tv Health Care Policy Conference Private Insurance Panel CSPAN October 27, 2017 8:00pm-12:01am EDT
i did and then it turned on me. some upon my hair and body slammed me. >> also discusses the violent protests on the campus last march following a scheduled lecture. watch on q&a. >> coming up on c-span2, look at healthcare policy. first officials talking about the role of private health insurance providers in efforts to create more choice in the marketplace. follow by sylvia burwell discussing her experience of the affordable care. then henry waxman talking about the price of prescription drugs and what lawmakers can do. . . . .
first of all, i'm an associate pastor at the public affairs american university and i am delighted to moderate this panel. today we're talking about private insurance subsidy first ever selection. i'm sure everyone in this room knows prior to 2014 the private insurance market in the individual market was the wild west. people would buy health insurance that was fully inadequate and extremely expensive but on the other hand you had people with employer-based insurance who were very happy with it as the model if you like what you have,
you can keep it. the aca was very much focused on changing and improving the private individual market but also preserving the employer supported insurance market. today we will hear from for experts with unique and intricate knowledge about the development, implementation of the future of private insurance and individual market and elsewhere. you have their files and i won't read their list of expertise. first, we had joel michael, partner at mcdermitt, will and emory an adjunct professor at the sandra day o'connor law university. >> good morning everybody. what i thought i would hit are some of the issues that affect insurers and how they view the market. let me make sure this is. so, here are some of the major themes of white insurers who are
used to having picked ability in the way they write coverages and plan benefit plans and rates it has been a marketplace that has been anything but double and a lot of that is driven by legal and policy changes. the whole discussion that has evolved on capitol hill, will the affordable air care act be repealed or replaced? for how long? that's a short-term gap measure so is it a full repeal in all of those questions determines where the legislation is going and it creates an atmosphere of uncertainty. then the other question is what is the process to implement changes to the affordable care act -- is it through executive order, is it through an agency policy change, is a through formal rulemaking or statutory amendment? i will say that the ease in which former policies were made through various channels you may
see some of that revisiting in reverse with the weight changes are made to the lost now. process, notice, rulemaking and those protocols may be put to the side as changes to the policies are limited. as we have seen with such things as dramatic cut back in agency marketing and the like. then of course what impact will the court decisions have on certainty and what we have is conflicting court decisions and many of the issues affecting insurers and a good example of that is the risk quarter litigation with 22 cases and the federal court claims has come to different outcomes as to whether the monies are owed to insurers or not and we will see once the issue is up for the federal circuit and how that is results.
then consumer understanding and it's a tough enough loss to understand and interpret and figure out what your obligations are but how do consumers understand all of this legal uncertainty. do they understand that when they hear the idea that there is an association health plan is tentative coming and that is by executive order but ultimately it is an invitation for rulemaking which has a potentially long tail to it and will consumers sit back and say i heard about the stuff and the president has set x, y and z but i will hold back and not purchase insurance through the traditional markets for the time being. then what does this mean to the health insurance themselves. at what point do you finally say i knew i wanted to be in this market and all of this uncertainty is much too much and i need to be able to be more
predictable and publicly traded in a for my stockholders and i am just going to move out of the market until it becomes legally more consistent and more clear the kaiser family foundation has interesting data. in 2017 there were 4.3 issuers. state on average and in 2018 that number is down to 3.5. then the critical question for a lot of insurers particularly in the beginning of the program was the issue of premium stabilization. can i be sure of who i will get and what protection does the law provide to me as an insurer and making sure that i will not take a massive loss when these individuals hit the market for the first time. as i mentioned before the risk quarter figures one part of that program but when you look at it a lot of insurers right now are standing in line and haven't
received those risk quarter payments and these are significant amounts of money in terms of what it means i saw one piece of data that suggests the shortfalls amounted to 4% and 7.5% of premiums for 2014 and 2015. this is far from chump change and a significant amount of money that are do these insurers and there is also some question and at least in 201,516 whether the reinsurance payments would be in jeopardy and there was legislative activity up on the hill and questions about the issue of appropriation and making sure that so much of the collections for the reinsurance premiums were reallocated to the treasury and so far those payments have not been disrupted to insurers but it did create some unease. then there is this whole issue of the risk adjustment process and you better get used to risk
adjustment because there will be a lot of legal questions going forward as there already has been with this process and not only in the commercial insurance market but also in medicare advantage. it's a formula a concept that is subject to a lot of adjustments and data changes and has an amazing financial impact as well as impact on market enrollment. then i would say the other thing is when you look at all of these issues of premium stabilization in the uncertainty and couples with the recent decisions to cut back on csr payment is is it unreasonable for health insurers to look at the program and say do i have a reliable partner that i can count on when it comes to any kind of cost sharing responsibility under this program. i mention the risk adjustment impact and the idea at one point
was there will be these new startup co-ops and they would be great and actually it is the smaller new start plans that have the most difficulty with risk adjustment and many of them found themselves with huge bills to pay back to cms on risk adjustment formula. they were on the brink of insolvency if they went ahead and made those payments so they went into federal district court and tried to get an action to enjoy cms from collecting these money and the outcome was the courts were not going to hold back the enforcement of the risk adjustment approach and at least in three cases the evergreen plant in maryland and the minuteman plan in massachusetts and i think the new mexico plan and these were plans that were
litigation challenging the risk adjustment formula and two of those plans have gone down. the third is trying to negotiate a buyer to prevent the insolvency from occurring. the other is not just new start plans but also providers, sponsor plants. a number of health systems and saw this is a great opportunity when the law was passed to get into the insurance business. it is more complicated than one thing and the idea of how you master risk adjustment was new to a lot of these plans and particularly plans who were undergoing rapid growth and had no experience with the enrollments. they really did not know the health status of the individuals and if you don't have good mechanisms in place to capture the health status of those individuals which triggers these payment applications on risk adjustment you can find yourself on the short end of the stick
and that is exactly what happened to [inaudible] they announced in august they were withdrawing from the market and that was after losses 157.8 million in 2016 and another 59.9 million in the first half of 2017. these are systems that have resources and the withdrawal from the market will be painful as opposed to letting the plan go through receivership. so, what has the government done? it is not like this has been a total absence of attempts to stabilize the market. there was a market stabilization roll that was developed and released on april 18 with the effective date of june 19. it did some things that the insurance agency would favor. for example, when you look at the question of adverse selection and when we talk about that today there is a way to look at it from the consumer approach. what i mean is are there and i
will call them gaming of the system that consumers can engage in two time when they buy health care coverage. that is a form of adverse reaction. with the very liberal, i will say, grace. premiums due under the program a lot of games were played about not paying premiums, enrolling in another planning getting another grace period and so on and so forth. these rules tried to avoid that. also, special enrollment. they became potential for abuse to individuals to wait till they needed coverage and then through special enrollment cycles enrolled in the coverage for that cycle. these rules tightened up those particular provisions so that it would be harder to have this gaming of the system. but, there were other provisions in the rule to but these were the ones that had the most direct correlation to adverse selection. some people would say what about the shortening of the opening enrollment. and also with recent cutbacks with marketing and advertising funds from the federal agency
the speculation is that too might have an impact on adverse reaction. in other words, who will be the most focused on getting health care coverage in a period of uncertainty. the people who have health status problems and need the coverage they will be right on it but the healthy, the younger folks will probably remain passive and not actively enrolled. we will see if that plays out do this open moment. then there is the question of the individual mandate. is it to be enforced or not? there was this executive order i think last january where the president put out which in essence gave the signal that they could waive deferred grant exemptions from or delay the provision of any requirement affordable care act and the question the speculation at the time was this is a signal that
the individual mandate would no longer be enforced. there were some things going on at the irs at the time where they were not collecting a certain information about other coverages that people started to interpret with some form of a policy to suggest that this idea of the mandate did not exist and was now being carried out by the irs and at the end of the day that was more confusion than it was reality and the irs believed appropriately that it had an obligation to collect the information and enforce the laws and that is too much where we are today. in a rising premium environment and in light of all this uncertainty what impact does the individual mandate have on people's purchasing decisions. again, ties with family foundation says most are unaware that the individual and most are aware that the individual mandate is still in effect but for intent of uninsured are unaware or unsure about the individual mandate.
so, then the next question is what is going on with other executive orders and this issue of choice. i think the question here is when you give people choices about coverage options, it can potentially have an adverse impact on the risk pool depending on what those options are. this issue of choice has a history and it didn't start with this current administration but has a history with the transitional plan exceptions, president obama same and if you like your plan, you can keep it. that was the beginning of maintaining coverage options outside of these marketplaces that insurers would say would adversely affect the insurance pool. the current administration has come out with some other ideas
in the new executive orders and one is to expand short-term limited duration plans which have historically been viewed as accepted benefit plans and not covered by the requirement. they were narrowly defined by the prior administration. why? because by granting this kind of choice with more folks believe the concern it was take over and weed out more of the better risk selections to these kind of products. the other thing was an association health plan that the executive order just recently put out and this will again take time. it, too, will have arguably the same effect of draining off the better health risk. why? because if you are in association health plan and rather than taking the current view which is i will not look at
the association in the aggregate and i will look at each employer group member that is a member of that association you get very different results in terms of premium rates and in the case of an association plan where it is not aggregated the premium rate limitations of the portable tracks would apply. this also, by the way, is an awful lot of confusion about these association health plans and are we talking about insured association plans, real insurance policy issues and yes, they would be requirements of state insurance law and the affordable care act would apply. or are we talking about self insurers association healthcare plans that would have the reach to go across state lines without worrying about state insurance laws and as a result, be free of a lot of the requirements of the affordable care act in the process.
i know i am running short time and i think i have expired my time. me the last point here be as we look down the road and the bipartisan approach to deal with some of these issues. one, to take out the issue of legal ambiguity on the csr which will talk about to create definitive amounts for marketing and 2018 and 19 and you can get 2018 at this point. expand access to catastrophic coverage and when you look at those particular approaches you wonder why that isn't and why does that create adverse selection and if you look at the bill they are talking about the policies being part of the same risk pool and with the subject to many of the same applicable requirements guaranteed availability, no pre-existing conditions and the like. then, the last is forming the state waiver process and permitting great latitude to
stakes to introduce reinsurance. when you look back on premium stabilization the risk quarters were financial problems and risk adjustment has been in a people and the one piece that seemed to work pretty well was reinsurance and yet that is now expired. giving states the ability to stabilize the market for reinsurance features is probably a good idea from an insurer's perspective. i will stop at this point. >> thank you so much we will hold questions for the end. next, we have a gene who is senior fellow at the century foundation and former deputy assistant to the president for health policy for president obama. >> thank you very much. we will switch gears a little bit and pull back up and talk about why the affordable care act is haven't word as well as how they can be improved. i do that because when you think
about all the trials and simulations at the aca over the years and i think most pendant saw on the morning after the election the ac would not survive a year later. yet, we are heading into the enrollment. and there is still a marketplace of people are still signing up and in large part it is working with improvements we made. i would like to discuss three factors about why the marketplaces have continued to operate despite what some people call sabotage by the initiation. first is a statutory design. when you look at the design of the affordable care act it was drafted learning a lesson from inform including state experiments and it was in short, designed to bring in three different people. first, people with pre-existing conditions. people who were prohibited or barred from insurance because of practices that ensured the use of the nine coverage people who
had pre-existing conditions, medically underwriting the premiums, adding annual and lifetime caps on benefits that does a personally affected them and having the selected coverage of benefits for the benefits that were extensive or needed by or excluded. those were prohibited by the portable correct and those people came in. second, we included premium tax credits and subsidies to help the low income uninsured who were out because they couldn't afford it get into the individual insurance marketplace. third, to help these high income, uninsured people who didn't really care for coverage but in this new world could get it whenever they needed it we had the individuals share responsibility requirement and if you can afford healthcare coverage, you should have it or pay a penalty, if not. those three groups of people came together in this way to health insurance market places and despite claims when we were entering into that first
tumultuous open enrollment in 2014, and claims now where we are entering this bit and tumultuous open enrollment given the policy changes this is know the spiral in the system. there actually can't be by design and that is primarily because of how the premium tax credit is design. the premium tax credit are linked to actual premium cost. when things rise, they rise and when they fall they fall. that means premiums are pulled up by having sticker people in individual marketplaces and so too are the premium trend [inaudible] in fact, if you look at 2017 a year ago there was reports about the high premiums and skyrocketing and this could be the end of the marketplace we now have data from the first couple quarters of 2017 that show that despite over 20% premium increases for 2017 the monthly claims costs have increased by only 2.7%.
