important no matter what i do, in the years ahead i will somehow be associated were working on those issues and pushing for action if we don't get the kind of action i would like this year. i was pleased to play a roll and talking about broadband and the open and goodness. as soon as i got to the commission back in 2001 and finding out the internet could be in some peril because of potential gatekeeper control. i am proud of reaching out to nontraditional stakeholders. native americans and people who are so profoundly impacted right decisions that are made at the fcc but often did not have input with the lawyers and lobbyists in washington d.c. have, so i think all of that was important. of course i was there during the

dtv transition and was acting chairman so it has been a wonderful experience. as they say my thoughts now are mostly on the rest of this year, but when i leave the commission i will not leave these issues. >> host: any structural tube would like to see? >> guest: one thing i would like to see and i hope we can get the congress to respond is to change the so-called closed meeting rule. ..

some of the problems we've had in the past. if i could have one form just magically appear that would be it. >> and you have a final question? >> it's actually followed by that question because to play the devil's the ticket on that idea some would argue already the fcc does so many things behind closed doors and the public meetings you have every mother's excruciating that it's so much worse to have you sitting around the table privately reciting the news because the public -- >> i don't agree because converse crafting legislation and bills are talking members of the court before they decide the supreme court case and you have

to have some protections. you wouldn't let three people with one party need and the gang up on the other two. it wouldn't be supersecret. he would have some sort of a -- just a we need to do business why should this be the one institution and in fact other executive agencies, too, why should they be denied this opportunity to share experiences and perspectives and work stuff around the table, and i just think of an expedite the business i don't know how different the final results are going to be. they would probably be better but there's plenty of opportunity for the stuff to get together. we are missing important opportunities for some positive interaction and i think could lead to some positive policy outcomes. >> commissioner michael copps as always think you for being on the communicators and amy of "the wall street journal."

thank you. >> thank you for having me.

up next a discussion on health care costs in a policy including implementation of the one-year-old federal health care law. we will hear from congressional budget office director doug elmendorf and former tennessee governor phil bredesen. this is hosted by the world health care conference. >> quickly leaders are leading global diagnostic testing and health management providers working with employers, health plans and positions. we are keenly interested in all things having to do with determining actionable goals and implementation strategy is to demonstrate quality consumer choice, cost effectiveness and transparency and health care. thinking back to last year, almost to this very day, the big news of the conference was the patient protection and affordable care act as we all

know the 2,000 page bill designed to change how health care is delivered and paid for in the u.s.. our next speaker doug elmendorf discussed in great detail how the cbo held a calculated the multi-year impact that this bill would have on the overall p and l of the federal government. now, for those of you who were here last year, you might recall the final remarks and whether he meant it as a touch of humor or perhaps political fortune telling, i'm going to paraphrase here but he finished the presentation by saying and of course, all bets are off if in the midterm elections we see a substantial shift of power. i think it's safe to say that we've seen that shifting power a few months that. so earlier this year i was at a

conference with the blue cross blue shield association and as we know it is a group of about 39 companies that manage about 100 million lives here in the u.s. and its clearly i think everyone would agree is on the leading edge of those companies that will see much of the actions, much of the action when it comes to the 32 million folks who are expected to enroll in health care programs over the next three years. and a bit of foreshadowing one of my favorite sessions was titled something along the lines of you have survived the first year of health reform. now what? and on a positive note as i travel around the country talking to health plans, employers and providers there is a growing concern and i am sure everyone here would agree about the sustainability of the current system of health care delivery and it's a situation that is compounded by readily

rising costs as well as growing shortage of primary-care providers. these concerns have triggered interest and approaches to mitigate the advance of chronic disease and a much greater focus on prevention. and given health reform provisions covering prevention many employers are already well down the path of adding programs that focus on prevention to their overall health strategy. employers i talked with our including screenings, health affairs, telephone and online coaching and other innovative programs to help their employees. more importantly, as we speak to employers, they are beginning to see the beginning of positive changes, positive changes in their health care costs. it is a step in the right direction. whether you are in favor of health reform or whether you are working very hard to unfunded, a member of the bill provisions

are already taking effect and beginning to change health care is delivered. they're making it eligible for tax credits. also is a bush intimate received levels of health insurance pools for people who can't get preexisting coverage. finally, extended coverage for adult children under the age of 26i think we would agree those are starting to take effect. the largest the tip of the iceberg still to come are a few topics we will for sure be controversial and subject to the spirited debate and no doubt probably take a few turns in the federal courts issues such as whether or not we can require all legal u.s. residents to have health care coverage or whether to expand medicaid to cover all uninsured people love to 133% of

the poverty line. and finally establish state level exchanges for individuals and small businesses. again, how the s. con. res. 70 and future congresses wrestle with the ongoing issue of delivering sustainable and affordable health care in america will directly impact each of us in this room today and also our children and children's children which i'm sure everybody would agree is a very sobering thought. so over the next few days we are going to hear from a number of experts both from the u.s. and beyond our borders. and it'll be interesting if collectively by wednesday and how we overcome the challenges we face one of the health reform and if we are getting closer to understand how to bend the trend on health care costs and achieve cost-effective care. it will be interesting to see if we are thereby wednesday. so that said, i'm delighted to

