payment system is you can't really accomplish under the fee-for-service system is we would reach a variety of hospitals in the community and our kind of bottom line is to arrive at a place where we pay providers on the basis of equality of a clinical outcome and that is where our payment methodologies are headed and if you do that then brand begins to mean much less than it does today. so it's a leveling of the playing field based on the quality of clinical outcome, and we think the institutions like partners will rush to demonstrate that they do it better than other institutions and the data will reveal that and the payment will follow that. ..

>> point i'm not at kind of the traditional quality measures about point them at the outcome measures. if you're in the air business, one of the things you can do is to change incentives and change

payment, things as reward. in this way we believe systems that produce a better quality and solve questions about primary care, what's the role of primary care, how do you value that. you value primary-care or primary care will be valued in the context of a delivery system that is recast. the real role of primary care will emerge if the whole delivery system is changing itself to accomplish better clinical outcomes. i think that for it as well. >> great. now a couple of questions on access. i'm going to turn this to you, uwe. what should we do about undocumented workers? and how does that figure in to your formula going forward? >> actually, if we had only undocumented workers uninsured, we could probably handle that the way we have always handled

the uninsured. because to put in a law that says every undocumented worker has full rights, you could do it. germany doesn't have does it. it does send a signal for people to come and i don't think there is bipartisan support for that at all. [laughter] >> so i think we would just have two leave them, deal with them and pay this money and handle it through the back door or have neighborhood health centers for them. i do believe this nation would know how to handle that. if we have everyone who is legally here covered, this would not be an unmanageable problem at all. >> great. there are also several questions concerning the incentives for

your program on what was in smoking sensation. in addition there is a separate question but related, do you do with anything with children with special needs? kind of a load off to the site, but if you go for those. >> so incentives around -- >> smoking first. >> we look at smoking as a comprehensive way as possible. so we have smoking cessation programs in place that have been very, very effective. some of them with 45% quit rate so you are talking about significant sticking power to those programs. but when we build our programs with employers, some of those are based around a premium incentives that i mentioned earlier. so depending upon if you've got someone who is a smoker and he quit and they stick with that, there's a potential premium

reduction that comes with leaving your smoking habit behind, as well as managing your numbers. so people who have a baseline set of numbers established early in our program, and manage those numbers, actually have the opportunity. similar to the kinds of programs and you've heard from safeway and others. we have those kinds of programs in minnesota. and some of our large employers have those working very, very well. if you package a consumer directed health plan with an employer-sponsored incentive dollars next to that, and a potential for premium buydown, if you think about all those things working at the same time. we have some large employers that have flat medical costs over the last three, four years. so it's really a matter of getting all of the lovers together and having them working in unison. it's not a matter of sort of one piece of this equation. it really is a lot of different things, from benefit design to

delivery system, alignment and getting all of those things working in court nation. that's when i hear a lot of the discussion, it frustrates me when i hear it getting around to feeling like a single silver bullet solution that's out there. there isn't. it is really a very comprehensive book that has to come into play. so it is around the benefits. is around a lining consumer with a provider, with the health system, all working together toward that common and. and in terms of children's hospitals, that's been a rich part of our dialogue. so the children's hospitals ceos are in our roundtable discussi discussion. they have a high concern around what does global payment mean to them, because they are obviously a selected against institution, if you will, drawing against lots of different places, and having very special payment needs.

so i cannot take today we got that piece of the equation solve with the same payment reform that we are looking at other places. we are in that dialogue. we are working that issue. it's something we're very sensitive to, and it's not something that we think we can shoehorn into just the same solution we are using other places. we understand they have a very specific need, and we're going to be sensitive to that need as we work through those discussions. but today i don't have the in game answer for your. >> great. another one, and i think, cleave, you would be a great one for this, or any of you all, as we expand coverage in this country, what's going to happen to access? >> if we spend coverage in the company without dealing with the clinical race in the system, we will continue to have an access problem. i believe that there's plenty of

