Remarks by Andy Slavitt: Building on the Nation’s Progress in Health Care
Below are prepared remarks by Andy Slavitt, CMS Acting Administrator before the Citi Global Healthcare Conference on December 8, 2016
It’s great to be with you here this morning as we look forward to the final 45 days in what has been an incredible period of progress in working to improve and deliver care for millions of Americans. It is obviously an interesting period with some big open questions as the new Administration moves from campaigning into governing mode. As a country, it’s good for all of us to move past the rhetoric.
Today I will look at three important national policy areas. I don’t have a crystal ball, but I will tee up some areas of policy likely to be a major focus in the near term that will have a significant impact on how our health care system– and how our economy — functions: any changes to the Affordable Care Act (ACA), Medicaid and drug costs.
I will say at the outset that even with policy differences, my primary responsibility is to help execute the best transition possible so that the President-elect’s health care team has the greatest likelihood of success. The commonality of our responsibility is the 140 million Americans covered by Medicare, Medicaid, CHIP, and the Marketplaces– many of whom live on low or fixed incomes and when they need the health care system, they don’t have the luxury of focusing on politics.
Before I talk about how to carve a path forward in these three different areas, I want to first assess where we are in terms of delivering for those people, for taxpayers, and for the country as a whole. After a long period of years preceding the ACA, which had record levels of people without insurance or access to care, unsustainable medical cost trends and poor quality health, it’s clear things have changed. 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. There’s never been this level of progress.
- The US is currently experiencing a record 74-month streak of job growth. The unemployment rate is at 4.6%. In November alone, the US gained 178,000 jobs – and nearly 30,000 were in health care. About two million jobs have been added in the health care sector since the ACA.
- We are covering more Americans: Over 20 million new people have been newly covered and the uninsured rate under 9%.
- We are making advances in quality: It is now objectively safer to use the health care system than it was eight years ago because of the tools in the ACA. Across the country, people are getting higher quality care with 95% of national quality metrics improved over the last eight years.
- We are bending the cost curve: Medicare cost trends have averaged under 2% rate of growth compared to just under 6% the previous eight years, and a decade has been added to the life of Medicare’s trust fund.
- We are also advancing innovation: Medicare has become the leader in alternative payment models with over 30% of payments now going through models that pay for value. Thirty new payment models have been scaled over the past six years, and investments in electronic medical records and a data and analytics infrastructure that is sparking a new set of innovative companies.
- And, what it’s all about in the end: Making real gains in the lives and the health of people. Record numbers of people report being able to see a regular physician. Record numbers report being satisfied with their care, and now able to afford to fill their prescriptions. Medical bad debt is at all-time lows and that’s true for both patients and for hospitals.
It’s been a rich period of growth and innovation in health care. The health care private sector has flourished during the President Obama years. Even as we have bent the cost curve and gotten more efficient, health care companies have outperformed the broader market, which itself has more than doubled since the ACA.
If you had invested $1 million in the health care index at the start of the ACA, by the time of the election on November 8, you’d have outperformed the broader S&P by 15% or have $320,000 more than, if you’d invested in the broader S&P 500. There was high performance in all sectors of the health care economy:
- Managed care outperformed S&P by 120%;
- Health IT beat by 83%;
- Medical devices beat by 4%;
- Hospitals beat the S&P by about 11%; and
- Even large pharmaceuticals and biotech, despite significant underperformance in the second half of 2016, matched the market in the case of pharmaceuticals; and biotech beat it by 64%.
If you look past the partisanship and sensational headlines, while it doesn’t always feel like a smooth path at the time, the Obama formula of public-private partnership has covered 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 capital and hundreds of thousands of new jobs.
One of the critical questions we face now is whether we will build on the progress that we have made by focusing on improving the areas that need it or whether the new Administration will seek a wholesale do-over by repealing the ACA without a plan passed to move forward.
Let me be clear in saying this first. There should be no pride of authorship in improving the ACA. If we can improve upon the things that were started, we should do it. It doesn’t matter if it comes from a Democrat or a Republican. We should all have a rooting interest in more progress, and all the better if it’s bipartisan.