turn over the stage to doug elmendorf who's the director of the congressional budget office who will give us the year one perspective on health reform and i will also turn over to adelstein from the "washington post" will moderate the first keynote session, the cost of health care reform. thank you. enjoy the conference. [applause] >> thank you very much. it's great to be back of the world health care conference, and i've been impressed so many people are up early this morning to talk about their health care spending. i'm going to talk about restraining federal health care spending. i'm going to discuss three specific topics. first, i hope this isn't a surprise to anyone here, quote in spending on health care programs is one of the central fiscal challenges facing the federal government, second, last year's major health care

legislation made important changes to medicare and effort to restrain spending and third, the federal government has other tools it could use to restrain its spending on health care. but like in those tools will not be painless. let me elaborate on those points. first the spending on health care programs is one of the central fiscal challenges facing the federal government. in the current fiscal year the federal government will spend more than $1 trillion on health care. more than half of that will be through medicare a little more than a quarter on medicaid and the children's health insurance program and ship and the remaining fifth on the veterans' health care, the military health care system, health research and other programs. although the place together the representing 7% of gross domestic product the to a lot of the country. moreover husband and on the programs would increase rapidly under the policy to be followed in the past.

due to but rising costs per person and an increasing number of beneficiaries of the federal government programs. in addition last year's legislation expanded the government health care programs. which will also push of spending. let me touch on each of those reasons in terms of rising costs per person hears the most important fact between 1985 and 2008, medicare spending per beneficiary adjusted for changes in the distribution increased an average of 1.5 percentage points faster per year than gdp per person. over the same period, such growth in federal spending for medicaid with 1.2 percentage points. that wasn't a fluke of the particular decades if one looks back over a longer period one finds even more rapid what it increases in spending for those programs. another factor in the next few decades will be the increasing number of people eligible for medicare through the aging of

the population the oldest baby boomers are becoming eligible for medicare this year and we've projected the number of medicare beneficiaries a decade from now will be one-third larger than the number of beneficiaries in medicare today. the third factor pushing up the federal health care spending is last year's legislation as a result of the expansion and subsidies and changes in insurance rules from that legislation the country is now on a path towards achieving 95% health insurance coverage among the legal on elderly population compared with 83% today. our most recent estimate is that those coverage provisions of the legislation will have a net cost to the federal government that exceeds $150 billion a year by 2017. and it increases further beyond that. the legislation also reduces the spending for medicare and other existing health programs and raises revenues in various ways taking all the provisions

together we estimate that legislation will reduce budget deficits. at least for 2021a will be increasing federal spending. last year's legislation made an important change to medicare in an effort to restrain spending. the legislation could in any provisions designed construed spending on health care in ways the would not explicitly shift the burden to the beneficiaries or harm their health. from the economist's perspective that sound like a sort of free lunch we are trained to be skeptical of. at the same time, there was evidence of unnecessary spending in health care system and considerable consensus among analysts and practitioners about the broad changes would be useful moving away from paying for procedures or treatment starts paying for value and improving health. a quitting providers and patients with better information and providing stronger incentives for both providers and patients to control cost.

with that backdrop last year's legislation included many changes in the management of the medicare program. one thing the legislation did was to reduce payments to the medicare providers of what it to what would have been paid under the prior law. fee-for-service updates for many types of providers would grow less than the rate of inflation. in expectation of ongoing productivity improvements. in addition, payments to medicare advantage plans would be cut sharply. those reductions would pose greater pressure on providers to increase efficiency in the delivery of care or else suffer financial losses on the care they provide medicare beneficiaries. of course any fixed payment provides an incentive to increase efficiency. unless the government captures more of any savings that result. we estimate those cutbacks in payments to providers will save the federal government about

$500 billion over the next decade. with the reduction will be sustained over a long period of ty remains uncertain, however. last year's legislation also included numerous provisions intended to identify opportunities and create incentives for providers to make changes for the health care delivery system. those provisions include a wide variety of approaches some of making a lot of the specific changes and others establishing to the above information that can guide the decisions for future changes. the iowa input is publishing payment incentives to report measures of the quality-of-care. crating pan and incentives to the lower-cost and by establishing accountable care organizations. pummelling payments for different types of care for a single medicare even or condition. and then posing payment penalties for the readmissions in certain cases. bye contrast they seek to develop information that could inform future decisions and

putting activities designed to improve the measurement of quality come expansion of research on outcomes for medical care and the development of a mechanism to test innovation and implement those that reduce costs and improve quality. these experiments are very important not only for medicare but also because improvements in the program as large as medicare are likely to have positive spillover effects on the efficiency of health care outside of medicare. however it is unclear how successful the experiments will be for three reasons. first, there is little reliable evidence about exactly how to move medicare and the directions experts support. the problems faced by previous medicare demonstration projects show the difficulty of making ideas work in the real world. a second obstacle is to try to reduce spending in ways that do not in hinge on health we need to measure the quality or value of the caribbean delivered. such measures of course exist and are being enveloped but much