suggesting that it wasn't just the people who came in and we didn't lose how the people and the marketplace is still a decent risk and that's a new study came out today by brookings institution. second, if premiums are forced up because of stock cost-sharing reduction payments as jewel just mentioned, they rise as well. we are now seeing new reports of the high rate of premiums going up over 30% in part because of the policy changes permitted by the administration and in the coming days if people begin to get the data released this week i think you'll hear a lot about people with subsidies in premium tax credit been able to buy plans for free and they will have a bigger tax credit which could, again, bring in more young and healthy people contrary to expectations. that is a structural to the legislative divide of the correct. second, is careful regulations. we use every tool we have to engage experts, stakeholders, state officials, consumer groups
that included white papers, conferences, request for information, advance notices, guidance because we wanted to have a very robust and learn the process to make sure we implemented things and changed it over time and while some people would argue that created uncertainty it also created adept to be. most recently, for example, we did tighten up special moment rules and verification procedures for 2017 to 2018 and the risk adjustment program we made changes that were requested adjusting for [inaudible] who may or may not be healthier and created a high cost risk pool where we have certain type of reinsurance program being paid out through the risk adjustment for people with claims over a million dollars and again, looking at the early performance for 2017 what we are finding again is that these systems may be working. it also looked at gross profits for the first two quarters of 2017 and found that compared to
pre- aca profits dropped in 14 and 15 and in 2016 they were about the same as they were before the affordable care act and now they are for the second quarter twice as high before the affordable care act. again brookings analysis would say they have had there not been a starcrossed production had there not been the changes we actually could be seen single digit premium increases next year. third, attribute some of this stability in the marketplace to the fact that it is working. i think there is some question about their arctic successes but the old and ministration is gone and the new and ministration as they are and are you defenders of the marketplace and our people like the insurance commissioners. historically they mostly and bill can attest to this spend time complaining about the burden and complexity and all the things that we were imposing upon them yet, in september when there was bipartisan hearings on the aca they were star witnesses
saying don't get rid of the portable correct, improve it and here are sensible pieces to do it. similarly, health insurers we are not cheerleaders of the aca and we do not support this passage and they changed every step way in the implementation and i will personally say that last fall when these premium increases were proposed they were screaming to the sky is falling and they contributed to this debate this year about the imploding obamacare market place. yet, in the last couple of months they, too, have used their voices and their influence to say we think this is working, don't get rid of it, improve it and coming to the table with concrete suggestions. i think the most obvious reason that we think these insurers are bought into the marketplace is there is not a so-called bear county in addition where insurers are just abandon it and the nation is covered and they will be offering open enrollment again and that's partly because insurers have recognized that there is something to be said for this place.
last but not least, this year and this is more about the legislative debate is a testament to citizen engagements. from the little lobbyist on the hill to jimmy kimmel to people really trying to understand and engage in social media about the health performance debate i think it has changed the nature of our health policy discussion so it is not limited to nationals like us but i have a right to an opinion and get involved and tell me what to do and how can i act. that manifested itself through the summer in the legislative fight in congress but i am cautiously optimistic that that also could be captured to help people sign up during the open enrollment. there are efforts to going on to figure out how you can raise awareness once you get the information out there about what is available to people and some counter to the uncertainty and confusion the consumer space going into open moment. now, i will stop and say my
former boss, former team, we were quick to say at the start all the way to the end of course no law is perfect and it can be improved. we learned along the way and there is much that can be embraced to make things better. from the start, for example, we thought the premium tax credit could be more generous and we really cut off in a pretty low level and there were a lot of middle income families the still can't quite afford coverage. deductibles are often a barrier to access to healthcare and economists say a thousand dollars is good and roughly $2000 higher in the marketplace you could change that in policy higher cost-sharing reductions or linking premium tax credits rather than the silver plan you can target young adults in more efficient ways. bump up premium tax credits. the corporation did an analysis that if you did of the dollar add-on to premium tax credits for young adults you can get 1 million more young adults. that's a policy that is not [inaudible] getting young people and by raising people so older
people [inaudible] that is a saying that is young adults and get them in and everybody wins when they went. they went in the older adults due to when premiums go down. joel talks about reinsurance program and every major insurance company in this nation through the part d program has reinsurance. reinsurance is way most well insurance works. having a permanent program makes a difference. i will say it is hard to talk about these instructive improvements when the real catchword of the day is do no harm. joel talks about the bipartisan healthcare stabilization act. it's primary benefit is preventing a step backwards. apex the payments for at least two years and restores the outreach money for two years and does have some of the other policies that joe mentioned yet all of that positive should be enacted could be undone
depending on the rules that come out of the executive order. if, for example, short-term limited duration plans which are old policies from the pre- aca days and three have but days in 1986 their policies that fought for three months were a couple of months in between jobs and issuer started filling them for 364 days a year and they are not regulated and if you think about that that's not long-term maturation but getting around regulation and trying to sell to people who otherwise could be underwritten in a positive way and that could undermine the market place. that is a sure way of saying we had to keep our eye on these executive actions because the congressional advances could be set back for their regulation. i will end by being cautiously optimistic. i think if you historically bet on what people would do for kate that would happen it should have been a much bigger disaster than
it actually has been even going into this open enrollment. i do think that trying to focus on the positive improvement, the city state and things that haven't been undone in the regulation and executive branch is equally important. "much. >> thank you. next, we have [inaudible], former general counsel at the moment of health and human services. >> thank you. i want to start by complementing american university on this conference. the affordable care act was the culmination of 25 or 30 years of work by people on the hill, executive branch, just dedicated to this desperate one of them is jane, who you just heard from. she managed to pull all of them together in a single conference. you managed to do it in a very
timely way. what could've been a better time than right now to do this conference. there was an article in "the washington post" this morning about a woman who was trying to navigate her way to the complexities of buying insurance and i was just thinking as i was listening little does she know how complex it can be. at least she doesn't have to understand the difference risk quarters and reinsurance in order to purchase insurance. i was asked to talk about cost-sharing reduction. so, a single piece that has been the subject of a lot of news lately. from the first day in office, of president trump, the insurance agency an opportunity and everybody cares about the formal care act has been holding their breath because there was one thing that everyone thought the president could do if he wanted
to destabilize the insurance market. that was two and cost-sharing reductions or as we call it csr. it didn't require regulation and it didn't require in order. all he had to do was decide he was going to stop defending a lawsuit that was in federal court and i will explain that as we go through this. first, let me tell you how cost-sharing reductions work. as you know, the affordable care act provided insurance in two ways, really. one was through medicaid, through expanding medicaid and the other was through making subsidize private insurance available to incomes, to individuals that otherwise couldn't afford it. what we are talking about is insurance. insurance really had two different types of subsidies. one was the tax credit that jean
just talked about. that is the system that has been paying premiums and how much assistance depends on your income but for anyone below four 100% of poverty they had available to them some assistance in the form of tax credit for paying their premiums but the second form which was really didn't get as much attention is cost-sharing reductions. these are available to some of the people who get tax credits, mainly those below 250% of poverty if they buy a specific plant called a silver plan, a mid-level plan they can get cost-sharing and cost-sharing helps pay co-pays and this is what you pay your doctor the part you have to pay when you go to the doctor, the insurance company pays the rest but also deductibles and coinsurance. now tax credits are paid for by the united states so when you buy insurance on the exchange
and when you pay your premiums you pay part of it and the united states treasury pays the insurance company the rest and it is all reconciled when you file your tax returns cost-sharing on the other hand is paid for by the insurance company so when you go to the doctor you pay part of the cost-sharing or maybe none of it but the insurance company will pay the rest and this is important because even if the insurance company doesn't get reimbursed for the cost-sharing it has to pay it in the law says the company has to pay. if they don't get reimbursed all they can do is raise the premiums in order to make up for that. congress envisioned that the united states would pay the insurance companies every month for the amount they paid in cost-sharing but in order to
reimburse the entrance copies the ministration had to have the money to do it and that comes through appropriations. now, this is something i really wasn't aware of and there was a lot of things i wasn't aware of before i went to work as general counsel of hhs but this is certainly one of them. there are two kinds of appropriations. they are the ones we think about the annual up patients every year, congress, appropriate the money for the fda to pay the salaries to its employees and for it to pay the buildings and for the defense department to pay for muscles. every year those appropriations are made and often it is a tense time because in recent years it always has a venture whether congress would appropriate the money and if they would have to close down. the money is appropriated every year there is a second kind of appropriation called permanent appropriation and those do not have to be made every year. congress just says they are permanent. for example, the tax credit.
all tax credits there is a permanent appropriation and congress doesn't have to figure it out every year it just has said you can count on them. medicaid is another example where there's a permanent appropriations. the issue on the cost-sharing was that it was permanent or was it an annual appropriation. on the affordable care act through it is pretty clear everyone assumed it would be permanent just like the tax credits. tax credits are permanent and these are bound together. the congressional budget offic office's job it is for any legislation to figure out what the cost will be they scored this as permanent so when the affordable care act was paid for congress had to come up with the money through tax increases and medicare savings and other ways to pay for the formal care act and they paid for permanent
appropriations in terms of cost-sharing. as happens with all laws, really but happened with this law more than once the law wasn't as clear as it could have been and congress, once the administration in the obama and michigan started pain cost-sharing the house of congress [inaudible] in which they said we don't thank you have the authority to make these payments. we think this could only be paid if there's an annual appropriations and guess what, we didn't appropriate. there are a lot of issues about whether you can bring that lawsuit but in the district court and in the first level trial court level the judge ultimately ruled that they have to bring the lawsuit and ruled in favor of the house that there was no authority to make these payments on annual a provision.
that got states of the payments have been made through the obama administration and through the trump administration until now. that lawsuit was pending on january 20, 2017 when the new president came into office and the big question was what he do. this is something the insurance agency cared about and if it was going to be stopped with pain for cost-sharing it was going to raise premiums and probably more important, it was going to add to the instability of the whole thing. the one thing that i learned and i think we all know and everyone in this room knows the insurance agency cannot live with uncertainty and their full job in their whole existence is predicting how many people will get sick and how much will they have to pay. it is really hard to do.
but when you add the other kind of uncertainties that we've seen in the last year it is destabilizing and this was a big question. since january 20 there have been, you know, conflicting rumors, weekly stories about what the president would do on cost-sharing and he was getting advice from the secretary of hhs from the cms administrator and maybe from his daughter, not to do it. and he was getting advice from his budget director and other white house advisors and elsewhere. if you want to end the affordable care act you don't even have to issue an order or regulation. you can just do it. stop and tell the justice department to drop the lawsuit. two weeks ago we got the answer. cost-sharing will end and the government will drop its appeal in the dc circuit. it will abide by the district
court order and no longer make the payments. now, as you know there is activity on the hill and the alexander murray bill which will store the payments for two years, 19 state attorneys general brought a lawsuit challenging the president's decision but on wednesday of this week federal court, at least initially rejected that lawsuit and said we do not think there is not enough farm for the court to get involved in the judge actually wasn't optimistic about how he would rule on the merits. this brings us to a really odd feature of cost-sharing which has to do with the interplay between cost-sharing and tax credits. you would think that if the federal government is no longer cost-sharing it would mean it would save money but appropriations cost money and every time that congress
appropriates, it is spending money. that's what an appropriation is. when congress doesn't appropriate and ends that program, then surely the government is saving money but that is not true here. in fact, the opposite is true. this has to do with the interplay the tax credit and cost-sharing and insurance premiums. as cost-sharing goes down the tax credits will go up. and it will cost the federal government more money. jean alluded to this but if you limit cost-sharing, as i said, the cost of insurance companies have to pay it themselves and people still get cost-sharing if they buy the silver plan and they are eligible for it in under 250% of poverty but the only difference is the federal government doesn't pay insurance industry so the insurance agency
raises the premiums and, as jean alluded to, tax credits go up. tax credits are kept. they depend on your income and the way the law works you only have to pay a certain percentage for your health insurance. if you are already paying that insurance and you're in that category it doesn't matter to you how much the premiums go up because you don't have to pay that difference. guess who pays it? the federal government. when we eliminate cost-sharing and we save money on that we spend money on tax credit and in fact, this is the killer -- we spend more money on the tax credit then we saved on the cost-sharing. the cost-sharing has been costing about $7 billion a year, i think and cbo estimates that the increase in tax credits from ending cost-sharing they estimated $200 billion over ten
years. about $20 million a year. do the math. it is not saving money but costing money. you know what else more people are now eligible for insurance so there will be more people for tax credits and there will be more people in the tax credits and in the long run if you put the turmoil aside you could argue that this isn't such a bad thing. this is one of the strongest arguments in the case in house verse four well. it had to be a permanent appropriations because it can't be that congress intended to do this annually and leave himself in a situation whereby not appropriating it would not and spending more money. that makes no sense. i don't know that there's ever been a statute like that.
that is exactly the argument that the administration had one in the supreme court and in other aca cases and knows how this would've come out. i am not sure it will matter. where does that leave us? the big concern about eliminating the question it will contribute to destabilizing the market. it will lead to less certainty by the insurance agency and increase the risk that insurers will exit although the numbers achieved gave you are encouraging and we lost insurers and that is not a good thing. we are still alive and in every place that sells insurance. first, the aca will not work unless the insurers stay in.
when you look at the risk pool and the destabilization there are a lot of factors, how much hhs spends on ads, the expansion of the association plan, exemptions from the aca and this will be a piece of it. this matters but maybe not as much as everyone has said. i personally do not think ending chr will have the dire consequences many have predicted. it will make it more challenging to keep the industry calm and it will be a number of concerns that we need to have but it may not be the back breaker that everyone predicted. thank you. >> thank you. next, we have brendan, at the university of connecticut school of.