money in america spent on health care to pay for the kind of care that americans aspire to put. but there isn't enough money to pay for that care and waste at the same time. >> all right. another question beige. >> can i comment on that? i just want to comment on that because i think there's some real lessons in clay christiansen's book about this and frankly i think there are real opportunities for pharmacists to do more for allied health professionals to do more, and what we were talking about in our ongoing care initiative, many physicians can handle a number more patients if they had an ongoing care capability also attached to their office. we are finding as we talk to health systems about the payment for ongoing care that lots of health systems have health professionals who want to work part-time, and they would like to be involved in some of that part-time activity in this on light-year mode. so there are ways of extending

the current system. i think if we look at the current system is a how do we do everything today for more people, we've got a big problem. we have to think about how do we change what we do today to accommodate more people. and i think that's really a core component to thinking about an innovation philosophvelocity to health care. >> but, i mean, here again we shouldn't overdo the problem. as the urban institute study shows they will be an increase of 5% in health spending. so an increase roughly a 5% of use, but not all of that disposition. could be hospital also. a lot of hospitals are empty anyhow so we have the capacity. so you are talking about physicians and possibly nurses. and there's enormous variation across the u.s. in physician population ratios and nurse. massachusetts, very richly

endowed, and other much less so endowed. and i think you somehow expect over a decade, 5% gain from that sector is it really asking for that much. and as cleve says, there's enough inefficiency, we could handle that. the primary care physician problem they have in massachusetts and elsewhere, that sort of unique to especially. it's not across the board at all. and i don't really know if we have a shortage of it. i mean, you have to choices here. either you say the american people are really stupid. we have a shortage of primary care doctors, therefore we underpay them. that a stupid. [laughter] >> or maybe you say maybe we don't. maybe somebody dreamed this up at but if we really needed them we pay to market this is a market economy in this regard, and why are we. so i'm not totally convinced that we actually have a shortage

of primary care physicians. it doesn't make sense to an economist. given the way we price this. >> actually think, really what cleve and patrick were saying, really comes down to unless we reform the payment system we're not going to get the improvements in productivity and efficiency that we need. and i think at a time given more people coverage and increasing the demand for medical care, that is the ideal time to get provider cooperation. when demand on them are growing. so i think this is the opportunity. i think in primary care, i think we have, without knowing it, have so discourage entry or maintenance in primary care over the last few years that we likely do have a shortage. and it's going to take a lot of time to reverse that. i mean, we can reverse our incentives quickly, but until the supply adjusts.

so i actually think expanding our effective primary care supply is going to involve a lot more delegation by the primary care physicians to other people, some of whom today, they can get paid for if they delegate that work. so this is the task of the payment reform. >> bob, did you want to come? >> yeah, i think there's a danger here that we're getting a little too optimistic. [laughter] >> i think when we look at national averages are we as to who the voice of the woebegone states. [laughter] >> above average, you forget about vast differences that there are in this country. a quarter of the population of texas doesn't have insurance. average uninsured person in america consumes something around half of what they would

consume, if they were adequately insured. that implies if you expanded insurance coverage in a state like texas, you're going to get 12% or so increase in demand. and while we can set up here and say, well, if i can reorganize and the delivery system, and eliminate the waste that's in that system and the low value services that are provided, no big sweat. even in a place like texas. we can make it work. but there's a whole lot of it is in that sentence. and we don't know how to do any of them. and what this argues for i think is a very measured pace at which we introduce this. so the changes of that paul has talked about can have a chance to take and eat back. we really need sort of a medpac for nine years, we continually

recommended that payment for primary care be boosted, those for specialty care be reduced, and that this would then take, you know, many, many years to redress the imbalance that now exists in the relative supplies of those two food groups of physicians. and so i think we want to approach this with a good deal of caution. >> that is a buzz kill. >> bob, i don't disagree with you. it's going to be challenging for our market to move the global payments as far along as we are. so i understand that that's going to be even more challenging for markets that aren't as advanced in that regard. so we are not underestimating the challenge that here, but i think your caution is a good one. but it also underscores that there isn't one answer at