The American people are certainly going to judge any plan based on what it accomplishes. There are four tests any new plan will have to meet:
- Does it improve access? Today, we have record low uninsured. We would welcome any plan that covers more people this Open Enrollment. We have seen millions signing up for new coverage at a record pace that exceeds last year. Any plan that increases that will be welcome.
- Does it keep people protected? From the point of view of someone recovering from an opioid addiction or who has a past cancer diagnosis or who wants access to free preventive care or worries about annual and lifetime caps, does this plan protect those individuals as well as they are protected now? Poll after poll shows that these protections, lifetime caps, no denials for pre-existing conditions, are vital to the American people.
- Will it be more affordable or will it increase costs? Today 70% of eligible Americans can find insurance through the Health Insurance Marketplace for what they consider the magic number for affordability– $75 a month with tax credits. Seniors save thousands on prescription drugs from the donut hole being reduced and are gaining access to medical homes and diabetes prevention. These are all reducing future costs to our program by keeping people healthier now.
- Is it fiscally responsible? Remember the ACA extended the life of Medicare by a decade and has helped save $473 billion while the deficit is being reduced throughout the country and projecting to cost $2.5 trillion less than original estimates.
If any plan or amendment can meet these tests of improving the ACA, we should all embrace any improvements no matter which party they come from. Since the election has settled, polls are now showing that the majority of people, no matter who they voted for, want to build on where we have started, and not start over with a repeal. Some recent comments from Congress have begun to show a recognition of this reality, with the Speaker recently saying that people are going to be no worse off at least with a change — and that would be a good place to start.
But, if there is no plan developed to replace the ACA whatsoever, it would be a significant mistake to repeal the ACA with a delayed implementation with hopes of developing a plan later. All of which would put us in a great deal of uncertainty. This so-called repeal-and-delay would turn into repeal-and-chaos for consumers, for providers, for payers, and for investment dollars.
Health insurers have to begin making decisions around their market participation just a few months from now. Without active support of the program and little clarity about the future of the mandate, prices would go up dramatically as number of health plans will significantly reduce their participation or drop out. Millions would lose coverage– tens of millions by some estimates– and bad debt would increase across the health care system again.
This, along with the contemplated repeal of Medicaid expansion, would cause significant hardship for hospitals that, in just the first year of ACA implementation, saw uncompensated care costs reduced by $7.4 billion. Earlier this week, the hospital systems estimated that repealing the Affordable Care Act could cost them over $165 billion by the middle of the next decade and trigger, quote, “an unprecedented public health crisis.”
Now, hospital and health plan CEOs are going on record publicly urging that there be no delay between repealing the ACA and delivering the details of a new plan, with many privately saying that they will be forced to contract, drop coverage, reduce service lines, and reduce participation in value-based models.
And, while I haven’t yet seen reliable estimates on job losses with this approach, they could be significant considering that 2 million health care jobs, many of them in small communities around the country, have been added since the ACA. A report yesterday from the Urban Institute estimated yesterday that 30 million people would lose coverage under a repeal, and it would be easy to imagine a significant number of job losses.
This leads into the second critical choice we face, which is how we will fund significant government programs. And, in the very near term, the conversation will shift to the Medicaid program. There will be differences of approach to Medicaid, with continued emphasis placed on state innovation waivers and the new Administration will bring their own approaches to the parameters, of those waivers. There will be philosophical differences in those parameters but I’m not going to focus on those here.
The significant question is what would be the impact of cuts to Medicaid funding by moving to a “block grant” Medicaid funding. Now you may hear terms like block grants or caps to Medicaid discussed. These are decades-old ideas and just to be clear these are cuts. In conversations about cutting or capping Medicaid, it’s first important to start with what Medicaid is today because there are many misconceptions.
- First, half the nation’s births are covered by Medicaid. And, about half of the country’s children (over 45 million) are covered by Medicaid and CHIP;
- Half of the long-term care we provide in this country to our seniors is covered by Medicaid;
- Over 40% of Medicaid covers care for people living with disabilities, which tomorrow could be anyone of us or anyone in our community;
- And, Medicaid is vital to rural communities, driving down the uninsured rate significantly in states with rural populations who have expanded coverage.
Cuts to Medicaid will ripple across the country – from small rural hospitals and health centers that struggle to get by to large county health systems that are in urban areas.