>> i'm going to turn on my microphone. good morning and i will talk about a potential reform proposal involving adjusting the regulatory hurdles to the people who are currently employed purchasing insurance on the exchange. the core idea is i offer the claim that the exchanges with many but not all the reasons we might prefer using implement based insurance for the mechanism to deliver health insurance to people. the suggestion is that we modify the regulatory hurdles to keep 150 million people locked in employment -based insurance world and out of the exchanges while not throwing out the good parts of employment -based
insurance. the idea was conceptualized mostly before trump was elected. that reflects a certain assumptions about how policy is made and implemented and it may very well be that in this environment let's say this is not a congenial environment for nuanced counsel. that said, i will proceed. the idea generally is that there are certain goods we want people to have like health insurance and the markets on their own don't give enough of them and enough quality of them and distribute them properly. health insurance is a classic example. the government wants to intervene, excuse me, to improve things and they have regulatory tools they might use. one of those regulatory tools is what i call employment -based intervention which is a government based intervention that regulates the inclusion of some socially desirable in the labor deal with the aim of
improving good [inaudible], better quality, stripping more fairly. the intervention can vary in the manner and magnitude of what it is comprised of. why it might make sense to use in employment -based intervention as a mechanism to improve health insurance availability, equality and support. we have to first ask what we are comparing the intervention too. i'm imagining a world where everyone buys insurance on the open market. we imagine that world there are few reasons why employment -based interest expense which i call sophisticated actors, group leverage and behavioral program. these apply to any social [inaudible] if i was a powerpoint i would object, as well to being used in the session.
when this is over ambient will send me a cease-and-desist letter. the idea is that employers are more sophisticated in purchasing company goods like insurance. employers and they are better educated and more capital they can specialize and it's there unlikely to improve outcomes. the other obvious benefit is using the implement based approach is that when you have a group and that's the processing unit that allows you to drive down cost insurance and get down adverse selection problems and this is a fairly well-known benefit of using the employment group purchase unit rather than individual. i guess i'm having -- the third one is i think less recognized by a lot of people. it's a behavioral argument.
humans are imperfect decision-makers and we often have trouble focusing our attention on committing resources to certain types of goods from a company goods are contingent on come due in the future. if you connect insurance to the paycheck brings it to your attention. if you connect insurance to the delivery of pay like the employment -based system does then that is an administratively consistent time to [inaudible] and to consult with devices that make it such that if you don't end up buying the goods you lose some of the comp. right? for example when you get health insurance and you don't accept it generally speaking your pay is not gross up. lastly, the labor deal is a gallic fulcrum the use of defaults and choices were presented by the employer with different insurance options as opposed to going out on their own and look at a big impotent choice world to be paralyzed by the choice process.
now the flip side though is that if we think about why we like employment -based insurance we also start to realize that its attractiveness is limited and may in fact be not attractive at all. employers are more sophisticated than employees but is not clear they will deploy that sophistication in particular used ways connection a purchase of interest. one is although they might be more sophisticated than employees they are certainly not sophisticated to insurance completely may not be so good at checking deals. second is if they are sophisticated they might use that dictation as way that is adverse to the interests of employees and one of the obvious ways materializes as the owners and managers of the business certain moral purposes but what should and should not be included in an insurance policy. we will have to regulate them to make sure that what they are
doing is using their's prosecution in a way that advances the overall insurance delivered to the employee. the next problem with employment -based insurance is that employers are not actually in the business of producing interns. they are producing widgets and to the extent they provide insurance and they have residual administrative or liability obligations. that means there must be some sort of rules that govern their behavior and if there some sort of rules that govern their behavior the more onerous that becomes and employers will push back and say wait a minute, don't make this too hard for us or we will stop doing it. the alternative is world where people can't buy health insurance on their own and regulators will face a real difficult problem which is it will be tough for them to insist that employers follow harder rules because they will be met with a credible threat.
i will attend the remedial powerpoint class, as soon as this is over. another point that becomes very clear about the limits of employment -based insurance is mainstream discussion of the effort to correct and hobby lobby. even though it's an economic matter the price of insurance is clearly a form of compensation and essentially an employee wage. many people describe the insurance as being paid for by the employer but that is not so. there are two negatives to that. the first is that employees did not appreciate what the actual price of insurance was so when the price was something was salient that interferes with ideal decision-making but the second is that people assumed in many cases that the employer giving them insurance was providing gratuity and if you suggest to someone let's move away from employment -based system and they think that employment -based system has a gratuity of insurance moving away means to them were taking
away a gift. because the employment -based system is not particularly good at making clear who is paying for the insurance and what the price of it is you cause something that's not conducive to people making our choices nor to stakeholders appeasing the merit of alternatives. so, let's talk about the affordable care act. let's talk about what it does in respect to the individual marketplace. we will can pair the individual and market place. [inaudible] in short, it fixes the individual market but it keeps it locked and what we mean by keeps it locked. there are two locks. the first is if you are in large employer you have to offer insurance and if you have to offer insurance the employer mandate rationale is different than the individual mandate. the employer mandate was installed because of the fear that employers would change their behavior and that would be undesirable politically.
employers would drop coverage, people would be upset, alternatively, more sophisticated criticisms were like well, the players may drop coverage but then not raise wages because the theory of equilibrium wage differential says if you drop one work form of benefit another form should increase to offset. the worry was that you would destabilize the system and that there was not be an increase in wages because the workers were [inaudible] the employer mandate is one way to preserve the status quo. it says employers have to provide provide employer-based health insurance. the use of the tax system. payment based health insurance [inaudible] non- employment -based insurance paid for post act tax dollars except for the affordable care subsidies. this creates significant labor pressure beyond the existence of a mandate on players who offer
implement base coverage to serve as a vector for a tax break they cannot get if they do not get insurance in the workplace. not changing the differential tax treatment on implement -based insurance during the affordable care act passage serves to perpetuate the implement base system. now, ask yourself if there are two systems, employment -based system and exchange system would now have. it doesn't make sense to have the locks on the employment -based system. let's think about whether we like the exchange pay system compared to the employment. the group levered advantage of the planet -based system is largely dealt with in the exchanges. it might be the case because there is community rating in this pooling but it might be the case that better insurance is lost because the pool of people in the exchanges is smaller and sicker than insurers that employers and they also lack employers as negotiating agents.
it may very well be that the creation of the individual market so absolute group limited opens but not all of them. the second is the sophisticated actor benefit of the employment -based system is produced when you have intelligible marketplaces where people can make choices and not be overwhelmed by the decision to purchase insurance which can be difficult. lastly, by removing, excusing, using an exchange pay system there is not an opportunity generally speaking for other ticket agents to get involved and take steps that are adverse to the engines of people buying insurance. so -- now, one thing about the individual exchanges that significant in terms of the difference between the exchange
-based approach in the employment -based approach is that the behavioral fulcrum associated with employment -based system is not there. in an exchange pay system if you move everyone to the exchanges there would be no connection between their paycheck and health insurance and there is no default and there's no constraint compensation of forfeiting part of your pay. you may also lose the fact that employers may have a superior understanding of risk not underinsured then if you put people in the market to act on their own. let me skip regulatory fertility, just it is much better to have people buy things on exchanges then through their employer than writing the text to the cost of something is the single best way to appreciate exactly what it cost and exactly how it is buried. so, what reforms might we consider to capture the benefits of the employment -based approach but also use to changes
to use an incremental path forward that improves outcomes for everyone. the animating idea is to convert the employment, entrance into a funding mandate. it gives employers the option to instead of providing insurance the option of funding for all full-time employees in exchange for an account with a stipend equal to the amount by the employer but no less than some minimum value that ties a median value on the exchange selected by regulators. ... >> we need to pay for the insurance. it frees them. from meaningful administrative
administrative and legal -- which under the affordable care act are considerable. for companies already offering employer-based insurance that amounts to an funding employee accounts which would've been funded to an insurance company. you make the cost more salient to employees and ensure the collective wages of the employees used by health insurance would go down to the benefit of all employees equally. lastly if the employer mandate was lifted companies who declined to offer insurance would face immediate pressure.
's, ties the insurance fortune of labor to those with management while discouraging management to be stingy. a lower stipend would deny tax advantage when purchasing a more generous policy. that means the most highly compensated employees such as management. that would -- their this is constrained station. average my time. it's constrained compensation because their forfeiture and consequences of an employee choosing to purchase a less generous policy that will come back to understand sure not sure. allows her worker choice. finally, this would swell the ranks of the exchanges. the make it more likely to attract insurers to a bigger and healthier pool.
the influx of employs into the exchanges might to a lot of work to solve problems we have about five ability and stability of exchanges without resorting to other measures that have attracted considerable attacks. it's conceivable but unlikely a large knife shift went to the exchanges it could reduce the need for an individual mandate. i don't think that will happen. but maybe in the interest of federalism there might be states that would take that approach. >> thank you. we have about 25 minutes for questions and i'll take moderators. one follow-up question, a surprising result from the affordable care act is the popularity of medicaid. we talked about employer-based insurance is quite popular among people who receive it.
in light of your changes, how might that opinion playing? >> public opinion is interesting we talk about insurance and benefits. there is evidence that people don't appreciate the existing mechanism. so the example of a someone say get government out of my medicare. is people referring to the idea of the employer paying for health insurance that totally lacks from the appreciation of economic reality. one of the benefits of being a policy nerd is that i frequently have no advice to offer people that messaging questions. i don't know, i think being direct is a good idea because
even though their short-term thing people learn that they understand the system better and prefer less government involvement but at least i want them to have an understanding of what is happening now before they reject changes in the future. finally, i would like to point out this idea was an effort to get a conversation started. nothing personal say it's better than any alternative i could think of. whether it's all these other proposals, but this i thought might be an incremental way forward that could attract attention to be part of a larger discussion. >> thank you. whenever people bring up the tax inclusion for health insurance which i teach my health policy
class it's extremely aggressive but extremely popular. it's a challenge. secondly, i want to return to the issue of cfr's. yesterday a panel discusses and try to put in context how many people are affected. the small proportion of the pulation received health insurance on the marketplaces in the subset of that would benefit from the csr's. but elaborating about how the refusal of payment an increase in premiums and the increase in tax credits could be a good thing. one thing talked about yesterday was how insurance companies increase their premiums to the patient but then also may benefit from the restoration and
have increased premiums and tax credits and restored cost-sharing. but if you could also reflect on the people who are not receiving premium tax credits those are the ones hurt by the increase in premiums. >> i don't know if that's true. the increase in most states is just for the silver plans. just a single type of plan. if you don't have tax credits you're free to go by one of the other plans. there's no logical reason there should be an increase in i don't think there is. also 80% of the people on the exchange receive tax credits. so they're the ones that are fully protected from these increases. >> this issue about sense the
premiums are built-in, what happens if congress appropriates the funding for 2018? the bipartisan belted building rebates of the idea would be to say the state insurance commissioner could provide monthly rebates to consumers during the year, or a lump sum after 2018 return that money to consumers, with the important change being that it requires insurance to return some of that to the federal government which is why the bill mostly saves a billion dollars. >> i heard the remark about the idea that if no legislation is introduced and credits are
increased and yet the health insurers with still have the ability as a legal matter to come back and claim the unpaid csr payments. i haven't done the analysis of the law but it wouldn't be a great position for most insurers to be in. road worry about it more might be insurance new entrance on the brink and if they saw it as a potential source of funding maybe it's worth trying to get a court to agree they might make that effort. state insurance departments would want to jack up rates on one-year on the premise the cost-sharing was absent and at
the same time trying to recoup monies as a legal matter from the federal government later on. >> the idea the lawsuit the statute said the federal government all the money. it didn't pay it and they can go into court and recover it. it's impossible to know how that would come out. >> joe said some interesting, one of the things insurance people tell you assuming you can stay awake long enough to hear their sentences, is that good risk pricing and pooling leads to good policy. they want to price risk and get good pools. anytime there's a proposal that will operate and undermine those things their ability to price or insurer pools, if you segment pools that undermines their ability to write policies they have confidence in, you'll do damage to a private player to
ensure in a stable way. the frustration about the proposals that come out said it doesn't appear to be an appreciation that certain approaches are nothing more than a way to undermine pools. that worries people who knows what happens when he undermine pools. not because you have an objection to thinking outside the box, but if you destroy a pool because you think it will cause competition for prices will drop, that's why experts heads explode. this like we have to relearn that were trying to figure out what path forward will follow. something that a lot of people believe is if you don't pay close attention to how it does
work any of rules that make it not work, that will make the stage welcoming to a nonprivate insurance approach. some people are in favor of but many people suggest rules that undermine the system will not be in favor of. there is an irony and how policy might evolve. >> if you're trying to create and maintain a good pool, then you need to create incentives for younger folks were good risk to stay in the pool. if the rating methodology is an accommodating enough then they will find appealing alternative pools and products which may be will be available down the road. but when you talk about how do i improve the singular pool, what is community rating and i know there were proposals to try to
move from a 3 - 1 ratio to a 5 . others said you can't do that. it's difficult with the existing constraints to make the improvement to keep the good healthy pool in place. >> jeans idea about increased premiums for younger people, right now students, people up to age 26 can say stay on parents insurance. so having incentives to get them back on. >> i want to add to the debate, the same study that talked about dancing, that would be the impact of keeping the three to one age rating and covered as
many young adults without losing older adults the higher rating at a lower cost of the federal government. if you increase that 5 - 1 then it all goes up. we should use the moment to look at alternatives. it seems easier to say deregulate but demand up costing more than alternative rac ways. >> i want to open it up to audience questions. >> please introduce yourself. >> michael cook, medicaid -- in virginia. one of the major issues that will arise, though i agree 100%
in effect some folks have taken a look at it the skies and falling with the csr but on november 1 member of the public and we have an election on november 7, you will see blowing up, these astronomical premiums that probably wont hit you and we have 90% of the money pulled on providing resources to reach out to folks. obviously, you look to possibly get in the governor for someone in the state to start doing public service announcements. that will be a real issue. actually raise the idea of getting rid of the employer-based insurance at one point in the campaign and even before that.