more needs to be done before most providers and patients would have great confidence in those measures. a third issue is the legislation included important limits on the experimentation that will occur. the considerations in mind, cbo has projected limited savings from the experiments during the next decade. even with all the provisions in effect and the 30% reduction in the position payments of medicare scheduled to occur under the current law and bill law proceeding last year's legislation tdo's projection still shows spending on federal health programs rising relative to gdp during the next decade thus putting increasing pressure on the federal budget. that brings me to my third point. the federal government has other tools for federal spending by applying the tools will be painless. let me briefly describe five possible approaches. i want to emphasize cbo wasn't for or against any of the

approaches, the lowest analyze alternative ways of addressing budget issues and then to let congress make the decisions. one approach is to reverse the expansion of medicaid and the subsidies for purchasing insurance that were enacted in last year's legislation. as policy makers meet decisions about policies that affect insurance coverage, there will inevitably face trade-offs between the level of insurance coverage and budgetary costs and intrusiveness of the federal policies. significant numbers of people the special low-income people won't purchase insurance at its market price unless they are subsidized, encouraged in a non-monetary way or both. as a result achieving the near universal health insurance coverage is not possible without significant subsidies and significant changes in rules from those in place prior to last year's legislation. the near universal coverage should be the national goal that is a judgment for others to

make. and i don't mean achieving the near universal coverage requires precisely the combination of subsidies and changes in rules in last year's legislation. but i do mean that the near universal coverage cannot be achieved cheaply or easily. another approach persuading federal health care spending is reduced the number of beneficiaries of the federal health programs and other ways. one specific possibly of the sort is to gradually raise the eligibility age for medicare. to 67 for example to line up with the alleged devotee in the social security. another specific possibility under the broad approach of reducing the number of beneficiaries is to turn the federal medicaid payment into the block grants instead of matching payments to increase the amount of the block grants overtime at a rate that is below the rate at which spending would increase and the current law and give states greater flexibility in how they spend the funds.

under the change in policy and state governments presumably would fit tighter limits on eligibility for medicaid and reduce the benefits and some other way. especially the size of the block grants fell a lot of to the amounts it would be provided under the current law. a third approach to restrain federal health care spending is to increase the premiums or cost sharing amounts paid by beneficiaries for a simple one option we analyzed is to increase the basic premium for medicare part b on a gradual basis of to 35% of the program's cost from the current level of 25%. a release that option would be to change the cost sharing structures for medicare and medigap insurance. for example by replacing medicare speed of current mix of cost sharing requirements with a single combined annual deductible. in from the entrance right above that an annual cap on each enrollee is the federal cost

sharing liability and the medigap policies from covering any of the medicare deductible. we've estimated the budget carries that policy would appreciably change and strengthen incentives for more prudent use of services and i will also provide greater protection against catastrophic costs. at the same time of course, the change would put a greater burden on average medicare beneficiaries. the fourth approach of restoring federal health care spending is for medicare to take costs into account in its coverage decisions. currently medicare pays for nearly any medical treatment or procedure that the doctor recommends. if the new treatments and procedures are more expensive in dealing with a specific health problem and the doctors recommend those new types of care, and medicare will pay in general higher cost. an alternative way to structure medicare payments would be for medicare to pay only the cost of existing payments, existing ways

of dealing with a specific health problem unless the new treatment or procedure is shown to be better for the beneficiaries health. under such an approach, patients would be able to use their own money to pay for the more expensive care. but the federal government wouldn't pay more itself unless the more expensive care was shown to be more valuable than the less expensive care. such a system is much easier to describe and implement than an immense challenge to formerly classified treatment and procedures and to set address the same health problems and to evaluate some treatments and procedures are better for some or all patients. accordingly cbo was not estimated the budgetary effect of the specific options of the sort. however it is an approach the analysts outside of cbo are analyzing. a fifth approach for research and in federal health care spending is a cut back on the tax expenditure rather than a direct outlay tax expenditures are provisions of the tax code,

deductions, credits and exclusions from income there are similar to the government spending because they provide financial assistance to particular activities for groups of people. the largest tax expenditure is the exclusion of the contributions to health care and health insurance premiums and long-term care insurance premiums. last year's legislation changed the treatment of employer sponsored health insurance but only in 2018 and beyond. the provision could be accelerated and strengthened. other approaches in the 55 describe here exist, and my list is not meant to be comprehensive nevertheless the daunting long-term budget outlook means that some combination of those or other approaches will ultimately be needed in order to put the nation on a sustainable fiscal course. thank you very much. [applause] >> thank you for letting us know

our hard choices. i'm going to pose the first couple questions and then turn to yours and i hope that many of you have been sending and really hard questions this morning. so, to start with, this is obviously not the first time somebody from the federal government articulated the notion that health care spending and restraint is going to pose a big problem for the country. and as you point out, there are some provisions in the health care law with respect to medicare that are going to throw spending. at the same time, there is a long history of people in the federal government. there's been commissions, studies, they haven't all led to the through downs in spending. there were provisions in the 1970's of the balanced budget agreement as though spending on the positions in medicare and congress has repeatedly flinched at carrying out that provision. so i'm curious, at what point are we really in trouble if we don't act? and when will we know we have reached that tipping point?