legislation and one simple way to do this for the whole country. people are in different places, and we need to encourage the various models to grow so that we can see what are the best things to be done in a variety of places. >> i know uwe also wanted to comment the. >> this reminds me. there was a study years ago when québec introduced universal coverage overnight, and they didn't phasing anything. it just went the way canadians do hockey, rough. >> and what happened was there was a redistribution of physician visits on the higher income group to the lower income groups. that was the immediate effect of it. and of course, we could do that here also. in other words, whatever resources exist, we share them. that's the canadian approach. the alternative is to phase it in until the uninsured segue, we

don't want to give up anything. wait until we grow the supply. i'm not sure you want to grow the supply actually. because then you have to feed the supply. so i'm not sure what is the right answer here. probably you have to have a little bit of both, redistribution from us, the fortunate to them, and some phasing in. but i wouldn't wait too long until paul's strategy works. that could take a decade. i wouldn't want to wait that long with the uninsured. >> i would just like to offer this notion. you know, i believe that having a payment reform advance quickly is really a choice. it's a choice. i mean, kind of make you think about what your responsibility is. clearly the elimination of clinical waste in the delivery system, it's almost the more benign kind of activity we could be involved in, at least the

payers. which you have to realize at the same time is that people die as a consequence of this waste. and people are harmed. 5 million incidences each year of clinical harm, unnecessary c-sections. c-sections are a serious operation. it's not, you know, it's not without its implications. there's a whole list of those things. as a matter of fact, one of the books we brought is out on the table, and it's called study after study. how many studies will it take? it includes over 500 examples of overuse, underuse of care all from referee could clinical journals. and the folks who did that study estimate that there is 690 to $700 billion that can be saved by getting rid of that stuff. so when i go see a hospital, or a doctor and talk to them about what i want, i say why did you get rid of the stuff in the book? but that book didn't exist

before last year. it didn't exist before last year. and so that book, along with the other resources we have and we know about, information from the clinical systems, all of these things are available to us today. and you can make a very strong compelling case when you talk to providers when you put that stuff on the table and say to them, you know, this is just not acceptable. we're not going to pay for this anymore. and that advances the conversation in a way that's been different from the past. so i'm very optimistic that we will move quickly. i think we have some evidence that that's true, and i think we need to engage in this problem at that level in those terms. and we can move much faster i believe, you know, for people who kind of don't they. >> let's turn to financing, backed financing for a mode.

as a way of financing reform. how would you recommend that a policy like this be designed and implemented? >> i can say what bipartisan policy is going to propose which is recognized, look, that is number one, a potentially important source of financing since it is a major, you know, i would call it a third health care entitlement in this country. we've got 400 billion a year on medicare, close to that on medicaid, and 250 billion plus in die you on the foregone taxes from health insurance exclusion from employers. so it is a big source of financing. and our proposal was to cap that at the level of the federal employees health plans, just as generous plans go. it doesn't cover everything. 90% of those costs that uwe put up on his slide earlier. and if you look at the incident,

you know, who is affected by a change like that, there are several ways to limit it. one is to make sure that you adjust and initially for the fact that health insurance is much more expensive in other areas of the country than others. and maybe even for differences of the demographics of the population being covered. beyond that though, the big impact of this, if there is an impact, not most people who are affected at all, is on higher income individuals who are in higher tax brackets and who have more generous health plans. so the vast majority of that impact is on families with income over $100,000. this is a policy that doesn't have necessarily uniform support from either party, but perhaps some support from both. that made it attractive from us too from a political standpoint, but from the republican side normally a party who doesn't support a tax increases, there's

kind of a recognition that changing this tax exclusion could provide more incidents to get people into more efficient plant instead of having to government-subsidized dollar after dollar of health care spending regardless of how efficient or generous the plan is. and on the democratic side, not the recognition that a vast majority of the vast tax break goes to higher income levels and could be used much more effectively to get affordable coverage to people who are really struggling and getting no help today. so some of the families in the lower levels of uwe's chart making 30, 40000, 50000 a year and are basically on their own, are paying for $13000, $50000 policy. so for all those reasons this seems like a good choice. it's not easy politics, but it's better than i think some of the politics of the other pay for reforms that are being considered. >> bob? >> i agree with mark.