i promise you, i have been promised you will take off every interest group imaginable if you do that. >> my mom thinks it's an excellent proposal. >> i, having lived through many moments including less fall which was brutal and not as brutal as this one would be the 24% last june 304% issue, the public impact of scare value of the unsubsidized number that would affect probably a couple million people is a tiny fraction of the u.s. population outweighs the real world impact. some people argue not to restore csr's because then you have a trade-off.
i personally and for the targeted subsidies for that reason. one thing i did mention this part of our challenge is to keep insurers in these counties, they are monopolies that can charge whatever they want in the premium tax rises with it. people look at ideas like can you limit this, but we do have a problem without competition within monopoly insurers. those premiums are way too high. >> we are most loss, but for the strenuous efforts of the governor and are two senators, we almost lost that. >> i have a hypothetical -- i met lawrence. i have hypothetical question one or two years from now the nine
appropriate csr equilibrium where there is silver loading in places places are recalibrated to be more generous to get a credit but less generous for those who don't. can you talk about the hypothetical world and is that were insurance say, do not fund this. is that a world the politics of that wind up paying out? they saying don't fund it or what is that world look like? >> insurers are really from the current dilemmas and haven't thought too much about what it means for the future. the idea at the end of the day is to have consumer engagement regarding the cost of healthca healthcare, having the issues of rising premiums been resolved to
the premium tax credit may not be the best way to get there. many insurers believe that if you cannot inform across healthcare you need three pieces. one is the access and the other is changing how providers are compensated and then how do you engage consumers so their interest in the cost of care and the policies going forward would consider all three elements. >> i think it's a debate right now. having the csr is paid for through premium tax credit,
their -- if you read the tro there's a decision by california judge and he weighed in on it said part of the reason why he didn't want to disrupt is that he thinks predominantly low-income people are better off under this plan then he would be should intervene. it's an economic and insurance debate. >> it's a great question and i think as you can tell nobody knows the answer. what we are hearing is that perceptions are really important. this perception of rising insurance rates is a killer. even if it doesn't apply to a small number of people it's a killer. arguably if they were put back in insurance rates would come back down that's not such a bad thing as a public relations matter. two different question in terms
of policy matter and coverage. >> mobile statisticians. i want to come back to the thought i found it interesting the presentation. both in terms of saving aspects of the individual market would be nice the employees could shift over. many small states, the insurance pool is not large enough to guarantee decent competition. so having people for employees going into the individual market would stabilize the markets. when you talk to labor economist it's no secret that employer insurance decreases labor
mobility. you go to any large institution like my university anyone ever go to smaller employer simply because they get the insurance for the family through the large employer. so there's these negative employer-based insurance problems that we never talk about. >> part of the conversation about the approach the united states to take delivery of health insurance to people has to be broader than any 15 minute panel presentation could consider. every suite of tools you use will have problems that another might not have, just so happens that most of the countries have considered the tool with the least amount of problems this heavy government involvement. it's not clear to me that's a path forward. not because i object to the
because i think there's more serious conversations to be had for many years the national conversation has been locked in what i perceived to be not really serious discussions about ways to solve the problem regardless of whether or not there's merit to the idea. >> i'll follow up with the medicaid buying question. it's been debated in more attention in the news there is talk about a public option and it's part of a medicare buy-in and in nevada it almost went through but the governor vetoed it. i love to hear the panel's thoughts on that.
>> as a political matter, it's exciting for the first time there's a medicare by. that's a result of the fact that this year in the throes of the repeal and replace bill when medicaid per capita cap was put on the table and the expansion of medicaid could've been repealed, people began to understand and talk about it in ways that it hasn't been spoken about. i think the flip side, the monopoly in virginia where the fear of counties without insurance plans all year long the limited competition in some of these areas have led to private insurers won't fill these gaps so i not look at
medicaid the members of congress plan, there's been state employee buy-in, is apparently to fill the gaps and people think medicare is not a dispensary and their insurance plan is going up. it's been driven by gaps in the system as well as price and affordability gaps. whether that can be well-designed. and a 2009 it was not easy to figure out these proposals. the complexity is greater than a buddy thanks. i'm not too surprised giving the current debates that's resurfacing. it's interesting to see if any state reforms take off like
nevada. >> i'm sarah with bloomberg laws healthcare news division. does anybody have a sense of what the difference in cost to the government from allowing people to buy into medicare or medicaid as opposed to subsidies provided under the aca? >> there hasn't been a lot of research done figures. there is a rich debate in 2007, eight, nine, ten and the congressional budget office to do public plan option estimates both during the affordable care act debate. that's the word. the challenge now is that we don't know whether the marketplace plans look more like
commercial plans or medicaid plans. it looks like medicaid matte mel plan it could be at or below but if it looks like a employer care the rates could be more. >> one observation is typically with medicare, advantage and maybe other federal programs there are good models with the federal government helps facilitate the market and creates a competitive market among the insurers were insurers can make informed choices. for the affordable care act and markets has not succeeded a business model competition for
several reasons. some of the proposals may be trade-offs, if it's not that attractive furniture to interpret rule market, feel part of the bigger market that might be a quid pro quo. what lessons can we learn from the affordable care act in terms of competition. what are good examples of competition the federal health benefit program and can we borrow anything from those? >> thank you. when you think our panelists for great discussion. and thank you for coming earlier before the talk. i want to thank the washington college of law for hosting us. we have a 15 minute break prior to this talk. [applause]
reform, 2017 conference. this year partnership with the american society of law, medicine and ethics with support for mark cosponsors we expanded the event to three day conference attracting speakers and attendees from multiple disciplines, the academy and practice. apparently, this conference is timed with the launch of our new health law and policy program. for faculty and students will be partnering with you on important work in the areas of healthcare law and economics. thank you, and join me in welcoming american university provost who will introduce our american university president, sylvia matthews. [applause] >> thank you dean and can morning to all of you.
it's my pleasure to introduce the next keynote speaker, sylvia matthews burwell, the 15th president of the university. president burwell is a visionary leader with extensive experience in public and private sectors. for careers a testament to a lifelong commitment to advancing solutions to pressing challenges. her government experience includes positions such as the secretary of health and human services, director of the office of management and budget. deputy chief of staff to the president of the united states. chief of staff to the secretary of the treasury department. in the private sector she served as chief operating officer president of the global development program of the bill and melinda gates foundation.
she's also served as president of the walmart foundation. response to the session on healthcare i like to highlight her accomplishment and expertise in the health sector. in her recent role as secretary of health and human services she helped shape the vision to ensure every american would have access to the building blocks of a healthy and productive life. to this end, she had oversight into agencies and programs which included the centers for disease control and prevention, the centers for medicare and medicaid services, the fda and the national institutes of health. she oversaw implementation of the affordable care act which represents most complete overhaul of the health care
system in our nation's history. the aca help more than 20 million americans obtain health coverage. improve the quality of health coverage and made improvements to bend the cost curve. when she assumed leadership of hhs prior to the second open enrollment of aca, one of the first priorities was improving service delivery. as a result, enrollment in aca which was previously a stumbling block became more efficient and smoother. during her tenure, she oversaw the government's domestic and global response to two unexpected major health crisis, the able epidemic in the spread of zika virus.
this response included working with other nations to slow the spread of disease. building the system to identify high risk individuals entering the united states. establishing a network of hospitals to serve as treatment hospitals and investing in the research of a vaccine. she let hss work to prevent and detect and respond to the zika virus including research, development, and testing of the zika vaccine. throughout her leadership she's had a significant impact on safety and services provided for the well-being of americans of all ages, abilities, and socioeconomic backgrounds. perhaps the were closest to home wallet hhs lesser implementation the early childhood program,
headstart's largest revision in 40 years. sylvia had her early education beginning at headstart and hidden, west virginia. she cites this program of sparking her love for learning, and she is carried that throughout her career in public service. this community is excited to have an outstanding public servant at our home. she earned her bachelor's degree at harvard university and a ba in philosophy and economics from the university of oxford. her work has improved the lives of many in terms of health, and safety of millions of americans. join me in welcoming president sylvia burwell to the program is she seared shares her insights.
>> thank you for those kind words and your leadership at american university. want to thank you for your advice and guidance the first few months as i have joined this family. i think the american society of law for bringing together such a great group of people and speakers and the health law and policy program. i don't have a law degree myself, but have more than my fair share of supreme court cases name for me. if i could just log one complaint about my previous job, was that one, but two lawyers who failed to or me that once
confirmed, all court cases switch to my name. the first, the burwell family council. the second, the 44th president of the united states of america. just saying, little heads up would've been nice. my transition to american universities interesting exciting and challenging. i gained a passionate engage community thinking learning and doing things about the world's most interesting and important problems. i've taken on a new title without ever having gone to a diner in iowa. rather than look back, and please this conference is looking forward. our healthcare system has come along way in the past seven years.
we help more people access coverage and care. we've improved healthcare coverage for families and we started to bend the cost curve. freeing up resources for working families and for future generations. when i say we, i mean our nation as a whole. this is a work of government or business alone. his work of physicians, advocates, attorneys, patients, families. they are not slowing down. when i started planning for the remarks i look closely at the agenda. two things came to mind. first, jealousy is my team reminded me that i cannot block off two days on my schedule and listen to all the sessions.
second, an appreciation for the ying and yang in healthcare. the few areas of policy once so complex and so simple. today's agenda speaks to the complexity. from payment incentives to coverage of young children, to the challenges facing providers. this conference gets into the notion of moral questions that churn every day in our healthcare system. the system is grounded in simple reality. in moments of joy like birth, pain of a sprained ankle or fear and uncertainty is in a fight against cancer, we all count on the system to care for us and our loved one. when i worked at hhs the complexity surrounded us. we had late nights and early mornings going through briefings and studies things to the
academics in the room producing those. we spoke to hundred thousand providers to get input on rulemaking. we tried to understand how the system was working, where opportunities and how we could use our short time to deliver meaningful impact to families. to the colic still there today, career public servants who deliver impact for the american people to those career staff let me say it was an honor to serve alongside you. our nation is stronger for your service. [applause] at hhs, and impact was her northstar. her goal was to tether the conversation and analysis to facts, experience the reality on the ground.
one sees the reality every day at hhs. you see it where nation's top medical researchers are crossing the next fight frontier through things like precision medicine. on the campus of the fda were safety a and innovation are front and center you see it in the men and women who packed their bags, left their families to say families in west africa from ebola and are ready to make that journey when they get called. you see the reality and headstart classrooms where young minds have the chance to become our scholars and leaders of tomorrow. you sit in healthcare professionals in this audience this morning for trying to build a better healthcare system. this is the complexity of the
system in simple outcomes that everyone is working towards. today i want to focus on what orients our discussion on where we want the future of healthcare reform to go. how we improve the access, quality, and affordability of our nation's healthcare system. i want to highlight how people can maintain the progress. first, access. in november last year uninsured rate drop below 9%. the lowest it had ever been. between 2010 in the first quarter 2017 the uninsured rate fell from 16% to 8.8%. that's the largest decline since the launch of medicare or medicaid.
still leaves more than 28 million americans uninsured. connecting people with coverage is a problem of will not strategy. we know how to maintain the progress we made a move forward. nearly half of uninsured adults and the cost is prohibitive. we can actively get the message out that coverage is available especially to communities were those messages don't reach. we need to raise awareness of financial assistance for people who shop on the marketplace to make sure more people know the financial assistant there today is available. last year eight out of ten people qualify for financial help. most found a plan between $1500 per month. more awareness and more assistance will lead to more enrollees and more access. so for old times sake it's about
to be november 1. the start of open enrollment. encourage your colleagues to go to healthcare.org. for those who are spanish speakers you can go to -- and shop around. since the law passed the share of americans who can afford care has fallen by more than one third. affordability has matured just for the newly insured. for the hundred 57 million americans my premiums have grown at a rate of 4.5%, down from almost 8%.
affordability extends to what taxpayers spends as well. medicare spent $473 billion less on personal expenditures between 2009 at 2014. in the context of budget conversations going on finally, the third way we can measure progress is quality. hospital acquired conditions like infections and pressure ulcers declined by 21% between 2010 and 2015. by linking those that decline prevented 124,000 deaths. most healthcare plans in the market do not cover maternity care, a third did not cover
mental health and almost one intended not cover prescription drugs. while the laws imperfect others ways it can be improved and changes will make it better, there are some benefits of reality in a clear and simple reality. another reality is the direction the healthcare system is moving. we often talk about reform separately, it's important to reflect it was a part of the act. some important changes to move forward come from provisions in the aca. like the center for medicare and medicaid innovation and the ability to support accommodations. they also stem from other laws.