>> what cbo said on a number of occasions is that we don't know how to predict whether it is a tipping point in federal debt or what that tipping point might be exactly. but the retirement of the baby boom generation is not a surprise. i've been going to conferences for a decade noting that when that happens the burden of social security and medicare and medicaid would go up sharply and the country should be making plans for that. as you say the changes in policy have been enacted but none of them so far that to put us on a sustainable path. i do think what is different now is first of all the retirement of the baby boom is a pun off and thus the projected increase in spending that he's the only in the long run budget projections are now write upon us. the second thing is that the event of the past few years, the economic crisis, financial

crisis, the policy responses have led to a large jump in federal debt relative to gdp. so we start this period of the next decade and a must become much worse than we expected just a few years ago. although we don't know exactly that tipping point might be if one proceeds over the next decade with the sort of policies proposed by the president and recommended in congress one ends up with that pushing up towards 90 or 100% of gdp pushing towards the highest levels we've seen in this country. so i don't think this problem would be diverted for that much longer. let me ask you something broad. the congressional office created the neutral adviser to converse. increasingly, office exists in a kind of accurate part of the partisan climate. and i'm wondering as the

director, why do you cope with the increasingly shrill republican suggestions that the effort to the delegitimatize your numbers and the suggestions that your projections showing that the affordable careful long-term beneficial effect is based on fraudulent but it. how do you cope with that criticism? >> most members of congress, nearly all members of congress are glad to have an organization like ours they're providing independent objective analysis. even the ones some specific estimates, those members might find the numbers and convenient for them or impossible to them. my predecessor tells the stories of acrimonious partisan environments that they worked in so i don't think my problems are just mine and i think in general

we did a tremendous amount of support from the members of congress on both sides of the all for the work that we do. that doesn't take away the fact some members again on both sides of the all will be unhappy with particular pieces of analysis. and that is the situation we are in. i think what is important for us is to always do the best and impartial analysis we can to explain it clearly and then to let the political debate occur without ever getting further involved. >> okay. you don't sound too black and blue. let's go. we only have 06 minutes, so let's start going to your questions. the first is from dave oppenheimer who is a physician from the san diego. he asks how wealthy a co interactive and allow for the laws governing the corporate practice of medicine those states with such legislation exists?

>> that's a good question. >> would you like to expand aco or for example? >> aco accountable to organizations are an important avenue through which last year's health legislation and before that a number of analysts think that we can with our health care delivery system to provide a more effective care and less expensive care and the basic point of the accountable care organization is to have some growth providers responsible for taking care of the elmendorf, and to coordinate among themselves and get paid a essentially once, not a piece by piece of the elements of the care provided to me. and then to be paid in a way where if becerra can get high-quality care and provided to me have a lower-cost some of the savings to the federal government as go to the

providers. just last week there were hundreds of pages of regulations released regarding the aco and. i haven't talked with people all my stuff to read them and i don't know those exactly and i don't know how that would interact with the state law i'm afraid. >> i was told we would have a steady supply. the technical failure but i'm wondering does anybody want to raise their hand and ask a question? >> must be some its 8:00 in the morning when you look alert. >> nobody? >> okay i see one brave soul. >> shout loudly. >> why would reducing the pain and medicare providers.

why doesn't it, people to leave the system? that is one of the concerns. in the past when payment providers have been reduced one reaction tend to be an increase in a number of or complexity of the procedures are treatments that are prescribed to patients. there is a quantity feedback to the direct reduction in price per unit being paid for the procedures and treatments fulfill enough one would expect some physicians to simply stop providing that procedural trick to the net care beneficiaries we see that medicaid today,

medicaid providers and sources of medicaid are paid on average much less than providers and private health insurance. it varies based on states, and because of that, medicaid beneficiaries have more difficulty finding physicians to treat them than people with private insurance to so that sort of outcome is possible if payments go far enough and this is a topic we are to written our concerns about in last year's legislation but we haven't developed the capacity and a quantitative way the thing that there's a growing amount of research on how doctors and hospitals and nurses and other providers respond to the direct financial incentive the face of that research is still in a fairly restage and doesn't speak

that clearly to exactly what would happen with the cuts of the magnitude that are now in the current lull so the physicians in particular it is for 30% cut roughly in the payment would be well outside of the range of historical experience and it comes after a period of a number of decades in which payments have been reasonably country already said that puts us to a different place so we don't really know what will happen if we got there and if the congress actually let that take effect. the payment restraint for other providers in last year's legislation takes effect gradually over a period of will come every year going forward, and whether sufficient efficiencies can be realized to keep those payments at oral of cost for most providers is also not clear. i think the concerns you raised are legitimate ones and are one of the reasons i said in my

