Obama at the AMA: The cost of inaction is greater

(Some key excerpts: the entire speech can be seen here.)


Today, we are spending over $2 trillion a year on health care – almost 50 percent more per person than the next most costly nation. And yet, for all this spending, more of our citizens are uninsured; the quality of our care is often lower; and we aren’t any healthier. In fact, citizens in some countries that spend less than we do are actually living longer than we do.


Make no mistake: the cost of our health care is a threat to our economy. It is an escalating burden on our families and businesses. It is a ticking time-bomb for the federal budget. And it is unsustainable for the United States of America....


...But let there be no doubt – the cost of inaction is greater. If we fail to act, premiums will climb higher, benefits will erode further, and the rolls of uninsured will swell to include millions more Americans.


If we fail to act, one out of every five dollars we earn will be spent on health care within a decade. In thirty years, it will be about one out of every three – a trend that will mean lost jobs, lower take-home pay, shuttered businesses, and a lower standard of living for all Americans.


And if we fail to act, federal spending on Medicaid and Medicare will grow over the coming decades by an amount almost equal to the amount our government currently spends on our nation’s defense. In fact, it will eventually grow larger than what our government spends on anything else today. It’s a scenario that will swamp our federal and state budgets, and impose a vicious choice of either unprecedented tax hikes, overwhelming deficits, or drastic cuts in our federal and state budgets.


To say it as plainly as I can, health care reform is the single most important thing we can do for America’s long-term fiscal health. That is a fact.


And yet, as clear as it is that our system badly needs reform, reform is not inevitable. There’s a sense out there a

The question now is, how do we finish the job? How do we permanently bring down costs and make quality, affordable health care available to every American?

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So let me begin by saying this: I know that there are millions of Americans who are content with their health care coverage – they like their plan and they value their relationship with their doctor. And that means that no matter how we reform health care, we will keep this promise: If you like your doctor, you will be able to keep your doctor. Period. If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what. My view is that health care reform should be guided by a simple principle: fix what’s broken and build on what works.


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The second step that we can all agree on is to invest more in preventive care so that we can avoid illness and disease in the first place. That starts with each of us taking more responsibility for our health and the health of our children. It means quitting smoking, going in for that mammogram or colon cancer screening. It means going for a run or hitting the gym, and raising our children to step away from the video games and spend more time playing outside.


It also means cutting down on all the junk food that is fueling an epidemic of obesity, putting far too many Americans, young and old, at greater risk of costly, chronic conditions. That’s a lesson Michelle and I have tried to instill in our daughters with the White House vegetable garden that Michelle planted. And that’s a lesson that we should work with local school districts to incorporate into their school lunch programs.



Our federal government also has to step up its efforts to advance the cause of healthy living. Five of the costliest illnesses and conditions – cancer, cardiovascular disease, diabetes, lung disease, and strokes – can be prevented. And yet only a fraction of every health care dollar goes to prevention or public health. That is starting to change with an investment we are making in prevention and wellness programs that can help us avoid diseases that harm our health and the health of our economy.


But as important as they are, investments in electronic records and preventive care are just preliminary steps. They will only make a dent in the epidemic of rising costs in this country.


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Let me be clear: identifying what works is not about dictating what kind of care should be provided. It’s about providing patients and doctors with the information they need to make the best medical decisions.



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But alongside these economic arguments, there is another, more powerful one. It is simply this: We are not a nation that accepts nearly 46 million uninsured men, women, and children. We are not a nation that lets hardworking families go without the coverage they deserve; or turns its back on those in need. We are a nation that cares for its citizens. We are a people who look out for one another. That is what makes this the United States of America.





Now, even if we accept all of the economic and moral reasons for providing affordable coverage to all Americans, there is no denying that it will come at a cost – at least in the short run. But it is a cost that will not – I repeat, not – add to our deficits. Health care reform must be and will be deficit neutral in the next decade.