macro was passed with overwhelming bipartisan support. the support changes throughout the entire system. the healthcare system is undergoing a historic change. many of you are well versed, your research implications and advocated for them, some help set the policy to clear the path. whatever your perspective in the room is, it's clear the healthcare delivery system is entering into a new error. we developed a three port strategy to support the healthcare system and making progress. first, change the way we pay for
care so payers are rewarded for the quality of care rather than quantity of services. second, change the way we deliver care by promoting coordination and prioritizing wellness and prevention. third, unlock data and information so doctors can make informed decisions and patients can be active participants in their own care. we implemented the strategy with a simple philosophy, where we needed to get out of the way, get out of the way. we committed to have 50% of medicare payments go through value -based contracts by 2018. when we left where had a schedule. commercial insurers were entering into value -based payments on their own. in january we estimated a quarter of healthcare spending
-- are administration advocated for the democrats and republicans like my predecessor, former secretary mike leavitt and former senator, bill frist. the delivery system reform effort is what they called an empirical learning approach to health reform. based on experiments, evidencing careful observation and learning. it's essential for this approach to continue to meet the nonpartisan goals a better care, smarter spending, and healthier people. delivery system reform requires persistence. i'm hopeful that the new administration settles in the see the same value that we did. an opportunity that that leaders
from both parties have recognize. it's important to keep moving forward, supporting programs like bundles and aco's that we were providers for better care at lower cost. it's important to expand programs to improve healthcare like the diabetes prevention program that we model. as a title that we find better healthcare while bending the curve. policymakers and leaders are moving forward. i've been encouraged by the bipartisan efforts of governors and people like senators lamar alexander and patty murray. this represents the way that we can get things done. together with more than 20 cosponsors across both parties they have the opportunity to
make improvements in basic measures on access, affordability and quality. i've been encouraged by leaders step forward. we started a group called the healthcare payment learning action network. public-private partnership to encourage the adoption of alternative payment models. more than 6500 people joined including 130 organizations that set their own goal. after i speak you'll hear from dan who was ceo of independence blue cross and in au along who has also step forward in the space. today there is no shortage of complexity, change in news. through the complexity simple reality remains.
that's why i'm honored to welcome you to american university's campus. a little over a century ago young attorney they mesh -- jackson asked -- to prentice or as a student of law. these women have been denied admission to a number of law schools. legal professions for the women who did manage to study law were few and far behind. so they hosted the first session of the women's law class. they believed in a simple truth. the system needed to change start with them.
three years later the washington college of law was founded. it became the first law school in the world to be founded by women. the first law school with the women dean, and the first law school to graduate and all-female law school class. as ellen said, the keynote of success is the readiness for opportunity. our opportunity in healthcare is now. for years and decades had conferences and events to discuss the challenges that stand in our way. with the leadership in the room and across the nation i believe we can overcome those. nation will be successful at building a better healthcare system. like ellen and those who came
before, we are ready. thank you. [applause] >> good morning. i'm jean and for those who are here earlier will keep my introduction brief. i'm privileged to be here today to call you not madam secretary but meta- president. it has a nice ring to it. i'm here because i was able to witness your leadership, skill and tenacity at leading the agency. what perspective do you have -- i wanna talk about your main focus on your remarks. i know it jumpstarted when you arrived.
how did you develop that strategy? who is involved and how did you get results for quickly? >> want to say something about jean. i've had the opportunity to work with jean from the 1990s on. you will not find a person who knows the issues more in depth across the whole range. when you're she has an incredible wealth and dedication to the kind of change i was talking about. [applause] in terms of question and putting together a delivery system. in putting together strategies at different places in organizations i generally think
about what is the problem, what is the solution space, what are we good to? the objective is to get yourself for those three things to overlap. so important in a strategy process to be clear about where you're trying to go. the other thing that i've had the opportunity to learn from different types of organizatio organizations, the bill and melinda gates foundation is heavily focused on strategy. at walmart execution is a core strength. you have to think about both of those at once. one without the other will not achieve the results. >> the regard to specific issue,
there was a realization that we had a short time but is moving forward to implement parts of the affordable care act focus on the access part, we needed to have a focus and do it in a strategic way with priority so we could move forward. bringing together a number of parts and pieces we were fortunate at hhs tab patrick conway and karen who were partners in leading the effort. they'll tell you, it was a process. to get to that strategy into a quickly and engage whatever white house colic. that was in part because when you get to the end is a strategy informed by all the players. the uniform by the real world was an important strategy.
but we had doctors with practicing physicians and they brought a number of perspectives. those who work with me know i prioritize and i generally work in threes. getting this to the three things with the process. they were private arrangements in terms of what we did. is bringing people together working off where we have been, and a lot of work was done previously before we got there. a different approach occur but then we put together the strategy. as we did the idea that we were going to set goals that i was gonna commit the federal government to something on a deadline was not necessarily a
common thing to do during administration. but there was supported by an and it was important. having the three pieces of the strategy that action was important because it did two things. it was very important signaling of the commitment we're making that we're coming to the table. the federal government wasn't just saying you're all good. the kind of skin in the game is indicative over here is serious. the other thing is it indicated direction. i know that's important we heard that in terms of certainty, predictability, where things going. that predictability is importa important. >> as you look at the priorities and problems facing your first day here in american university, what were the challenges you
faced a secretary of hhs? >> there were a number of them. the first day i was confirmed around noon and went straight to a meeting. i had conversations with them because one of the immediate things were facing and that i would face was making decisions on the technology. in order for us to do end-to-end testing which i was insisting that we would do for the marketplace i had to make technology decisions. my predecessors one and it to be my decision and felt it was appropriate if i was going to be responsible i need to be able to have ownership of those decisions. . . . .
someone has injected 50 years and it's been on there for two days? [laughter] within 20 days i stood up the command center that stood up for almost all of my entire time is secretary for evil a and then not even a month later over the children pouring across the border and what i think most people don't realize is that tens of thousands, over 40000 that year children under 18 coming across the border, children as young as four or five people don't connect is that is hhs people most people think it is d just because the
border but dhs within 72 hours has to have those children with us because we care for them until we can place them in a place that they will be safe and cared for until they have their immigration papers. for me, it was the volume of crisis, the number and the volume of crisis was the first challenge. one walked into knowing the things around the portable care act that was an opening i think but it was the number in volume the challenge. >> as you know, the administration is looking for a new secretary of health and human services and that person, he or she were sitting in this today what advice would you give to the? [laughter] >> run into the fire. that's my very strong belief and
i would start by saying first and foremost, understand the incredible people that are at this organization. career, civil servants dedicated to better which administration in what point of view facts and substance. first, i would say though that you are walking into a place where there are incredible resources. number two i would say importance to be aligned with your president. understanding your president and having been able to know that your going along the path and implement and that was my experience at hhs and that alignment really does contribute to and if you're not aligned to figure out how you can access and work through issues. that's another very important part. the third thing i would say is as much as you could get out.
it is hard but it's a large department in your running and the more you can talk to whether ceos or headstart kids or a visit, that's an important part that of understanding what you're trying to get done. >> looking forward what do you think the stealth issues are facing help form? we know some of the issues about opening moment in the rulemaking and challenges to the environment but what else might be on the horizon that this team should be on guard for as well as the audiences they are doing their work in various fields? >> i think instead of a specific issue it's a category of issues that i think are not always recognized which is change we're talking about when we get to five, ten, 15 years from now in our healthcare system looks differently with the consumer at
the center and the way we do it very differently it will happen because of true behavior change and i think that is hard because whether you're in an organization and anyone in the organization your first answer is let's change the structure and let's change the people in the last thing is because it's the hardest thing is changing behavior. this will take change behavior of consumers and you will have to be more knowledgeable and you'll get information to be more knowledgeable and it will be a change for provider and it will be a change for payers in insurers and it will have to be a change for pharmaceuticals and a change for everyone and that is the issue. it doesn't come out because we speak about this in specific terms. what we need is to pay in this way but i think one of the
hardest issues to make that change there has to be behavior change i think that is hard. >> and its related question which is most of the discussion around the portable care act is about the axis component, not necessarily affordability. which do you think is harder, expanding access or affordability? >> i think both are harder, both are very hard but i do think with access we understand a single very important lever and how you go about fixing that lever, the lever of cost in terms of the axis issue for those who don't have access at all at least there is that you can is on and that is why when one looks at the progress of the affordable care act against the three measures i think our best progress was against that one because it could be targeted in
august. the affordability and quality, i think are sometimes harder because the levers are more [inaudible] in the other thing is i think we do struggle with measuring quality which is related to affordability because you don't just want portability and you never want to say one of the other. i think quality is hard to mention. >> then let's look for and what job in the audience can learn from it. what's the biggest surprise? i thank you held so many incredible different positions throughout federal government and in the private sector and was there something uniquely surprising about being secretary of health? >> i would say two things. one goes back to your first question which is i was preparet omb in this administration it was the day i arrived it was an
alternative sequestered day so most of the staff was gone and i arrived in crisis. some might say i like the guy with the cloud following him. the dust of the cloud. [laughter] it was a crisis i was used to do but i will say the volume of crisis was extreme. the ebola that was well. kids on the border in your fourth of july in her trying to figure out how to place four, five, six -year-old whose parents thought it was better to send them a thousand miles across mexico and to have them stay with them. and you're trying to find a safe place for those little -- and they are alone. i had to keep asking if i have a ten -year-old and i kept asking they can't be alone. they have to be with the siblings. we just haven't match them up. there crisis and the second
thing was the joy of the breadth and depth of hurtful things going on in the department. at hhs there's something called the ideas lap. that is a place where ideas and innovation we were encouraging those within our department and out of our department and this was started by my predecessor, kathleen and by the time i got there the conferences drew people from around the world. those kinds of things and the story of the individuals from the center for disease control and prevention who wrote [inaudible] in liberia of rivers to get ebola samples to figure out if those people actually had ebola and i knew that seeing it is surprising.
it's uplifting and great to see the positive things that are going on and a huge department. >> we are in mostly a conference of lawyers but describe a little bit of the role that will lawyers play in proposing health reform. >> an incredibly important -- i would start with the clinton administration i had a saying. a lawyer a day keeps the subpoena away. [laughter] >> it didn't necessarily keep the supreme court cases away but what i believe is engagement with your attorneys i have always viewed lawyers and actually i'm not a lawyer but i've been given the gift of a black law dictionary when i left the treasury department years ago because i engage with
lawyers but i believe your lawyers are your business partners. i believe lawyers actually have two functions that are important. they need to tell you the law and in issues like healthcare and healthcare reform it is extremely important whether that is in rulemaking or implementation or on a day to day basis. extremely important that they tell you the law. but they are people that see through your issues. your legal department is one of the most crosscutting departments in your entire organization wherever you are. having them join as a business partners and it is not get it. they can tell you when they are saying this is the law. now let me tell you from experience and knowledge what i think will happen if you implement that way for if you read the law that way. i am here to give you legal advice but i'm here to give you broader advice and i found and
at omb one of the most people never worked on it but some of the most complicated and best lawyering i've ever seen was during the government shutdown you are operating in an unnatural state that doesn't happen with questions every day from can you -- the coast guard first time in three years a coast guard vessel needs to be one back and no money to fight back so what do you do for the family. appropriations law and everything all coming together and then is it legal or is it assisting funds to have someone else play and you want your lawyers and what they do in crisis and then on your day today and in government policy in general.
>> we have scholars here because, as you mentioned the american journal of law and medicine and ethics is looking at issues in this conference and how did evidence inform your proposed [inaudible] >> every day. i bring up an issue that has been in the news today. opioids. as we put together our opioid strategy and yes, it was [inaudible]. as we put together that strategy that was and it was extremely important. the research on medication access to treatment as one of the key approaches to deal with those who have addiction in opioid space was the research that guided those priorities. the question of does the locks in which is the drug that you give to save someone's life does that actually cause more addiction or not. these are the questions that these are scholarly questions that are analyzed and studied across the academy that inform
your decision-making every single day. research on e cigarettes. as we look to make rulemaking in the tobacco at fda. in addition to the research itself we draw from these patterns. richard frank who is now back in the academy and maria can't steal who was at the administration for children and families built all of the modeling that we used to try to predict the flows of children. drawing from our colleagues at the department of homeland security estate department. she built a model. academics and scholarly work use literally every day. >> my last question is will the drama around policies ever down down and? >> i would say that healthcare is a lifetime employment but i
would kind of change beginning of that. i would change it because there is always going to the opportunity there will always be a place for us to go and do better because it is something that impacts everyone's life. excuse me. therefore i think there will always be credible opportunities and i am glad that so many people are engaged focused on these issues and i thank you hear my optimism about getting to a different place and you can start to see it and i think we will get there. >> thank you so much. [applause]
>> i am pleased to introduce the next session which is entitled getting healthcare right. now i might be biased but i think that we brought one of our esteemed alums to campus to speak on this issue and dan is the perfect person to lead this session. as sylvia mentioned he is the president and chief executive officer of independent blue cross. one of the nation's leading health insurers. since he became ceo in 2010 the number of people the company and its affiliates serve have tripled to nearly 8.5 million in 24 states and the district of columbia. he has more than 25 years experience in the field of healthcare, government affairs
and including leadership positions at organizations such as where health, keystone mercy and blue cross blue shield association among many others. he is a dedicated to the transformation of healthcare in america seeking innovative technologies and new models of care that will both increase quality and lower cost. i think that is something we can all get behind. he is a sought after speaker on issues of leadership, healthcare and the role of technologies in big data. he has appeared in "the new york times", "the wall street journal", on msnbc and other national media. he is among a very select group of nonpartisan healthcare leaders called upon often to inform government leaders and advise them on implementing healthcare reform. i am pleased to have him back here on campus today and i want you to please join me in welcoming him to the stage. thank you.