comment that it is unclear whether those payment reductions will be sustained for long period of time. >> i've got another electronic question. what are the areas of the greatest variation in your health cost i'm going to interpret that, what are you on certain about? >> we least certain about everything. [laughter] >> i said in testimony last week about the estimates that nobody is more aware of the uncertainty of these projections and those of us who are responsible for putting them together. and i think in particular the legislation moved the health insurance and health care systems outside of the historical experience in a variety of ways. so one very important uncertainty is how employers will respond to the existence of subsidies for buying insurance coverage and the new exchanges by our estimates there will not be very much dropping of

employer sponsored insurance because in fact the subsidies in the current tax code and other advantages will encourage employers to continue offering health insurance as a benefit to their employees. we might be wrong about that. the savings from the provisions in medicare, not the payment cuts so much which are uncertain enough, but the savings from the other provisions, the accountable care organizations, the center for medicare and medicaid innovation, the other more experimental parts of the legislation, the savings in those provisions are an incredibly on certain. much more might be saved and we expect but much less might be as well. >> thank you very much for those answers to hard questions. so let's think doug elmendorf for being with us this morning. >> thank you very much. [applause] >> good to be with you.

>> the governor can put it to terms of the 48 governor. he was elected in 2002 and reelected four years later when 95% of the counties in his state. he focused on a lot of things during those eight years, budget crises, education, land conservation, creating jobs but for purposes of this conference, most relevant is a series of very tough stances he took with respect to tennessee version of medicaid. tencare was proposed as long before virtually every state in the nation is now faced with medicaid ruining its state

budget tencare was the head of the pack. he can to the governorship after eight years as the mayor of national and before that he had moved deep in the health care industry in 1980 he founded of america corporation, healthcare management company that he later sold before entering public life. he studied physics as an undergraduate at harvard and at the interest is a licensed pilot, hunter and painter who is known for creating the covers of his family's christmas cards. he told me that if the 16 years in government, ten years after that, ten weeks after that he thinks he has won more solid career in him. there's not yet certain what that is. governor? >> thank you very much. i'm just getting used to my ten weeks, my new life here where the car doesn't go anywhere it

could just go sit in it and all those changes that happen when you leave this i thank a need for that and enjoy hearing mr. elmendorf's tauter earlier and i have a couple comments about things he said. i want to talk about the future, the affordable care at what ever is law. the shift of the political wind in washington. we still await the supreme court's view of whether the health insurance mandate is going to work. employers, there might be a lot of people in this room, and insurers are working overtime to come to grips with the added complication of the political litmus tests being applied to the strategies. everyone right now understandably is focused on the next three years. it's doubly important also for

for us to step back and lift our eyes of it and looked on the road a bit further to keep ourselves oriented on where health care is going. there's a long road after 2014, the cost problem hasn't gone away it will get worse. we will still have 15 or 20 million uninsured in the country and that is really why i'm here this morning to talk a little bit about that long for her rise in, and this talk is brief and has a very simple structure. first, i believe we've passed the health care reform that is deeply flawed and exacerbates, not solve our problems. that is a country in view for a democrat, and i will explain why i feel that way. second, i'd like to talk about health care costs. have you ever watched an artist look at the landscape and squint up her eyes? she does that so that she can get out of -- she can get through the distracting detail

and color and see the big shapes and i want to do that for health care costs. and third to finish up, i would like to get an out of the box idea that might prevent the change things and actually might be politically practical. it ought to be productive in that, how you combine those things that need to be done with the political ring devotees of the day on the other side and get bigger things done and the important things done. let's start with reform. the affordable care act, i try to do so in a way that a civil disagreement with the ideas and not some ad hominem attack on anybody who is involved in it. the obama flake word o oc because of think it is disrespectful and out of place. this is hard stuff and courageous people from both

parties struggle with it. governor romney and president obama most recently. but i do believe that the underlying structure of reform is deeply flawed. first all. it's completely about expanding the number of people covered. that's important. this is also the best chance literally in decades to start doing some of the hard things that actually take to make health care sustainable. the narrow scope, creating severe economic tension and health care beginning to require some personal responsibilities and most of all, taking on some of the economic interests of all kinds of providers in the system. when conditions are right you do the hard things and it's hard to imagine them being any better than they were in the first few months of president obama's term.

we really didn't try to those hard things. several years ago when we had to make the cuts to tencare i learned clearly that it is 100 times harder to take something away and to never have given it in the first place. with reform we've not only covered more people, we have done it with a broad benefits and with their eighth large subsidies. we've created expectations we can't possibly meet in the long run. we haven't solved any of the big problems we just made them bigger for some future president and future congress. second we not only didn't to get advantage of the chance to reduce the costs we did some things almost certain to increase the great deal. have you focused on the size of the federal subsidies available through the exchange for a family of four with an income of $90,000 that subsidy is still 44% of the cost of the health care, health benefits.

