverse population.

Since our legislation has been in effect, we’ve seen a significant decline in uninsured among low-income, among part time workers, and among Hispanics.

Financial barriers to access have decreased.

And the percentage of Massachusetts residents who report having a regular provider has increased for the first time in years.
However, disparities in access to care remains high – and remains something we have to address.
We also have to closely monitor a few other areas.

First, we’re finding that the balance of long-term care for the elderly and disabled is shifting to community settings.
We also continue to be concerned about physician workforce shortages in many specialties.
Keep in mind that even if a state – or a nation – enacts “universal” coverage, there have to be sufficient numbers of doctors and health care professionals to see the patients.

It would be like passing universal employment – a great idea, but one that doesn’t necessarily work.
Ultimately, we’re encouraged by what we’re seeing, but it’s still a work in progress – a work that is trying to focus on the big picture.

The AMA also has a plan to cover the uninsured that focuses on the big picture. The AMA plan to cover the uninsured builds on the strengths of our current system.

Let me be clear that while the AMA is working closely with the Obama Administration and Congress, reforming the nation’s health care system does not mean we support government-run health care.

Our nation is home to world-class medical innovations and research. We have the world’s best doctors dedicated to the health of their patients. We need to use the strengths of the private – and public sectors.
We think our plan strikes the right balance. Our plan is based on three pillars:


  • We want to make health insurance affordable for all Americans –
  • Particularly lower-income Americans who don’t qualify for public programs –
  • By giving them tax credits for the purchase of health insurance.


Increased choice in a public and private system will allow Americans to be more involved in their own health care decisions and shop around for the best care for the best value.


  • Insurance market reforms that establish fair ground rules are needed for the market to properly function.
  • This will help protect vulnerable individuals without unduly driving up premiums for the rest of the population.

I think you can see that the AMA plan is not just about giving. And it’s not about simply telling our patients to put down the triple cheese fat-burger. It includes the realization that patients have a shared responsibility in their health. It includes promoting wellness and prevention.

Government can’t – and won’t – do it all for us. We have to do a better job of taking care of ourselves.

When you consider the major determinants of our health, you should begin to see that there are some factors – such as genetics – that are largely beyond our control. But there are some factors such as our behavior and our environment that we can control – at least we can try.

Access to care also definitely plays an important role. Promoting wellness and prevention means aligning insurance benefit designs with evidence-based disease prevention. It means investing in initiatives to promote healthy lifestyles. It means saving billions – if not trillions of dollars.

And just as a side note to show you that the AMA is trying to its part by helping our doctors help patients, we’ve developed something called the Healthier Life Steps program.

It’s a comprehensive online tool kit designed to ignite greater discussion between patients and physicians about healthy lifestyle choices. For free, physicians can download patient screening checklists, intervention plans, motivational tools, and other program components. These are resources that your companies can use as well. You can take a look for yourself at www.ama-assn.org/go/lifesteps. Prevention and wellness clearly makes sense from a health standpoint. Prevention and wellness also makes sense from an economic standpoint.

As the baby boomer population ages, we can expect an increasing demand for health care services. In part, this will be due to the increased number of Americans suffering from chronic disease. Consider that in 1950, there were only 12 million people age 65 and older. Today, there are nearly 40 million more than 65 years of age. And by 2050, there will be nearly 90 million.

Are we ready? Are we doing everything possible to lessen the burden of chronic disease? I don’t know if we’re doing “everything,” but I can tell you that the AMA is providing resources to help medical students and practicing physicians care for the aging population.

We also are engaged with the CDC, AARP and others.

It makes sense for us – and it makes sense for you as well. For a business, reducing the burden of chronic disease can decrease lost productivity and health care costs. And most important – it can help your business care for its employees. That’s what I call helping the bottom line.

Speaking of chronic disease, let me talk for a minute about the way Medicare reimburses physicians. The Medicare dilemma physicians face looks like the open jaws of an alligator. But you don’t have to be Crocodile Dundee to see that the widening gap between what it costs to run a practice (even by the government’s very conservative estimates) versus what Medicare pays are going in opposite directions. It’s a ridiculous situation and an unsustainable trend.

We were very pleased to see President Obama’s proposed budget to Congress include provisions rejecting planned cuts.
Like many of you, I’m a small businessman. If my practice costs go up faster than my reimbursements, I won’t be in business very long.

I won’t be able to invest in new technology. I won’t be able to hire staff. I won’t be able to pay my bills. But that’s what government has asked physicians to do year after year. Here in Michigan, more than half of your physicians say that future Medicare cuts will cause them to discontinue or limit the number of Medicare patients they see. Your physicians are forced between caring for their elderly patients and continuing to be able to run a practice to care for all of their patients. If in your business – your customers give you $5 for products and services that cost $10 to provide – how long will you stay in business?

The good news here is also the bad news.

We know that the government needs to fix the problem. Government knows that it needs to fix the problem. It doesn’t get reported very often, but physicians nationally already provide tens of billions of dollars in uncompensated care as well as tens of billions in care that is uncollectible debt.
This is not a matter of providing more charity care. This is an issue where physician-business owners are forced to layoff staff; to cut hours; and sometimes, to end their careers early. Reforming Medicare is an important piece of overall health care system reform.

So the next time you hear insurers complain about not getting enough money, ask them why their reimbursements should increase each year while doctors – the ones who actually care for patients – only see the widening gap between cost of care and reimbursement.

We understand the need to reduce cost and increase value. This is something we try to do in our everyday life – and in medicine it’s a little more complicated – but the idea remains the same. What also is complicated is separating rhetoric from reality in the health reform debate. That was a challenge at times during the debate over the recent economic stimulus bill.

Here are the facts.

The economic stimulus package provides approximately $19 billion in Medicare and Medicaid incentives over five years to assist physicians in purchasing health information technology (Health IT) systems. This is the first substantial federal funding provided to help physicians implement Health IT systems – Systems that will generate benefits across the health care spectrum. The bill has carrots and sticks. The carrot is the financial assistance. The stick is that physicians who do not implement Health IT systems will see Medicare payment reductions starting at 1 percent in 2015.

Two points about this:

  • One – throughout the legislative process, the AMA urged flexibility in implementing these provisions.
  • Two – we have made it clear that these incentives are doomed if Congress fails to address the long-term viability of the Medicare physician payment system.

I also want to clear up the rhetoric that the stimulus bill will give the government the power to tell doctors what treatments to use.
The wonky term is “Comparative Effectiveness Research.” There have been some people who’ve said that the government “will monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective. There is no such authority in the legislation.

The simple truth is that the AMA and many other health groups have endorsed the concept of research to provide physicians with information on the comparative effectiveness of different medical treatment options. Physicians and their patients both can benefit from research that demonstrates whether a particular treatment option results in better outcomes.

But let me emphasize that research findings should be driven by clinical evidence and not be used solely to identify and promote the cheapest treatment option. We already have successfully advocated that entities conducting this research not make coverage and payment decisions. There may be some who attempt to demonize any effort by government to improve the system.
I’m sure that in your work as economists, financial analysts and business owners, you’ve come across people who are quite convinced that the sky is falling.

In today’s economic climate, I actually have thought that myself at times. But when it comes to the stimulus package, it contains no authority for government to restrict payments or make coverage decisions. I hope that clarifies things. I hope that you see that the health care provisions contained in the stimulus bill mark just the first step of a longer journey toward health system reform.
The first step that we have taken with the business community; with the insurance industry; and with patient advocates across the political spectrum.

I hope that we can continue to work together as well as we currently are doing.

I know that if our nation has any shot of meaningful reform, we must continue to work together.