[applause] >> good morning, ladies and gentlemen. it is still morning for a few more minutes. thank you for having me. dean, thank you and congratulations on this facility incredible program. i can't say enough about the work that you and vicki do on regular basis. thank you. it is my fate to follow great speakers. if we were in the well of the senate or the house of representatives i would definitely have exceeded my time to the president. you had so much fun over there and we didn't always have fun when we met with you but you two had a lot of fun. [laughter] again, good morning. heading healthcare right is the challenge of our time. i believe this is a most important task for us as a
society. similar to what sylvia said. there is no better place to talk about it then with this group in this venue. because the key issues of health reform land right on the intersection of the american society of law, medicine and ethics. it is where you live. the past eight years the american people have seen it nearly constant struggle over how law should interact with medicine. looming over the struggle are the most basic ethical questions. is healthcare right or a privilege? is it acceptable for our leaders to turn healthcare into a political football mark how do we find a path forward from here. there is no turning back. i have been sharing my thoughts on these issues as a ceo dealing with them every day, as well as a concerned citizen. we should be concerned. frankly, it is essential that
your voices be heard and that your voices be heard on these important issues. this debate will not is because to build a sustainable system that gives everyone access to high-quality, affordable care we will need input from every area of expertise represented in this room. both academics and industry and from the public and private sectors alike. future generations are going to judge us on whether or not we got healthcare right. we are not doing a very good job of it right about now. health form has been a dominant legislative debate for eight plus years. that is five congresses into administrations dealing with these issues. yet, we have less clarity over the past year that we had at any point during that time.
economic stakes are huge. 18% of growth gross tumescent product and some think it is between 25% for the year 2025 contracts. the public health stakes are just as high. we spent far more on health care then to our economic peers around the world. we all know the statistic. give the greatest clinicians and health system anywhere yet, by some measures are outclassed black. in the big picture, how we organize our health system will determine how effectively we respond to crisis like cancer, diabetes, opioid addiction this crisis. for a potential major pandemic. we find ourselves in the self-perpetuating crisis if we can't fix it people get sicker and then they need more care and the system becomes even more
costly and more expensive. dean, you and your team should be proud that the healthcare costs really slowed over your time in the white house. our window is closing and to preserve the gains and access we saw under the aca while getting control of costs which makes this a bad time to be unable to agree even on the basic foundation of federal legislation but i still believe a sustainable solution is within reach. this is why we work on this every day with our colleagues in health insurance at the blue cross blue shield association, with our hospital and physician partners with legislators and community leaders and with our members. let me take a step back before i talk about what the solution looks like let me tell you about my perspective and how it was shaped at home. it seems i've always been involved or around big public
policy questions in the healthcare industry. i am very comfortable at that intersection between politics and policy. in large part i can trace that comfort right here to american university where i got my masters degree in public administration and i know i don't look this old maybe i do but 1981 district anyone in the 1981 class desperate no, your all too young. i came here after graduating from st. joseph university in philadelphia in serving for nearly two years as a jesuit volunteer in inner-city portland, oregon. i came here with great confidence in the promise of our democracy. i was honored to work on the hill from my hometown congressman and witnessed the conservative, republican president ronald reagan and a liberal democratic speaker of the house bridge the ideological divide. to move america forward.
i loved every chance i get to come back here. i get that nostalgic rush of a different time in our nation's history. thank you to the washington college of law, the school of public affairs is everyone that americans are providing a venue. again, as sylvia said, for this critical discussion and frankly, for bringing me back, rekindling my optimism because it's hard to be optimistic most days on our inherent goodness as a people. together we can change our collective history for the better and it starts with healthcare. president is such a pleasant pleasure to be able to welcome her to my university. her incredible service as secretary of hhs applies the leadership that our country so desperately needs and deserves. frankly, we need american
universities to be at the center of this effort and you are off to a good start. this is incredible program. thanks again to asl for processing on health reform and thanks to all of you for taking the time to participate. there is a somewhat logical progression in my career path, even though it is played out over 36 years between my time in american university in the and my role as ceo independence health. independence has been covering people in the philadelphia area for over 80 years were coming up on 80 years. overall as vicki said we touch more than 8 million lies in 24 states and the district of columbia. through our blue branded products and are of their health subsidiaries. our flagship brand of service 2.5 million people in greater philadelphia. we are the only insurer in south eastern pennsylvania on the
commonwealth exchange. in new jersey, through our product we are one of two. by the way, we're not going anywhere. they can keep throwing changes as we were not going anywhere. [applause] in total, we cover over 300,000 people through the aca exchange. by the way, not that this is relevant but i feel i need to say this. probably, based on the way you hear me talking i am a republican. it is an important note because we have to change this dynamic. i consider myself a john k sick type democrat. i love when he gets on tv and talks about the power of the private sector in partnership with government. if we peel away all the labels and we peel away the portal called frederick, what president obama, what his administration, what they did was create an
opportunity -- it was not perfect and it still isn't perfect but in opportunity for the public and private sector to work together to make change. i want to script a little bit because it is important that we realize this is not a democrat, republican issue and i'll come back to that. independence and we have innovation investments in partnership across our region and around the country. through our mirror health subsidiaries we serve millions of medicaid recipients all across this great nation. most currently finishing up my tenure as chair for the blue cross blue shield association and i'm delighted of the work the blues are doing to make sure that health is accessible to as many americans as possible. we, the blues, represent 36 independent insurers covering 105 million people, one third of
the nation population. our brand is one of the most admired, highly recognized anywhere. i think what a solution looks like. all of those perspectives come into play. i'm a big believer in the power of private sector innovation. first, in partnership with government. i want to see a healthcare solution that harnesses the power to transform. as i worked with colleagues at the plants around the nation i see more clearly than ever the healthcare is best delivered at the state and local level, in collaboration with the federal government, guided by the federal government. i want a solution that preserves flexibility for local healthcare solutions with federal support and again with guidance. i know that any solution to start the bipartisan agreement to do what is best for all americans. healthcare is not a republican issue or a democratic issue.
healthcare is an american issue. nonetheless it is complex and rots with emotionally and politically charged rhetoric. that being said, i was encouraged by the alexander murray plan just last week. i know in pennsylvania, for example, we have leaders from both sides of the aisle like senators pat toomey, a republican in five cases, democrat who, i believe -- can you imagine? them in a room and say don't come out until you have a plan. they would get a plan done. we need that bipartisan the and that type of solution. they are not alone. there are many in the halls of congress represent a district or where you live right now who are ready and willing to cross the divide, to come up with a workable solution.
let's see if congress can come together. right, left and center around this measure. leader mcconnell, who i think is a traffic leader, please use these leadership skills. on the bill, save the affordable care act so that we can move on to an even better program for our country. the alexander murray plan is aimed at the right targets. short-term portability, increased flexibility and the time and stability to transition into what comes next. whether you call it repeal and replace or whether you call it fixing the aca, it doesn't matter. from my perspective, whether it's a tax break or subsidy as long as we get under the system. let's move forward. i hope we can use it as a springboard to competence of solutions for the long-term because under our framework, forgetting healthcare right, any process must do three things.
stabilize, transition and accelerate. number one, stabilize the system that is in a very precarious situation. i can't tell you the number of calls and erections are having with 300,000 people, not all of them but a strong number that don't know if they can sign up on november. aren't sure and that's how it was in year one. we should be well beyond that number two, manage a productive transition to whatever the next iteration of healthcare reform is and number three, accelerate innovation and care delivery and payment models to create true sustainability in the long run. you just heard that a few minutes ago. none of that can happen without a bipartisan agreement right now. we should demand it. whoever you can talk to, demand
they sit around a table and get it done. one of the key elements of stabilizing our system. let's start with the millions of newly insured americans in the aca. president burwell didn't really trumpet it enough. according to the national health interview survey there were 20-point to million fewer uninsured in 2016 than in 2010. truth is i like to look at it this way. when you look at the numbers of those who joined the exchanges, somewhere between 12 and 13 million, by our count and those who have been a part of medicare expansion somewhere around 16 million give or take a few but give me 8 million americans today have coverage who did not have it prior to 2014. 28 million americans. for all the -- [applause] thank you, you all deserve that. for all the sustainability issues and these are real, 20 million covered is pretty
exceptional. if we do not have these folks in the system, what does it mean? they again will show up in emergency rooms -- we are on the cusp of turning back the clock. we cannot do that. we can't let it happen. short-term stability also relies on private consensus on csr payments. these critical subsidies to the consumer have been used as a political cudgel. the aca envisioned a long-term transition to a market-based solution that will cover more people and hopefully bend the cost curve. if the csr's were part of that transition to bring some of the most vulnerable people into the system and they have been part of our business calculations to set premiums that have maximum number of people can afford. for an audience of legal and ethical fingers the csr
situation should raise obvious question, is that contract a contract? we have to live up to our contracts with our members and our customers and our vendors. shouldn't the government live up to its contract? shouldn't this debate be long over? does living up to that contract will be a huge step in reestablishing stability. once we do that we can talk about the logical transition to whatever comes next, that includes finding the balance between key trade-offs like federal uniformity versus state flexibility, a focus on [inaudible] versus tax credits and where the financial burden system falls. the aca's health insurance taxes waive this past year, this year, but will be reinstated in the future. this added another element of
instability and this tax being squarely at one stakeholder in the competitive landscape. it produces our ability to drive innovation and payment models and care delivery but i have to say this debate now where we are on the floor of the senate at the time that the senate bills found there was a number of senators talks about will not fill out the health insurance companies the truth of the matter is if you look from 2014 and i may be off by a few billion dollars but our cfo greg is here and forgive me for throwing numbers around but the insurance companies contribute 35, roughly $35 billion into the system but it wasn't the insurance companies. it was consumers of all through their rate supported the affordable care act. it makes my blood boil when this comes down to the will not do a
health insurance bailout. it's not bailing out the health insurers. it is making the system sustainable by giving consumers the brake they need. shouldn't there be a funny process that all brings stakeholders to the table, providers, pharmaceutical companies, everyone? whatever the next iteration of healthcare looks like there needs to be a tremendous untrained transition. that gives everyone time to plan and keep continuity for people who need healthcare. because the victims of a chaotic transformation are not insurance companies even though we have to figure out how to operate in an unstable terrain they are not the legislators of one party or another trying to defend their seats. the victims are people who lose coverage or have inadequate coverage if we cannot find a comprehensive solution with a reasonable transitional period. these issues of stabilization and transition are difficult and
critical and they establish the baseline for long-term sustainable form. now the good news. the good news, the next step which we call acceleration, makes me excited to come to work every day. our goal is to accelerate the transformation of how we pay for and deliver healthcare in america. the kit key to long-term sustainability is not anything that congress does, the key is collaboration by private stakeholders acting on the ground in healthcare. insurers, doctors, hospitals, pharmaceutical industry, device manufacturers and tech companies. we must work together, all of us, on new models to pay for and deliver care in the insurance industry, this is where we put our industry in every day.
there was a broad consensus in what was supposed to happen to create long-term sustainability and we need a system that pays for value and outcomes rather than for -- cms put weight behind and you heard about that earlier. even though there has been mixed signals without the new administration value -based models are not going away. the insurance agency has made the request for valuing our own. we are doing it in partnership with healthcare providers which is critical. we can't do it alone. they can't do it alone. we have to move into this world together. our company has put value -based models at the heart of our business. we combined our contracting health services and are [inaudible] into facilitated health networks. we built that function in rebuilding that function on
principles of disruptive innovation. if you are familiar with the plate of [inaudible] at harvard, he put it down to three principles and applied it specifically to health care in his book the innovators prescription. in order to disrupt our healthcare providers you need all three principles. a new business model, backed by new uses of technology in a new type of network called the facilitated network. in our world we call those elements engage, enable and empower. engages the creation of new business model, untrained and healthcare payment. we are implementing that model at the most basic level, our contracts with providers. we are going to the largest health systems in our market, places like the universe of pennsylvania health system and jefferson health. as their contracts come up for renewal we are telling them we cannot keep paying these
accelerating rates increases every year. we have to control the base rates of reimbursements and these are the same type of conversations we are having with other players around our products. when a pennsylvania senator talks about capping the medicaid expansion at cpi urban consumer price index rather than cpi medical these are conversations about the business model and we need to engage the business model with the accessibility and come up with a middle ground that works. at independence we put system together where we pay for outcomes, not for sheer volume, things like bundle payments and care and the transition to value -based care means we share responsibility for those outcomes. we share the risk. you know what? they all get it. they all understand it.