it's about to become very compelling for employers to simply drop health insurance coverage and help employees obtain subsidized coverage through the exchanges. there is no longer a moral imperative of employees to get excellent guaranteed issue of health insurance elsewhere. it's arguably better for the employees with more choice and more flexibility. i did an audit for "the wall street journal" last fall and i look what would happen if the state of tennessee the first corps employees for 40,000 state employees dropped health insurance and made it up to the employees and their pay check and pay the federal fines we would transfer about 44% of our health care costs to the federal government if we did that. there's a lot of policy problems with reform controlling the costs of talked about and that is certainly one of them the impact on the states of medicaid

that as represented by the concept of the mandate. i want to just finish this discussion of reform though. bye saying that a lot of these could have been addressed is the presentation of the finances of reform by the congress have not been so disingenuous had we really confronted what was going on for cost. you remember the reform of the finances were made acceptable by setting up a straw man with the cbo to say that would reduce the deficits the straw man was settled, it was very compliant with allowing the issue to be defined in that way. i've always found the cbo to be very straight up in their work, but given a set of rules set by the congress under somewhat otherworldly. they said yes it would reduce the deficits of the legislation passed literally within hours it was good political theater.

but with even a few common sense adjustments that's just not right. one example and mr. elmendorf mentioned earlier a part of the cost savings that were needed to reduce the deficits on hundred and 90 billion of them came from future reductions in medicare position provider payments. there is almost no one who knows what they're talking about. the of looking in the eye and the reductions are actually going to take place at least the corner of the mouth creaking out into a laugh. in previous cut in 2002 had no trouble being deferred whether democrats or republicans are running the show. these cuts aren't likely to happen and everyone knows that. this approach to appear to pay for it and fix the plater is

offensive anytime and doubly so for something as important in the nation and people as a result chrysostom. you've seen the movie casablanca. the scene and rex four the french police captain is with the actor laszlo, the czech resistance fighter and he says it is a bottle of your best champagne and put it on my bill. and he says captain i couldn't, no, please. he says please, sir, is a little game we play. they put it on a bill, it's very convenient. the finances of health reform are likewise very convenient asquint like the artist as health care of the landscape and particularly that the cost of and see if we can make out any large shapes.

i know of no field where there are more distractions and color and complexity details and red herrings than the issues of the cost of health care if you need is a vanishing way have to cut through the clutter and see the bigger pictures. this is a very sophisticated audience and time is short so what we cut for the bottom line. if he remembered nothing else for my being here this morning i like you to think about this. at its core, the high cost of health care in america and its high rate of growth is not the result of a new technology or administrative overhead or aging population or chronic disease or malpractice suits or the lack of information systems or the lack of transparency, the symptoms, for sure, at its core is the direct and inevitable result of systematically removing over decades the economic tension

between buyers and sellers that makes efficient markets work. we've created a system of health care as a seller's market where there is virtually no one with a necessary power and knowledge and a clear stake in the cost to be a careful buyer. patients don't care, insulated by the payment systems even when they have anticipation for the kuhl insurance for example it's mostly not in a form that drives in a behavior. if i have a state hospital i might get a share of the discharge but it hasn't driven any behavior i can control it is just a cost that i have to deal with. doctors and hospitals don't care, sometimes they have no economic state in the decision, the doctor writing a prescription of referring to a specialist for example when they do have a stake it often almost always favoring more and more expensive treatment.

and you know this well and insurance companies don't really care. the industry has a variety of initiatives to contain costs some of them very good, but in the end, they and their government and equivalents in medicare and medicare to be a commodity or financial intermediaries. higher costs don't fundamentally threaten their business. they are just something that has to be accurately assessed and passed on to their customers. the affordable care act has made that financial intermediary role even clearer their job makes it very clear is not to manage it is to pass on 85% of the premiums to the medical industry as efficiently as possible when you brush with the confusion the picture isn't all that complicated. what we've done with health care in america with the best of intentions is to carefully build a highly in the economic system one where the volume doesn't depend very much on the price.

when he took economics 101 in college, you learned that there is a scientifically correct strategy for a seller in a highly system and that is to keep on raising the price. there is no rocket science here. we've created a economic system and health care by insulating the buyers feeling the price and sellers have responded in the rational and predictable way by continually growing the price. it's a particularly easy in health care because the sellers often control not only the unit price but the volume as well. all of our rules and beating of insurance companies and pilot programs and information technology incentives are struggling upstream against barry the country powerful economic currents working against them. it's been no contest for a generation and it's not going to be a context in the years ahead.

now this feature of health care economics is hardly a fresh observation. a lot of people understand and have spoken about this. but if we see it as the fundamental source of the cost issue, that understanding can be used to change things. the problem we need to solve is how do we in a practical and a reliable and ethical way reinvigorate this economic system with some economic tension between buyers and sellers? it's not easy but it's the core of the issue. if we can keep our attention concentrated on that, and not be distracted by administrative overhead or single-payer errors or information systems or transparency or anything else, we can make progress. to slightly pared a phrase as has been done many times, to slightly paraphrase mr. carville, it is the economics, stupid. i have written -- the reason i got invited is i've written the book about how we might do this.