There are already voices saying the numbers don’t add up. They are wrong. Here’s why. Making health care affordable for all Americans will cost somewhere on the order of one trillion dollars over the next ten years. That sounds like a lot of money – and it is. But remember: it is less than we are projected to spend on the war in Iraq. And also remember: failing to reform our health care system in a way that genuinely reduces cost growth will cost us trillions of dollars more in lost economic growth and lower wages.


That said, let me explain how we will cover the price tag. First, as part of the budget that was passed a few months ago, we’ve put aside $635 billion over ten years in what we are calling a Health Reserve Fund. Over half of that amount – more than $300 billion – will come from raising revenue by doing things like modestly limiting the tax deductions the wealthiest Americans can take to the same level it was at the end of the Reagan years. Some are concerned this will dramatically reduce charitable giving, but statistics show that’s not true, and the best thing for our charities is the stronger economy that we will build with health care reform.


But we cannot just raise revenues. We also have to make spending cuts in part by examining inefficiencies in the Medicare program. There will be a robust debate about where these cuts should be made, and I welcome that debate. But here’s where I think these cuts should be made. First, we should end overpayments to Medicare Advantage. Today, we are paying Medicare Advantage plans much more than we pay for traditional Medicare services. That’s a good deal for insurance companies, but not the American people. That’s why we need to introduce competitive bidding into the Medicare Advantage program, a program under which private insurance companies offer Medicare coverage. That will save $177 billion over the next decade.


Second, we need to use Medicare reimbursements to reduce preventable hospital readmissions. Right now, almost 20 percent of Medicare patients discharged from hospitals are readmitted within a month, often because they are not getting the comprehensive care they need. This puts people at risk and drives up costs. By changing how Medicare reimburses hospitals, we can discourage them from acting in a way that boosts profits, but drives up costs for everyone else. That will save us $25 billion over the next decade.


Third, we need to introduce generic biologic drugs into the marketplace. These are drugs used to treat illnesses like anemia. But right now, there is no pathway at the FDA for approving generic versions of these drugs. Creating such a pathway will save us billions of dollars. And we can save another roughly $30 billion by getting a better deal for our poorer seniors while asking our well-off seniors to pay a little more for their drugs.


So, that’s the bulk of what’s in the Health Reserve Fund. I have also proposed saving another $313 billion in Medicare and Medicaid spending in several other ways. One way is by adjusting Medicare payments to reflect new advances and productivity gains in our economy. Right now, Medicare payments are rising each year by more than they should. These adjustments will create incentives for providers to deliver care more effectively, and save us roughly $109 billion in the process.

Another way we can achieve savings is by reducing payments to hospitals for treating uninsured people. I know hospitals rely on these payments now because of the large number of uninsured patients they treat. But as the number of uninsured people goes down with our reforms, the amount we pay hospitals to treat uninsured people should go down, as well. Reducing these payments gradually as more and more people have coverage will save us over $106 billion, and we’ll make sure the difference goes to the hospitals that most need it.


We can also save about $75 billion through more efficient purchasing of prescription drugs. And we can save about one billion more by rooting out waste, abuse, and fraud throughout our health care system so that no one is charging more for a service than it’s worth or charging a dime for a service they did not provide.

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I want them to benefit from a health care system that works for all of us; where families can open a doctor’s bill without dreading what’s inside; where parents are taking their kids to get regular checkups and testing themselves for preventable ailments; where parents are feeding their kids healthier food and kids are exercising more; where patients are spending more time with doctors and doctors can pull up on a computer all the medical information and latest research they’d ever want to meet that patient’s needs; where orthopedists and nephrologists and oncologists are all working together to treat a single human being; where what’s best about America’s health care system has become the hallmark of America’s health care system.


That is the health care system we can build. That is the future within our reach. And if we are willing to come together and bring about that future, then we will not only make Americans healthier and not only unleash America’s economic potential, but we will reaffirm the ideals that led you into this noble profession, and build a health care system that lets all Americans heal. Thank you.