Below are the remarks of Acting CMS Administrator Andy Slavitt at the 35th annual JP Morgan Healthcare Conference in San Francisco, Calif. on January 9, 2016.
It’s great to be with you here this afternoon for what will be my last public speech in my current role. Although I will tell you in a minute about an excellent panel at 6 o’clock that I’m really excited for. Whatever finale speech I had planned in my head in early November will have to wait for another day. I started a new one late in the evening on November 8th.
It’s been an honor to be a small part of making record progress in the last eight years—progress long overdue for so many. Let’s remember what things were like just a short time ago before the ACA: we had record levels of people without insurance, unsustainable medical cost growth and poor quality health.
Thanks to the hard work of many, over the last eight years, things have finally begun to change. In fact, there hasn’t been a greater stretch of progress in our nation’s health care system as we’ve seen in the last eight years:
- We are covering more Americans: More than 20 million Americans have been newly covered and the uninsured rate is under 9 percent, the lowest it’s ever been.
- We are making advances in quality: It is now safer to use the health care system than it was eight years ago. Across the country, people are getting higher quality care with 95 percent of national quality metrics improved over the last eight years. Thanks to this focus on quality, 125,000 lives have been saved.
- We are bending the cost curve: Our national economy is now projected to spend $2.6 trillion less on health care over the next decade – even as 20 million more people have health coverage. Medicare cost trends have been reduced from 6% pre-Obama to under 2 percent.
- Health care is more affordable for everyone: That’s true if you’re covered through Medicare, where you’re paying less for prescription drugs because the ACA closed the donut hole. It’s true if you get covered through the individual market, where, before the law, most plans didn’t cover maternity care, a third didn’t cover mental health, and almost 1 in 10 didn’t cover prescription drugs. Today, every Marketplace plan covers all of those services by law. And it’s true if you get covered in the employer market, where more than half of people used to have plans with lifetime limits – but now those limits on coverage aren’t allowed.
- We have achieved strong fiscal discipline: During this period, we have reduced the Federal deficit by 2/3 and added a decade to the Medicare Trust Fund.
- And, what it’s all about in the end: Making real gains in the lives of millions of Americans. The share of Americans who can’t afford needed care has fallen by more than a third. Record numbers of people report being able to see a regular physician and fill their prescriptions. As we hear about constantly, every year tens of thousands of lives are being saved.
And the private sector has flourished during the Obama years. Even as we have bent the cost curve and gotten more efficient. I did this analysis on November 8th. Health care companies outperformed the broader S&P 500 by 15 percent, which itself has more than doubled, since the ACA. And each sector—managed care, health IT, medical devices, hospitals, and pharma all well-outperformed the S&P. The Obama years have surely not been about a “Federal takeover” of our health care system.
The health insurance market is also more stable and growing. We are seeing record enrollment this Open Enrollment despite the obvious headwinds. And, according to S&P, the insurance exchanges are stabilizing after what they call a “one-time adjustment” to underpriced premiums. S&P’s outlook is for Exchanges to break even in 2017—and many are already. These results are from specific tough actions taken in the early stages of this market by companies and states and by our continued focus on improving the rules governing the risk pools.
I have a simple mental model of a before-and-after picture that I used during my years in the private sector that I would use when taking on anything new. Have we made things better for the American people? By so many measures, we have.
Of course, our “after” picture is the new Administration’s—and the new Congress’s— “before” picture. We pass the baton and the job ahead is to improve on the results of the Obama years, where we covered millions more Americans, reduced the deficit, bent the cost curve and, in the private sector, supported the creation of hundreds of billions of dollars in new market cap — and over 2 million new jobs in health care alone.
This is not to say that there aren’t opportunities for improvement. There are. The ACA was intended as the beginning of the journey, not the destination. But any changes need to build on what we’ve already accomplished and move us forward. The American people are going to judge any changes to the ACA based on common sense tests.
Does it provide coverage to at least as many people?
Does it maintain the quality of coverage or does it move us backwards with caps and loopholes?
Does it bend the health care cost curve in the right direction or does it cost American families more money?
And is it fiscally responsible?
If it fails on any of these tests, it is a step backwards.
But if any plan can improve the ACA, we should all embrace it. Let me be clear in saying this. There should be no pride of authorship. It doesn’t matter if a better plan comes from a Democrat or a Republican. We should all have a rooting interest in more progress.
This is what Americans are saying. Since the election, polls are showing that the majority of people, no matter who they voted for, want to build on what we have started, and not start over with a repeal. That should be a clear signal to the incoming Administration– the same one we had—to keep improving the before and after picture—and the lives of the Americans people.
