September 14,2005

Baucus Highlights Need for Health Care Reform

Senator Delivers Speech Discussing Major Health Care Proposals, Participates in Live Televised Summit

(WASHINGTON, D.C.) Today, U.S. Senator Max Baucus delivered a speech to the Society ofThoracic Surgeons and will be participating in a Health Care Summit with CEOs and otherpolicymakers to discuss the rising cost of health care.

In his keynote address to the Society of Thoracic Surgeons, U.S. Senator Max Baucuslaid out some health proposals to respond to Hurricane Katrina and ways to cut down on the costof healthcare. The same principles will be discussed at the Health Care Summit hosted byCNBC. The event and will air from 2-3 p.m., with no commercial breaks, on CNBC and itspartner stations.

As ranking member of the Finance Committee, Senator Baucus has been an outspokenleader on the need to invest on health information technology and reward Medicare providersbased on the quality of service. This past summer, Baucus help introduce two measures tosupport the nationwide adoption of health information technology and base Medicare paymentson quality.

Senator Baucus also expressed concern with effect of rising health care costs onAmerica’s businesses to stay competitive in a global economy. U.S. businesses are often at adisadvantage with global competitors because of high health care costs for their employees.Baucus says keeping the cost of health care down is key to keeping America’s edge in today’sworld economy.

A copy of the speech to the Society of Thoracic Surgeon follows:

Speech of U.S. Senator Max Baucus
Keynote Address to the Society of Thoracic Surgeons

When I first planned to speak to this gathering, it was to discuss health care costs, quality, andpay-for performance. I still intend to do that. But before I do, let me say a few words aboutCongress’ response to Hurricane Katrina.

We have all seen the pictures of Katrina’s wrath. They are unprecedented, shocking, andshameful. We must learn from what went wrong in response to this tragedy. That will takesome time.

But in the meantime, we must also agree to do what’s right. And that means providing Katrinavictims the means and support necessary to get their lives back together.

As soon as Congress returned last week, I worked with my colleagues on both sides of the aisleon a package of provisions to bring health care to the survivors of this crisis and support to thegenerous doctors, nurses, and hospitals that are caring for them. I want to move this legislationthrough Congress as soon as possible.

In developing this package, a couple of things became abundantly clear. First, while America isthe richest country in the world, many among us have very little. Millions of Americans live inpoverty, without access to health care or resources, food, or even shelter. Last year, thepercentage of Americans living in poverty increased to almost 13 percent. Poverty has increasedfor 4 years in a row.

Second, fragmentation prevents us from getting the biggest bang for our health-care dollar.Looking for ways to provide Katrina victims with health coverage, some suggested Medicaid,others Medicare. Some said vouchers to purchase private insurance, while others said we shouldgive tax credits to help employers provide coverage. Still others underscore the need for systemof national health insurance.

We ultimately settled on Medicaid as the means to cover Katrina victims, and ChairmanGrassley and I are working to find agreement on a package we can move through Congress.Medicaid exists in all 50 states and here in DC. It covers Americans of all ages, with a widerange of health-care needs. And it has been used as an emergency means of care in the wake of anational tragedy, such as the one that occurred four years ago Sunday.

But regardless of whether you favor Medicare, Medicaid or vouchers to provide health care, Ithink we can all agree on one thing: America’s health care system is terribly fragmented. Wehave different insurers, different insurance forms, and different access. Depending on who yourinsurer is, access to care can vary a great deal. And if you’re not covered at all – as is the casewith over 45 million Americans – you’re in even worse shape.

Even though 15 percent of our population lacks health insurance, we still spend $2 trillion onhealth care in this country. That’s over $5,000 for every man, woman in child in the U.S. – 53percent more than Switzerland, the next most costly country. And yet our health outcomes aretypically worse. The average American woman can expect to live to age 79. The averageJapanese woman can expect to live 5 years longer, to age 84. People can expect to live longer inCanada, France, Germany, Sweden, Switzerland, and Britain. And all of those countries spendless per person on health than we do.

So what can we do about this? How can we ensure that America’s massive $2 trillion healthcarebill buys more? How can we achieve the paradoxical goals of cutting costs and improvingAmericans’ health?

The answer is simple: take a few cues from the Society of Thoracic Surgeons. In the 15 yearsyou have been reporting data on quality of care and patient outcomes, you have reduced yourpatients’ mortality by 70 percent. Congratulations on these results! To follow your lead, weneed to take advantage of health information technology throughout the health care system, andtie payment to the quality and value of care provided.

America often leads in the invention and adoption of medical technology. We are pioneers in theareas of drugs and devices, pills and procedures, science and surgeries.

But we have not complemented this innovation with the proper use of health informationtechnology. The staggering cost of administering America’s pen-and-paper system of healthcare claims proves the point.

Thirty to forty percent of American health care transactions still rely on paper claims, accordingto health economist Ken Thorpe of Emory University. These claims can cost from $5 to $20each.

But administering health care claims electronically can cut those costs to as little as 50 centseach. Thorpe estimates that requiring automated claims processing would save the FederalGovernment nearly $80 billion over 10 years. Significant savings would also accrue to theprivate sector, if it fully automated claims. And proper use of health IT can prevent unnecessarymedical errors, hospitalizations, and other health care services.