As we look at the Medicaid program, its fiscal health is a top issue for state governors. But with the help of the private sector, per capita Medicaid costs have become more controlled and predictable than when block grant discussions first began several decades ago. The good news is that the Medicaid program has undergone significant fiscal reform with the growth of capitation and managed care to now three-fourths of the entire program. Today, Medicaid is highly efficient relative to the rest of the care we consume. It costs less than commercial insurance on a per capita basis and delivers more. So, as we have an informed debate about Medicaid, it’s important that we not ignore the progress we’ve made or the impact of undoing it.
The driving concerns in Medicaid are not best dealt with by cutting benefits to kids, seniors, or people with disabilities, but by focusing on things that are really driving its costs like drug costs – the most significant cost concern right now for both states and the federal government, not to mention commercial payers and employers.
Now, on drug costs: Let’s start with this. Yesterday, the Senate signed the Cures legislation and sent it to the President’s desk. In it contained seed funding for the Cancer Moonshot initiative, championed by the Vice President. I was proud to be part of the Vice President’s Cancer Moonshot task force.
While the promise of great cures is around the corner, the costs are risking making these cures out of reach for millions of Americans and it’s become the number one financial issue.
- Total prescription drug spending in 2015 was about $457 billion or 16.7% of health care spending.
- Based on recent trends, we’re currently projecting average annual increases of 6.7% through 2025.
- Part B drug spending doubled between 2007 to 2015, and Part D costs increased 8.4% between 2013 and 2015.
- Specialty drugs are a big part of the equation. In 2014, they accounted for 31.8% or spending despite representing only 1% of prescriptions.
- However, it’s not just the specialty drugs. If you look at the 20 drugs with the highest per-unit cost increases in Medicaid, seven were generic drugs. Those products had increases in price ranging from 140% to nearly 500% between 2014 and 2015.
We need sustainable costs so people can afford their care. What we see when drug prices rise, is families and state governments can’t afford it. And cost increases have been pervasive. EpiPen, so much in the news, wasn’t even in the top 20 increases in Medicaid. Top CEOs will tell you they want a sustainable path.
Taking on drug costs will require a lot of stamina because it’s a major issue, but costs are quickly becoming hard to ignore both for the American people worried about their next prescription and for the nation.
As we sit here today, we should both be proud of the progress we’ve achieved and cognizant of the challenges that remain. There are things that need to be improved. But, attempting to over-correct would be a mistake. Frankly, we can do better than to put nearly 20% of our economy in a state of suspended animation and millions in a state of uncertainty. As we’re doing our jobs, one of the things I’ve been cognizant of is minimizing uncertainty because we have nearly 20% of the economy in our balance. Companies have been able to succeed because they can plan.
The good news is we have don’t have to take a step back. As we move past the rhetorical shots at this and that, we have the capability now to tackle the challenges to the health care system and build on the progress that has begun. There is the opportunity for bipartisan agreement that we were not able to achieve over the last 8 years. There’s an opportunity to take the gains begun under payment reform, coverage and quality and allow the private sector to continue to lead the way to providing care for all Americans.
As I close, I’ll just share an insider secret – because it’s literally about the inside of the HHS building, where I go to work every day, what the new Secretary and my successor will see every day … and in 45 days I will walk past it for the last time in my current role. Inscribed in the Hubert Humphrey building is a quote from Hubert Humphrey himself, which says:
“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.”
We are now at a point in our country’s history today:
- Where 95% of children in this country have health insurance; in 1997 this was only a little over 85%;
- Where Medicare continues to deliver on its promise to all Americans that as you get older, or if you have a disability, will be able to access care and our family won’t go broke in the process.
- Where, before Medicare and Medicaid, one in three seniors lived below the poverty level. Picture that. One in three of our seniors lived in the poverty level. Today, that’s less than 1 in 3.
- Where since the ACA, we’ve seen coverage rates jump for people who were living below the poverty line.
We must continue to work together — private and public sector, non-profit and for-profit to continue to move on the path to progress that has begun. It has been an honor to step out of the private sector to be a part of solving these vexing problems in a different way these last few years, and I’m confident if we work together, our progress will continue. Thank you.