it is a longer subject and this morning permits but there are a number of very practical ways to move forward and reintroduce this tension in a sensible and ethical and workable way to get the economy of this country which is active in so many areas working once again for us. i want is a one last thing we talked about reform and its small and zero adamle economics of health care. now let's finish with just a big idea that might actually be politically practical. a balanced budget amendment but one of limited to social insurance programs amending the constitution might seem like overkill for a budgetary issue and i would argue the functions of the federal government have become so large and are so new

there such a threat to our security that it's warranted. these ideas balanced budget amendment are not an ally year. it's not a crazy idea. in 1995 the congress came within one vote in the senate of passing the one and sending it on to the state. there are nine of them circulating around the congress at the moment. but the broad ones trouble a lot of reasonable people, myself included, as being dangerous. the typically specify the balanced budget on the annual basis but if we start cutting budgets every time the economy slows, we just with salt and amplify the cycles and the economy. there's a second obvious concern, nearly every proposal has some form of a super majority override as a necessary protection, but we shouldn't hold hostage the country's ability to fight the war or deal with economic crises by being able to ability to assemble a super majority in the congress.

that's like a unilateral disarmament of the country. the country needs flexibility in dealing with the acute crises. deficits aren't always bad. most of us can easily see the rationale for passing on to future generations the costs of the war work for dealing with an economic crisis but i can't see any rationale whatsoever for passing on the future generations or for asking china to fund the day in and day out costs of old age pensions or medical care for america. so the matter of debate to modify the amendment limited to the social interest programs might make sense. any social the gerrans program constitutionally has to operate as a trust fund which is balanced and that truly sound over a 20 your time horizon. you can borrow any economy suffers and build reserves when it's strong but it has to balance on a 20 year time frame. i've come to believe that it would take some kind of an

external construct of forcing congress to act. right now entitlement reform is immediately tied up and bogged down in the specifics. it's not about social security's solvency. adjust rapidly becomes about whether you are raising the retirement age to 67 or not. separating the principal from the specifics might be a sound way to approach this. they might be guaranteeing freedom of speech while mr. assange is publishing confidential cables and the church is picketing military funerals, the principal would be confounded by its immediate applications. we have strong guarantees of freedom of speech in our country because we guaranteed the principal in the first amendment and in doing that we separate the principal from the immediate and usually the on popular applications of the problems of the day, and perhaps that could

work for entitlements. my thesis is simple. we have an unsustainable health care system. the reform has made the problem worse and what better. the core problem in health care costs the inelastic economics and solving that problem is the route to success. i've noted some solutions and invite you to read about them. the congress is dysfunctional right now with the constitutional amendment applying that only the social insurance could force them to act and eventually deal with our health care in a constructive and long term way. thank you for inviting me here. [applause] thank you for knowing how the health care lobby is and has a blanka. >> i'm going to ask you questions and i see we have some questions to keep them in.

one of your central point was essentially that. they've begun to doubt its usefulness and there's lots of vocabulary these days that get to that notion. accountable care organizations about what mr. elmendorf, the global budgeting, the episodes of care, and i guess what i wonder is how much do you think the private health care marketplace can gravitate in this direction and how much, even leaving out your idea of the balanced budget amendment and as much as the contras may be the function to become dysfunctional is going to stand and what can the markets due? >> i certainly believe that the fee-for-service approach has long since outlived its usefulness. it's something that worked just fine in the 30's and 40's at the beginning of it. it's like the employer based care. but it doesn't have any rationale to bid anymore and it creates all this inefficiency.

things that move us away from fee-for-service into purchasing care on an integrated comprehensive basis i think are the future of. i would take things even further in the account of your organization and say look i talked about setting up systems of care that are entirely responsible for the care for an individual and a strong quality auditing system to go along side of that with external to keep their feet to the fighter to provide the best possible care to set up the competitive system. but the things like bundling, they are good in the sense that they removed some of the transactions to go for that and increase the overhead. but they also don't get at some of the core things. we do vastly too many spinal fusion in this country. tens of billions of dollars

within this country that are probably unnecessary. bundling their provision might make them a little bit cheaper but it doesn't get at the core issue of should we be doing $20 billion worth of the fusion so why themselves it isn't the answer. ..