Each year, about 7,000 Americans die because of errors administering their medications. Buttechnology can help ensure that medical professionals give the right drug to the right patient atthe right time. We can help to do that by putting barcodes on all drugs. And we can help to dothat by using health IT to link medication administration to a patient’s clinical information.The inability to exchange clinical data among providers often causes duplication of diagnostictests. We can help by making it easier for one doctor to pull up the X-ray that another doctortook just the week before.

Why is America falling behind in health IT? Part of the reason is a lack of investment. Thehealth care industry invests only about 2 percent of its revenues in IT. Other informationintensiveindustries invest 10 percent.

As a result, only about one in five physicians use health IT in their offices. Among smallpractices, representing nearly 80 percent of all physicians in the US, the frequency is more likeone in twenty. In Britain, nearly all general practitioners — 98 percent — have a computersomewhere in their office.

We have to help ensure that health IT systems can communicate with one another. We need anagreed-upon set of standards so that health IT systems can work together. Otherwise, we willcontinue to have a tower of Babel, preventing communication of critical health information.We also need to make a significant financial commitment to health IT. And that doesn’t justmean the government. It means health plans, hospitals, physicians, and employers. One of thelatest studies on the cost of implementing a national health information network shows that itwill take a capital investment of $156 billion and $48 billion in annual operating costs to get thatsystem up and running. The government cannot foot that bill on its own.

This year, I worked with my colleagues on the Finance and HELP Committees to introduce theBetter Healthcare Through Information Technology Act. This bill will facilitate nationwideadoption of health IT systems. And it will help those systems to talk to one another. It will setup loans and grants to encourage the use of more health IT.

This bill will move us in the right direction, creating system-wide efficiencies, improvingquality, and reducing cost. But it will also let us take the next step – building a case for qualitydirectly into the way we pay for health care.

Medicare is the dominant payer in American health care. But today, Medicare is at best neutral,and at worst negative, toward quality. Medicare pays for the delivery of a service, not for theachievement of health.

And we see the effects. Patients receive recommended treatments only about half the time. Andmore care is often not producing better care.

Among the 50 states, levels of cost and quality vary greatly. In my home state of Montana, forexample, Medicare spends about $5,000 a year per beneficiary. Quality of care ranks near thetop. By contrast, some states spending around $7,000 a year per beneficiary have quality thatranks near the bottom.

I have introduced a bill with my colleagues Senators Grassley, Enzi, and Kennedy that will buildvalue into the way that Medicare pays for services. The Medicare Value Purchasing Act of 2005will begin paying for value in the health care system – good care, better outcomes, evidencebasedmedicine, and increased transparency. I deeply appreciate the Society’s contributionstoward our legislation.

We hope that taking a step forward in Medicare will drive the entire health system toward asystem of high-quality health care. But Congress should not determine how quality of care ismeasured. You know more than I do about the procedures you perform. And you should beinvolved in the process. That is why my bill sets up a system of stakeholder involvement atevery step – in choosing measures for each provider group, in setting up a data collection system,and in updating measures as science changes. Providers, payers, patients, and many other groupsare the experts who should be involved in the details of a health care quality system – notCongress.

Our bill sets up a two-phase approach to quality improvement. First, providers would continueto get their full annual reimbursement update only if they report data on quality to CMS. Later,providers who demonstrate high-quality care, or who show that they are improving, would get ahigher payment rate based on quality.

I know that cardiothoracic surgeons may feel the first step – paying for reporting – is a step inthe wrong direction. You already report data on a number of measures to a national database.

As I have said, you are ahead of the game.

We set out to design a system that would reward quality and had the potential to “lift all boats.”Because this system rewards quality, you will benefit from being ahead of the pack. But wemust ensure that other specialties can move in the same direction. We have to get the ballrolling.

I also know that many physicians are concerned that our bill does not fix the existing problemswith the physician payment system. Ongoing significant cuts to the physician fee schedule –which will take effect if current law is not changed – are unsustainable.I want to work with you to find a sustainable solution to the problems with the fee schedule. Inturn, I ask that you continue to work with me to move Medicare in the right direction.Ultimately, better quality and value means better health care, better coverage, and a strongersystem for all.

Together, these two bills stand to improve American health care and reduce unnecessary healthcosts. But for these bills to help, Congress must act. And I hope we can do so this year.In the short-term, action must help the victims of the Katrina tragedy. I have outlined a packageof proposals to do that: temporary coverage under Medicaid; relief for states treating evacuees;and help to providers incurring the costs of uncompensated care. I applaud the efforts ofAmerica’s health professionals, including some of your colleagues, to help Katrina victims. AndI hope Congress can provide quick assistance in turn.

In the long-term, we must continue to advance the twin goals of rewarding high-quality care andmaking the most of health IT.

In a recent editorial for the Journal of the American Medical Association, Andrew Grove, theformer chairman of the board of Intel Corporation, discussed the importance of bringingefficiency to American health care. He noted that the health care industry represents 15 percentof the United States’ GDP. And he argued that there is ample opportunity to improve healthcare’s efficiency, through the use of appropriate technology.

We have no more excuses. Whether the issues are microchips, automobiles, health care, ordisaster response, our country has a mandate to push the envelope, to take care of its people, toact decisively in the face of challenge. Dr. Grove leaves us with a challenge that I would like toshare with you today. He asks, “If not here, where? If not now, when?”

I would like to tell Dr. Grove that we are ready. If we begin investing in health IT and startpaying for health care quality, we can make the most of our limited resources. We can improveaccountability in our health-care system. And we can improve America’s health in the process.