the bottom line of which i think of all the flaws and unpleasant ways of raising significant amount of revenue, this might be the most acceptable, but it is a very complex issue because in addition to expensive plans being ones that are more generous than cheaper plans, as mark suggested, there is this issue of geography that it cost a whole lot more for the same plan, for the same person in miami than in minneapolis. but also within a single area, the cause very significantly by the size of the plan. and by the risk factors associated with the covered individuals. a hundred person plan would average age was 50 cost a whole lot more than many average age is 25.

in thinking about how you can moderate those perceived inequities i think is important. but then there's another dimension which people haven't talked about very much your and that is that this could have a negative effect on the social solidarity that occurs within a firm. we have categories of insurance in this country, worker only, worker plus kid, family. and nobody really cares a lot about that in the firm because they perceive, well, you know, my employer, they perceive incorrectly. well, my employer is paying 85% of this, so my research assistant doesn't really care that his employee premium is the same as my employee premium, even though the real cost of covering me is probably four times what it is to cover him. but when both of us get a

statement on our w-2 that we are adding $3000 to our taxable income, he suddenly might get more interested in the way we decide to do this. and that could sort of unravel the sense of social solidarity within the firm that has supported employer-sponsored insurance for these many years. and we want to think through these kinds of repercussions, i think. >> president obama has proposed adopting several medpac recommendations to cut federal spending as part of health care reform. and has said he would consider a proposal that would adopt medpac recommendations going forward unless opposed by a joint resolution of congress. do you think this is enough of a change from the status quo over the past several years to have real impact on federal health

spending? and, paul, it's directed you. >> thank you. i think there are two reasons that we need to look to mechanisms like this. one is that, i believe increasing congressional micromanagement of the details of medicare policy, such as how much to pay for oxygen or how should prices for durable medical equipment big set. really reflecting constituent concerns. but also i believe that the payment reform which is so critical, some of it can be written in legislation now. a lot of it is going to require piloting experimentation, and someone outside of congress really needs the flexibility to decide this thing looks promising, i'm going to make it part of the payment system. and so i think that there is a need to have, you know, some people call it a federal health

board, some people call it medpac on steroids. the basic idea is to have a respected organization that is not responsive to day-to-day political pressures, to have the right, to have the responsibility to make these very difficult decisions that are technical and are judgmental. and hopefully also will have the resources to be able to do that. and i think it's very encouraging, the increasing discussion on this issue in recent months. >> nancy, you will recall, you are along on this academy health trip to germany, and we discovered there was really stunned us. there was a body called the joint federal committee. they had their own staff, building and so on, and even research subsidiary to do

cost-effectiveness analysis. and the way they passed laws, the administering of health gets a bill passed that spells out what the government wants. they turn it over to this joint federal committee, which is a committee of interest groups. it's very much like medpac actually. except it has consumers, or patients at the table also. and they write regulations that are binding in the law. in other words, the minister told us, remember, at the lunch, she said i'm not a physician. i'm not a hospital executive. i don't really know what is the best regulation here, so i turn it over to you guys. you write it. if you can't get it done in half a year, i will write. and then you have to live with it. and because of that double-edged sword, they usually do come out with regulations. and i believe that is something we americans should study more, how that works. and i think the president sort of hinted at one point that

medpac might serve this role. this is not actually such a bad idea. when the stakeholders get a voice in how the regulations are really written or i think it works there and we should look at it. >> bob, serving on medpac dingell-boucher, what do you think? >> let the record show that after nine years, i am no longer, i have been freed at last. [laughter] >> and so what i have to say is not reflective of medpac views. but i quite frankly think this would be a terrible mistake. to charge medpac with this kind of responsibility. it would change very much the nature of medpac, and you know, i think paul rightly said it would be great to have somebody that wasn't subject to political pressure make these kinds of decisions. but as soon as you have some

buddies make these kind of decisions, inevitably it will be subject to political pressure. and what medpac has done over the years is make recommendations to congress about payment updates for medicare and payment reform and other issues with respect to medicare or and congress has taken some of them, recommendations, has not taken others. interestingly enough by my count, three quarters of the cost-saving measures that that the president has put forward in his $900 billion have been medpac recommendations in one form or another. what i would think would be more appropriate way to go and one difference between germany i believe in most of the other european countries and us, is that they have a budget for health. anha