And in overwhelming numbers, people insist on seeing the darn plan before anything happens.
A scheme that repeals the ACA with only the promise to produce a replacement plan later, as some are suggesting, is irresponsible. Millions of Americans and their families would be harmed by this scheme and indeed, many are sharing their fears on social media and calling our call centers, rightfully confused and panicked by this uncertainty.
Not putting a replacement plan forward would create needless chaos for hospitals and insurance companies. They need to begin making decisions on their 2018 participation just a few months from now. In board rooms across the country, there is one way to deal with uncertainty—and that’s by reducing investment and limiting exposure. With no clarity about the future of the individual mandate, premiums would very likely increase and many health plans would reduce their participation or drop out.
One reason people are expressing so much concern is because once a repeal vote happens, a replacement vote is far from guaranteed. In the parlance of Washington, the “pay fors” would disappear. Getting bipartisan support for the creation of a new plan and finding brand new money is infinitely harder than improving existing legislation.
Running CMS, one reason I proactively communicate so aggressively is that I remember what it was like in the real world. If you ask 20 percent of the economy to wait for a replacement and don’t think that will have an impact, you need to get out more.
I think this is why the real world is speaking up at a time when many would prefer to be quiet: the actuarial community, the physician community, cancer patients, hospitals, health plans, insurance commissioners, liberal and conservative policy experts a growing bi-partisan list of governors and Senators are warning us of the perils of quote “repeal now and hope to replace later.”
All of which means that if there is a repeal-only vote, the health care sector must plan as if the ACA will never be replaced. We are all trying to comprehend the impact of such an act. What experts are saying so far:
- The obvious impact is on coverage. An estimated 30 million Americans will become uninsured.
- The loss of pre-existing condition protections will immediately affect 127 million Americans. Not good for people or the emerging gig economy.
- That would be especially challenging because we know this scenario would reduce employment. The hospital sector is already forecasting, and I quote, “massive job losses.” By one estimate, 2.6 million jobs, many of them in small communities around the country, would be lost.
- Hospital bed debt would increase by an estimated $1.1 trillion over the next decade and hospital finances would suffer greatly, with losses estimated at over $165 billion by the middle of the next decade.
- Don’t expect any savings from this. All of this would add $350 billion to the Federal budget deficit and wreak havoc on state budgets.
This is not the before-and-after picture Americans are looking for.
After the repeal conversations, the Medicaid program looms as the next part of the agenda, and therefore the before-and-after picture for the American public. Let’s start with a quick refresher of what the Medicaid program does.
- It’s largely how we cover kids. Medicaid is the leading financier of maternity and prenatal care and about 1/3 of the country’s children (over 30 million) are covered by Medicaid and CHIP;
- Medicaid is how we cover seniors. Half of the long-term care we provide in this country to our seniors is provided by Medicaid;
- And it’s how we cover people with disabilities. More than 40 percent of Medicaid resources covers care for people living with disabilities, which but for a little bad luck would be anyone of us or anyone in our family.
Some in Congress are hoping to change Medicaid to a “block grant” or “per capita” program. This is sometimes described as an opportunity to give more flexibility or control for states to innovate. Don’t let the language deceive you. A block grant has nothing to do with innovation or state control or flexibility– those things are available to states today. Look at Indiana and their HSA-based expansion or Arkansas and their market-competition based expansion. Neither of those needed a block grant to innovate.
In reality, what a block grant does is place a cap on the money the federal government commits to states to run Medicaid. In other words, it takes control from states and gives it to the federal government.
We do have a live Medicaid block grant in Puerto Rico. The Commonwealth has had a block grant system for decades and at one point a few years ago, I think it felt like a windfall. What’s the picture in Puerto Rico right now? Puerto Rico has one-quarter the number of ICU beds per capita as the mainland, and no trauma burn units. American citizens wait to see the doctor, or they don’t go at all. Twice as many people have heart disease, and nearly twice as many report being in fair or poor health. And Puerto Rico’s block grant is hampering its ability to cope with its fiscal crisis and the Zika epidemic. I have never talked to a governor who envies Puerto Rico.
If you’re a governor, what happens when the usual but impossible-to-plan for happens– like the opioid epidemic or a promising new expensive cure for something like Hepatitis C. With no Federal financial support, they are on their own. Whose care gets cut? Kids? Seniors? People with disabilities?
So, if block grants don’t control the cost of care, what does? Medicaid managed care has made this decades-old idea of block grants obsolete. Three-quarters of Medicaid is already capitated or in similar arrangements. And Medicaid is our country’s most efficient health care program, far more so than Medicare Advantage and approximately 20 percent more efficient than commercial insurance on an apples-to-apples basis.