the providers want to work with us. these outstanding healthcare systems know the economics just like we do. it makes us easier to move into a value -based world when we do it side-by-side with providers. in fact, it's the only way to proceed. the enabled part of an engagement is technology and health systems have electronic medical records of patients and everything that happens in the point-of-care and insurers have planes data which is extraordinarily powerful. our data tells a story of what happens to our members every time you see a doctor, every time you have a test to fill a prescription. at every level we can link that data to democratic, democratic financial data and get a socioeconomic picture of a patient that helps diagnose
care. when providers are willing to partner with us on a value -based care we can also exchange data and building a database around both claims data and emr data which is the holy grail we are starting to do that with these two organizations. we are in an ideal situation to develop this concept working with pen and jefferson where they also have world-class resources for understanding data. the final cornerstone of our approach is empowerment. before i move on, i want to give a quick highlight so we can begin to impact on some of these efforts. because we are sharing data with the university of pennsylvania we have agreed to work towards episodes of care where we have a value. here's an example. they are so confident in their partnership that they agreed that they will cover any involuntary readmission up to 30
days. i think it is the first in the country. i don't no, jean, if anyone else is doing it but the truth of the matter is we calculated the impact. the impact is roughly $20 million a year in savings to the healthcare system. one hospital, one episode of readmission and think if you extrapolate that across the entire system, the billions of dollars in savings that we could find various episodes where we agree to partner between payer and provider. i lost my space. i got excited about that one, i'm sorry. [laughter] i might be repeating here but [inaudible] health systems -- i already did that. in the ideal situation i talk about here i am.
here is how we make sure this value -based model and all this data has the point-of-care, this means building a facilitated network which is a network of networks really. it means connecting the primary care provider, the specials, nurses, social workers, community resources, health system around the consumer, around the member and the patient. we linked all these components to facilitate networks by technology and we are building that technology with these two provider systems. our chief medical officer chairs hsx which is the health and information exchange for southeastern pennsylvania. under a health information exchange no matter where you wind up getting care or what hospital or doctor your medical records can travel with you. we also have clinical care transformation team which goes
out to position practices and systems. it helps them implement the very collaborative, clinical model called for by or facilitated health networks. our clinicians and their clinicians are coming to the table to understand episodes of care and to figure out how we define outcomes and pay for them. as i said, we are out in the real world doing this. doing what president there will talk to. we add pen and jefferson, two with amazed nations most outstanding systems of the renewal this year. both of those partners, as i said, are now contractually committed to principles of value -based payment and data exchange and clinical collaboration. our teams are exploring exactly what the value -based models look like as we go through implementation.
with jefferson, they are a dynamic innovative system that has grown quickly and they are working on new ways to treat diabetes and populations and expanding the potential of telemedicine and biometrics for remote care. new genetic approaches to prostate cancer. there are great ways to integrate a value -based model and for these projects. we will find them. university of pennsylvania is raising the bar for shared risk. i talked about the program we are doing about readmission and this agreement, the jefferson agreement both start by lowering base rates and pain value, value, only one value is achieved we pay. it comes and we come together to share data at a real time. the some of the most innovative american health systems in philadelphia and we are building a type of partnership with them that really has not been seen between insurers and providers. that is why i am so optimistic
if we can get that basic foundation built and stable in the private sector than the insurers and health systems all the stakeholders have the ability to collaborate on a system that works. that is my perspective and i remain excited and committed to tackling this challenge of a lifetime. i am also lucky to be in this room of passionate, experts, researchers and thinkers. i like to open the floor for your comments and questions and learn from you but before i do, allow me to offer a brief call to action. to begin with the same thing i tell everyone i speak with, we must demand that congress that they reach a bipartisan agreement on the issues in front of them. your opinions carry a lot of weight so please make your voice heard.
beyond that, keep doing what you are doing and put the focus on health care reform and that it is in the context of our legal system. how it affects the health of populations and how it reflects the moral compass of our nation and how all these things are interrelated. do everything you can to inspire and encourage and support innovation and let us together continue to build partnerships, collaborative partnerships that will make our society stronger in our population healthier. thank you very much. [applause] any questions? i know we are over time but -- here's one here. microphone is here. we'll get to lunch pretty soon. this is good.
>> are you participating in any multi- payer demonstrations and what are your thoughts on trying to merge incentives? >> obviously, health insurance is a very competitive environment but we created an entity called [inaudible] health a few years ago. what we do is we go out to independent primary care practices. we are up to about 500 in five counties in the philadelphia area and we are giving them the tools and technology to build and interrelationship with their patient and with their health system they interact. we have decided that we wanted an advantage for a period of time so it is just participating through [inaudible]. we are opening up to other insurers this year so that it will become agnostic. we believe the truth of the
matter is these clinicians have patience all insurers. i don't know that we will let everyone on but it will be multi- payer system and we are very interested. for example, this is something that would be unheard of with the [inaudible] a few years ago. our pbm is up to max owned by united healthcare. when we -- when we acquired our pbm i said how can soon can we move in i received a call from the team and they said give us a chance and come see what we do. we were so impressed with them that we will keep them. i think competition at the high-end will continue and we will fight hard to be united and they will do the same with us but when it comes to the back room and the things in the tools that we need to use to do everything i try to say this talk there is no reason that it can't be agnostic. our philosophy is that we will go down the path.
thank you. thank you very much. have a great rest of the conference. [applause] >> i'd like to get started with our lunch keynote address. my name is aaron and i'm an associate professor of medicine at harvard medical school and hospital. i run the program on regulation, therapeutics and law there which is an interdisciplinary research program that focuses on intersections pharmaceuticals and laws and regulation and clinical outcomes where they are the largest independent academic group on the country focusing on these matters. is my pleasure to be here and i want to thank american
university for putting together such a great program and the american society of law and method and ethics and other sponsors of this conference has been a pretested conversation. so, we spent a lot of time talking about the future of healthcare policymaking in our lunch session will be focused on one particular area which is the pharmaceutical marketplace. pharmaceutical prescription drugs are some of the most effective and most cost-effective interventions that we have in medicine. industry plays an important role in bringing these products forward but in recent years drug prices have continued to rise which has made some of these breakthroughs unaffordable for patients and leading directly to bad clinical consequences when patients are unable to afford their medication, as well as driving healthcare spending with spending on pharmaceuticals
assessments at about 20% of your spending overall. we are extremely fortunate during this lunchtime to have one of the key players in helping help establish this pharmaceutical marketplace and representative henry who has served as a member of the us house of representatives for 40 years, overseeing a number of important pieces of legislation, not only the [inaudible] act but also the orphan drug act, prescription drug [inaudible] and other pieces of legislation that helped establish the environment say. representative serves as chairman and the public communications firm and a
lecturer at the johns hopkins bloomberg school of health. we are hoping he can talk with us today about his reputation as one of the most accomplished legislators and one the most drivers in the important pieces of legislation as they relate to the pharmaceutical market. let me introduce henry and bring him up and he will give comments and then we will get down to some discussion. hopefully, at the end he will have time for audience q&a as well. start thinking now about your questions. thank you very much. [applause] >> i am delighted to be with you all today. i have looked over the schedule for the conference and it looks like a plastic conference. i know c-span is filming this and perhaps i can get a copy of c-span's record of what has been said in the last day and a half. i think a you for hosting this conference and i think aaron for inviting me to join you today to
talk about prescription drugs. i was in the house of representatives for 40 years and in the 1980s, we were focusing on the pharmaceutical issues of the time in the pharmaceutical issues that we were looking at was that we needed more of an incentive for development of new drugs. we needed new incentives for drugs to be manufactured for the broad population and we also needed to address the problems of people with rare diseases. in 1983, we passed the law called the orphan drug act. these are called orphan drugs because the number of people that were affected by a disease were very small in number and it wasn't in the interests of the manufacturers to even produce a drug that was known about, let
alone develop new drugs for people with these rare diseases. we tackled that problem particularly to view of giving an incentive for developing drugs for rare diseases that did not look like they would be profitable because so few people would be using those drugs and we adopted the orphan drug act. this gave incentives through the tax system and incentives as well to an exclusivity period of seven years. the next year we looked at the problem of incentive for development of new drugs and the pharmaceutical industry complained that they had lost time while there drug applications were being reviewed by the fda and they had only, within the last decade before,
had to come up with, not just for safety, but proof of efficacy, which required many trials to accomplish that goal. of course, the drug cannot be marketed until the approval was accomplished and finalized. they said they ought to have more time restored to their patents for the time lost at the fda. on the other hand, generic drugs were very small in number because generic manufacturers who were making the same drug as the brand-name drug had to go through all the test to show it was the same drug in terms of effectiveness and safety. they had to go through the whole a nda procedure so we adopted a balancing to help these generic
drugs by saying they could have an abbreviated new drug applications and all they had to show that they were exactly the same drug that had been on the market and that had already been established safe and effective for approval. we thought we got a balance. incentives for the development of new drugs and competition to lower the price of drugs on the market for the consumers. well, that balance is completely out of whack. that balance has been affected dramatically by a lot of changes since the 1980s, insurance now pay for pharmaceuticals and there have been a breakthrough pharmaceuticals and we are grateful for that but the drugs are exceedingly high priced when they are first being rolled out
and there is no competition permitted or sometimes when they are being rolled out and they have been on the market for a while the prices go up and there is no reason to explain the prices going up except for the fact that the manufacturer has either a patent and or exclusivity which means no competition. we have seen that drug prices are rising faster than wages in the last several years. drug costs are ever increasing problem to people to pay for their drugs even if they are only making their co-pays and they have insurance. by the way, since the 1980s we had insurance coverage for drugs which has i think helped increase the prices for these drugs and as we look at these ever increasingly frustrating problems the first thing i want
to point out is that there is no silver bullet to the issue of the drug pricing and there are a lot of people who seem to claim there is a silver bullet and all we have to do is negotiate prices and if you negotiate prices with a patent holder has a monopoly you negotiations will not go very far because you can't substitute an alternative drug. there are other problems in the negotiation but negotiation prices for drugs is no magic solution. ...
legislation passed. by the way men and these were ever passed on a policy basis. most of the bills i was associated with in congress was not passed on a partisan basis whether the expansion of medicaid or the drug back toward dealing with medicare or any of the other laws. they were bipartisan the truth of the matter is we do better when bills are bipartisan. i felt well informed when i introduced a bill that when you hear those comments that critique you learn more about your legislation to make a much better product. wish some of those laws we're having difficulty
dealing with right now especially the affordable care act were bipartisan. that is the only lot i ever had a role to draft that was only partisan but that was based on a political decision that republicans did not want to participate or be a part of it so they were against the stimulus bill and the regulation of wall street trying to do something about climate change. they did not want to deal with the affordable care act even though the affordable care act was based on many of the principles of the republicans who support it especially with those alternatives that they try to do during the administration to address the problem of
pharmaceutical pricing. so even in a divided congress for progress to be made we have to start a discussion not a bunch of solutions. look at the drivers to see what members are willing to take on. you can start to make some progress by addressing these issues. so we looked at the following kinds of drivers in hot health care, high in annual increases, what can be done about it? or the approaches? source some manufacturers create or take the advantage of natural monopolies that significantly increase prices we saw this that
eliminate any opportunity for competition because they have the patent for a exclusivity with nobody competing against them. sometimes it was a natural monopoly or sometimes it was contrived. but the lack of robust competition among manufacturers that result in less competition and higher prices. there is a real problem from the fact when the by a similar is as part of the affordable care act we gave this long exclusivity period i think it was 12 years. that was so long in comparison that makes it difficult to provide competition. but there is some possibility of competition
that we need to take action to establish that pathway for those bio similar is and genetics to be approved but it is difficult to analyze because it does not make pricing information available to the patients, other providers or payers that point of care where the decisions are being made and a lack of information about comparative effectiveness which at this very important time. federal law limits what the states can do under their authority such as medicaid to implement other price related measures we might want to look at something the states can do or what they're already doing on
their own like the status of california with a new transparency lot and others are following along. that is all for a the good with state experimentation if we permitted that with that drug formula. there are things we can do short term and long term but our approacheapproache s to talk to key senators and members of the house to get them talking to each other. if we could get members across the aisle to talk with each other they could start thinking about things we could agree on and that is a real problem now but even the most difficult time we were able to get things done just by working on a problem. with may not have been a big
solution but we have gotten bills through zero lot of time the only ones especially the last eight years were bipartisan. now they think they can pass them on the partisan basis so now we find out they are more successful. so with those introductory comments i am available to have a conversation. thank you very much. [applause] >> so the generic drug
industry are making up 20% from back when you pass the bill now to date it is almost 90 percent so the gao has estimated the availability of genetic -- generics have saved $1 trillion so with this success the envisioned when you created the statute?. >> we did not even have a model when we pass these even to know what to envision for the future. the act is a enormous success manufacturers wordy been looking to see if some of those could help they just did not want to be bothered with fat profit potential and with the generic drug market the new
with the competition but we never expected that to be as great as a success as it has been with $1 trillion so they hope to save $1 trillion. that is the good part. >> said to get back to the drug act also what you noted and touched on over the last three decades branding and manufacturing have figured out how to obtain secondary patons on the peripheral aspects to list those with the fda with paper delayed the settlements they engage in with the generic manufacturers refusing to supply samples.