This is not ideological—it is a pragmatic, centrist concern over a before-and-after picture that would harm states and the American public. Congressional proposals for block grants would cut Federal support for Medicaid by 1/3 to ½ by the end of a decade. The Kaiser Family Foundation estimated that would result in 14 to 20 million Americans losing coverage—entirely on top of ACA coverage losses. And those cuts ripple across communities– from small rural hospitals and health centers to large health systems that are in urban areas.
The good news is we have don’t have to take a step backward. The American public expects us to take what is working and build on it. The immensely popular features of the ACA like free preventive care and ending the pre-existing condition limitations should be left alone and the focus should be on a limited number of improvements that spur competition and increase affordability.
Many of these can be implemented at the state level and enjoy bipartisan support. Alaska, with a Republican legislature and an independent governor, recently implemented a reinsurance pool that dramatically reduced rate increases. And states that have expanded Medicaid have a 7 percent lower premium in the Marketplace.
Let’s get back to what we should be focused on as a nation. We have begun a journey over the last seven years to move health care toward what some call a value-based system, but what I might describe in simpler terms as a more relationship-driven health care experience. As I’ve talked to Americans from all over the country and even as I reflect on my own personal experiences, this is one of the most important things we are looking for as patients. We also feel we are losing this—the ability to build relationships with care teams, where a whole episode of our care can be managed end-to-end without abrupt handoffs, and where our doctor knows when something happens to our health and she can connect it to other aspects of our lives.
I’ve had many conversations with physicians over the last year since I made a statement here at JPM that we had lost the hearts and minds of physicians. Many of them say they want to experience the joy of medicine again—to be able to make a living from listening to their patients, coordinating their care, improving their health, and get paid for what works.
Whether you call these ACOs or Medical Homes or Bundled payments frankly doesn’t matter. What matters is that we can develop these innovative practices locally, test them, and spread them.
Converting to a relationship-based system takes work and investment from all parties. We’ve started the process with the broad participation of physicians and patients. Using the CMS Innovation Center, which is part of the ACA, as well as through MACRA, the HITECH Act, and 21st Century Cures, we are making the investments that unlock research, data, innovation and reduce the burdens and distractions that don’t support care. They demonstrate that we can work in a bipartisan fashion on important issues in health care.
Hospitals, clinics, wearable tech companies, big data companies, population health management and other innovators have a big role to play. Patients and physicians want technology and data to support their relationship, not distract from it. I will be talking about this further with a great panel at 6 o’clock in the Colonial Room.
But let me be clear on this. We will not be able to both re-litigate the past and invest in an innovative future at the same time. I’m sure you are beginning to hear this throughout the presentations today. CEOs, CFOs and boards are all meeting and retreating—their purchasing, capital equipment and building are likely to slow sharply in the first half of the year if we are going through the prolonged uncertainty following a repeal vote. This will stand in the way of building the better system we need and that Americans deserve.
In the end, we have a commitment to improve the lives of Americans and pass the baton to the next team. Each morning at CMS, I would check my inbox first thing to read about the problems that beneficiaries would write me about. Sadly, we never solved every single one of them, but we solved many.
That’s the thing that binds Administrations in our system of government and gives me optimism. It’s the 140 million Americans in the Medicare, Medicaid, Children’s Health Insurance and Marketplace programs that we serve. Just as I worked for them, soon, the new team will work for us. I can tell you, at least for me, something changes when you are working directly for the American people with so much at stake. And I will do everything I can to assist the new team in continuing the progress.
On their first day, the new team will be greeted by words that greeted me the first day I walked into the lovely Humphrey building where the Department of Health & Human Services is located. The words say:
“The moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy, and the handicapped.”
Look at our before-and-after picture from a little bit of a distance. Before Medicare and Medicaid, one in three seniors lived below the poverty level. Picture that. One in three of our seniors lived in poverty. Today, that’s fewer than 1 in 10.
Today, thanks to Medicaid and CHIP, 95 percent of children in this country have health insurance. We are holding to the promise we have made to all Americans that as you get older, or if you have a disability, you will be able to access care and your family won’t go broke in the process. And, with the ACA, we have extended that promise of care to include all Americans regardless of their employment, their health status, or their income.
Through this transition, we must continue to work together in the private and public sector to continue to hold to these commitments and improve on them. And we must make sure the conversation around any coming changes in American health care reflects the gravity of their impact on millions of Americans.
Thank you. And now, I’m happy to take some questions.
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