so if you were rewriting the act today would you do anything different? or anything that you can predict?. >> we may have predicted brand-name companies may have tried to stop people from buying generics. they talk about them not being the same or as good as a branding drug with a public relations campaign from the very beginning trying to make that point but i think they have accepted the idea if you can get a generic is a better price. that is the success of the law but the manufacturers look for lots of different ways to keep out competition
we envisioned a generic drugs to give a the manufacturer the incentive to cut out to say the patent was no longer valid they cannot manufacture a generic drug. were we will give the advantage to the first generic on the market so that encourages them to stand up and do the work and be rewarded. so now you are not only blocking the generics but you delay those other generics that are lined up for the market. i finca if you would get these very carefully to see
what they can do to address these issues. some are already on the agenda with bipartisan support hoping congress move forward senator grassley has introduced that bill to be sure of the generic competitor. so there is no reason. with all the countersuits but the court said it should be very much it should be
outlawed. son to be considered or looked at very carefully so to start addressing the problems. so if you start addressing some of those problems than the next up is easier. >> if you mention a couple of examples with concerns of consolidation with those shortages with the ongoing tragedy is in puerto rico so these episodes reveal they're not as stable as they may have hoped so how might we update the act to
address these concerns?. >> that since the '80s at one time you had drug manufacturers on the other there was a lot of hostility but now you have brand-name drugs and also the generic drug manufacturers. sometimes they have their own conflicts to say if they have the monopoly they want to continue or if they want to compete that is in just one side or the other i think we need to let these problems and see what
congress can agree to do with those aspects of the generic market. there are some good suggestions to stop the sole sourcing of drugs to bestow the monopoly there. there are ways we can ask the fda to do more to hold up with suggestions to have a more robust generic drug industry by giving them approved more quickly and trying to see if there is some way there is a sole source manufacturer or note in advance. i think importing drugs could help in a narrow issue
on the list of things that might be done. so some things that congress could do is to establish a pathway for those generic drugs with those biotech drugs to be approved with those other issues related to that such as questions when they can designate a generic drug as a drug that is substituted will. so they need to figure out the difficult criteria so of the game that we had from
various things that we could do it will take interventions at every level. not just federal or state legislatures but do you think there is a better or worse environment to have those conversations? how do we foster those bridges that we need to build?. >> when the problem gets to be difficult that representatives need to take on that issue. there is no good time especially if it has to be bipartisan and that is true
even now with the republican party majority in congress and republican president because there is no partisan proposal that one of the zero laws that i worked on over a decade was the clean air act, 1982 chairman of commerce committee was john dingell from detroit and the newly elected administration for ronald reagan came together on a bill. the bill was to reform the clean air act to increase car bin emissions and set standards that could be weakened and allow the air
to be geared year and it looked like it would pass but we fought very hard to stop it. after words we still want things to do to accomplish certain goals to strengthen the clean air act with all of these other issues so we tried to reach an agreement but not in tel we had president george h. w. bush said he wanted to do something about the problem. then we finally got a law passed that was almost unanimous. he didn't like the lobby past particularly but what move to the right direction in a way that was not strong
enough that the epa may do this but we said they also may not. but what it is required to do. so through that fact so we could get bipartisan cooperation and negotiation and a good bill. so then president bush said the same thing. but to say this is a great bill all the ideas are great but the fact that president trump said he wanted to do something about pharmaceutical high prices to hold the conference but
others whose seem to want to do thing to move the ball for word. >> so when you created the orphan drug act that there was no business interests to bring drugs to patients as you provided by incentives or tax breaks. but it has turned out they can make profits by selling it to them but here's the secret you make it very high with the fda to approve them on rigorous testing. >> so there are advances in
biochemistry and genetics but now all are understood. >> is it still relevant in this political context? that we could. >> it is still very relevant while those that have no hope from the four. so while manufacturers are working on these drugs profitable because to get insurance coverage for the drug and have to pay out of pocket and it has become a
to look at and a lot of times if we pass new laws called modernization to modernize for sure. >> but i can fill the time so we have seen in the last year that maryland passed day price gouging statute all patent drugs california tried to be an drug coupons with renewed generic versions so they don't push them to use brand-name drugs so d.c. these efforts will
have impact or do we need a federal intervention?. >> what we have is based on state experimentation and states can try things out so i am not sure of this conclusion but states can do more than their medicaid programs if we let them try. but they cannot try because of another law that we would provide the discounts for drugs under the medicaid program but they cannot figure out the formula for some drugs and not others which made it difficult for negotiations so we tried experiments so a lot of people think of the answers we can try we don't have to
turn around the whole system for example, medicare could try things out with a demonstration project to see what works and what doesn't. the state laws help and i know many cases where we push for national intervention but i have seen a lot of examples where people push for pre-emption doing things that the state level. >> i am the project manager from georgetown medical center. i want to know what your thoughts are on the recent controversy of the other hand trading their patent
rights to avoid the review patent and senator macassar goal proposed legislation for that happening in the future. >> that was a creative way. [laughter] to hold on to the expressivity and their monopoly. i thought it was a little too clever. for that attempt that could lead to some corrective legislation. i know she is very smart and dedicated to stop those abuses in the marketplace it isn't a foreign country but you keep the company without monopoly and we need more
competition and less monopoly. >> i am from harvard medical school on november 27 the supreme court heard the case is in short form in which the existence of the patent trial and appeals court is being challenged this is within the u.s. pt go with those drug companies to challenge the integrity of the patents of those drug companies if it is found to be unconstitutional and is
basically overturned that would be for the generic companies to challenge their patent. and will probably be deuce the efficiency that they can get to the market. >> i am aware of it. >> also one of the things about the patent trial is it isn't only generic manufacturers to see that consumer group with those patents related to hepatitis c drugs that lacked the
different strategies in it isn't a magic bullet but it is the effective strategy and it would be interesting what they say about it. >>. >> i am interested in bio-similars and what the appropriate strategies are to make it look more like a the generic market. in with those generic drugs. with that success in that bio-similars market accounting for those differences. >> i mentioned a few old
>> but i would second that as the biologic drugs there are dozens out there on the market that they need to be concerned about that there are mechanisms to make sure we are adequately addressing this issue but even though the fda has approved these bio-similars drugs they're only a couple on the market for those that have prevented these products from being approved. i know when to say a paper delay settlement but they
will not market that through 2023. and then with those very old 35 that they could use in europe. >> one of these presentations a senator stood up and said competition sets the price there is a monopoly to regulate. so with an unusual situation of pharmaceuticals there is no easy answer because we have to have a petition -- competition with the public is put in a position.
with the new miracles. then that the congress adopted this last year. and we have to think hard hour we going to be as a country? that is with the cost of the drug. but can you imagine today? if we had a vaccine for polio? not everybody can get it. they cannot afford it. so they made sure that did not have been. and with these situations.
but to have a lower price point. with lifesaving drugs with new breakthroughs. >> this is a powerful statement. and with that market with those physicians and patients as well. that it is hard to imagine that the efficient market that people that lead to the physicians are not paying for the product but the patients are paying in then the insurance companies make the decision and that is very inefficient.
so are there things that physicians and patients can do?. >> this is the problem generally with a third-party payer. and the family. and there is a further distortion with those values he gets out of medicines. and for scribers need to know that. >> patients need to know that. they need to know what is available to them. with the affordable care
act. it didn't produce what we hoped it would. at the behest of the former. so anything that could be used for a formulary and without that formulary so the medical system those those improvements. >> so in renewal of 2019, that question?. >> i work with the intellectual property program. i'd like to give you a moment to speak about nafta trade negotiation to be quite aggressive including higher projections with the
in the survey didn't envision the developing countries to produce a drug and have it on the market and then say after time went by a to get the generic approved even though it was already on the market and with our trade representatives they win in the untenable position with the ability of these poor people in the developing countries that could not afford the market because of the price we have to get those generics out as quickly as possible but generically ensure it is related. >> they give very much.
. >> the target was charles murray. i was behind him that look like he could fall to the ground as 74 year-old man so when you see a 74 year-old man on the verge of falling i grabbed him by the arm. to make sure he did not fall but also i was thinking there was a large group being separated and being left behind sorry took his arm but that is when it turned on me. somebody pulled my hair, body slammed me from the other direction.
. >> i will start first by introducing each panelist in the then go on. so i will start with one of the nation's most highly regarded economist. what distinguishes this model the brilliant on the theory and research of more than any other economist he understands how markets work . but he also said -- sits on the benefits committee where he learns firsthand why
we're not the least efficient. is that fair to say? [laughter] he also serves on the panel of health advisers with the board of directors and vice chair of mudpack we have the good fortune to have him serve on the foundation and vice three board one of the pioneers of value based insurance design to evaluate medicare and private sector organizations please join me to welcome him to the panel. [applause] >> i am thrilled to be here they have done an incredible job it is great to see all of you here so i will talk
broadly about benefit design because bob is going to talk about the budget i am not sure bob would have this but what did they have in common? if they exceeded income growth we were 2 percent faster and in the 90's that was a very good year or a least a very good decade it only exceeded income by 1.six percentage points so health care is growing much more quickly so one reason why it is great to be here today with ongoing national discussions of what to do in the health care sector so i will largely talk about a broad
idea but to make an important distinction in many debates when people talk about the challenges we face they talk about national health expenditures. those challenges associated that the government is spending too much with the different solutions to how you try to address the total efficiency of america relative to what the government is spending. so i will make a? comment about medicare challenge. in 2015 so to take that for what it's worth the health care spending growth continued to exceed income
growth by two percentage points which is roughly the average by 2352 via that 8 percent gdp. if we're able to reduce health care spending growth then medicare spending would be a little more than 6.5 if we were stunningly successful and the rose that the rate of gdp medicare would still rise to overall spending. because we have more medicare beneficiaries. so the policy solutions are different. there has been rising spending historically in the health care system so we are
struggling with how to finance a growing portion of population on medicare should lead be surprising if we have more beneficiaries per worker they will have to pay more to finance those beneficiaries. it isn't rocket science mouth but looking at a growing population that is very different than how you deal with it otherwise it is unjust day medicare problem. with the state houses and medicaid spending growth crowds out other things that the state level. so to give you some rough numbers i don't want to go into broad fiscal policy.
suggest with taxes alone to waive proportionately. and the historical rate is 2 percent faster. it would have to rise to the highest income group in the neighborhood of 70%. and it is true that the power of compounding if you go out far enough of those fiscal challenges are real to create enormous amounts of tension. but nevertheless to chair the benefits committee and what to do with our benefit
package and when we look at the numbers we can see projections of spending growth to put pressure on wages and salaries so even if we often talk of federal or state spending it is a huge private sector issue to control spending growth. so i want to spend the rest of my time on just use that word loosely i will not have a big magic bullet at the end so that is what you came for wait for the other panel. so there are other solutions one is reform the other is consumer strategy's to engage consumers through insurance packages. it turns out one strategy of you may use is to pay less.
and that the enormous amount where the assumed increase to physicians and no one that i know is thrilled about that strategy there is a huge amount of energy of alternative payment models. those are episode payments in the of population base payment model for those of to give you some idea, we had a system called sustainable growth rate. so we now have for rule that governs the way physicians are paid that is say pay for
value component. but what is most important to understand is the scheduled fee increases that are e essentially flat in nominal terms. and so roughly speaking 2042 physician fees is the base level a little less than 10% in normal terms. so slowly over time there is a reduction of the real value in with those productivity adjustments. they are scheduled to go up less than the input prices. that would be a challenge for decades to come in the
fee-for-service. so what we have been trying to do is build a different type of statement model with that delivery system can capture those deficiencies and by pulling those efficiencies out to allow those provider systems to share in those savings they can perform better financially over the next 20 or 30 years that is of very so the advantage of these models who said these flexible payment models allow them to change the way that are distorted so there is a lot of economic appeal. >> so i go through those payment models.
in with that deficiency to share some of that with that pay for performance component. increasingly that data supply. and with those two succeed under that model. and often in those models with the moniker of value based payment where we reconcile for vengeance and value the word value is very overused. that takes the question what do we mean by value? that my personal view it as a little bit of the sugar to make the medicine go down to
shift those responsibilities and accountabilities of quality care with those financial components and recall that value because it sounds much more appealing but that is not the standard pay for performance model. down to the delivery system. >> pavements have gotten a lot of attention. so in general the evidence is pretty clear that they save money. there are examples that are reported to save large amounts of money the be 5% there is a lot of concerns that there could be an increase of volume we're not
sure. to take that as proof because the quality goes down thinking it would go up but there are several concerns of the episode base payment and one of those is that it works well for certain types of conditions. but the problem in this country dealing with complicated interrelated conditions better much harder to put into those episode models it is unclear how far you could go to capture the population in the episode based framework. that second concern of course is what i mentioned. so now to the population base payment model. this is the difference the basic idea the delivery
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