>> i think that dealing with the medicaid by trying to be reasonable with a series of advocates and so on was a mistake that cost me a lot of time. i should have recognized that they were not going to compromise at all and dealt with the issues earlier, but the problem with health care, i think it's about the problem we're going to have with health care reform. everybody makes up spread sheets with the cost and anticipates savings that are going to come along, and anybody in business knows those have a way of the costs all come true on schedule starts on monday morning when you add people. the savings may be there or not be there. in the case of ten care, they were not there, and the cost went up dramatically. i was in a position where it was

absorbing about 80% of all of the revenue growth that we had in the state of tennessee, clearly, not a viable proposition, and i was to be honest with you neither cms nor the federal courts wanted to give us help at all in any sort of a more nuanced way, and we ended up just having to dramatically change benefits and have people lose their coverage, but that's what happens when you don't -- i think engage in the need to do things with health care. that's my fear about what's going to happen with medicare in the long run. if you don't get in and change the underlying reasons why the cost goes up, at some point it crashes and who gets hurt is not the congress, but all the elderly people who need the care. we need to engage with these problems. >> okay. thank you. let's take some audience questions.

first is this. how severe are the projected risks for state budgets given health reform. you touched on that a little bit with medicaid. >> it's substantial. it's a huge change for medicaid for the states. in tennessee, we estimated that in the second five years of the period was when it hits 2014-2019, it's about a billion new expenditures for the state, but that's at a time where we're just getting back to the levels we were in 2007-2008 of our budget, so it really is a problem. it's a problem for us. it's a pretty significant issue, and it's a real, i think, breaking of a contract or breaking of on understanding that worked for 45 years between the states and federal government. >> one question, because we have to wrap it up. it's a good one. it has to do with state's implementation of health

reform. there's a lot of uncertainty with the law, congressional uncertainty, frawl court, maybe supreme court. do you think it's the states to put it into law or be slow in moving forward? >> jim douglas, the republican governor of vermont, and i did a seminar if the new governor's boot camp that we have every time there's a new crop of governors, and both he and i feel no matter what your feeling is on reform, you're crazy not to go down the path of beginning to plan for the exchanges because it doesn't hurt you if reform is terminated or changed dramatically, and if you haven't started now, you want be able to -- you won't be able to implement them and there's vast control of health care decisions made in your state to the federal government. unfortunatelily, that's not happening because it's a

political litmus test and they fight it to refuse the money. any state that doesn't plan for this ire respect of their opinion is crazy. >> thank you, governor for being with us this morning. [applause] [applause] >> it was my pleasure to present this excellent panel coming up. now we have a mic. as the economics of health care become an issue around the globe, we're faced with the need to find a more effective health care approach for the next generation. innovative health care technology, information, consumer ingaugement in health care and early detection of chronic diseases are all essential in coordinating care. each of us is drengtly impacted by health care decisions we make every day for our employees, for ourselves. this subject matters a great

deal to vision care. we have employees all over the world, and the largest non-for-profit care in the united states, we have 5600 members we cover across the country. eye care is an example of a nontraditional way to provide health care for people who are not meeting with their primary physician. eye doctors and opt molingses can see early signs of chronic diseases through eye examines and take their patient forward to other care. with a small part of the health care system with a larger part of the system, significant savings are realized. we know through a third party study we conducted with our members that over 4.5 -- $4.5 billion were saved in health care avoidance with employers who had our health

care plan. they benefited with the cost savings making it more affordable for them to provide health care benefits. when you extrapolate that across to people who have funded vision coverage today, you save 1% of what the federal government spent on health care in 2009, and every percent counts. this is proof that we need to challenge the current way we provide health care and continue to look for innovative solutions like exchanging data between two parts of our health care system. now, it's my pleasure to introduce our keynote, the economics of health care. we will be joined by dr. david cutler by harvard business school, dr. robert galvin of the blackstone group. we are delighted to have

elizabeth cohen to moderate today's panel. she makes sure every #-b gets the help for them and their families and the book signing of the empowered patient today at lunch at 12:45 at the bookstore. let's welcome our great panel this morning. [applause] >> good morning, and welcome to our session. thank you for that introduction, and he mentioned my book, and i've been touring around the country for the last six months since it was released, and i tell stories about what happened to me and my family, good and bad in health care, and it's very heart felt, and i go on for 20-30 minutes about our experiences, and then i ask for questions. always, the first question when someone raises their hand is so, elizabeth, what do you think

about health care reform? good or bad? so what i get to say is i'm a journalist, so i don't have opinions, and then i ask for the next questions, but these gentlemen are not journalists, and they get to have opinions, so i figured we'd start right in, go down the line this way with your thoughts on the health care reform bill that was passed about a year ago. >> okay. well, good morning and thank you. you asked the question health care reform good or bad, and i will say good. let me offer -- i know that's a big surprise -- but let me offer a couple reasons why. the first is that it will finally give coverage to essentially all americans ab sent people in the country illegally. almost all americans will have coverage, and it's hard to overstate the impact of not everybody having coverage. people are worried about can i change jobs, can i afford to move from one business to another, what if my spouse loses

her job, will i still be covered? how will i make sure i get care? there's an enormous amount of economic uncertainty and economic or economic outcomes associated with that, so that's the first big thing, and then the second big thing is that the reform if we build on it the right way, i think it will lay the foundation for a very significant reduction in medical costs by rationalizing how health care works, and rather than give you any of the economics, i'll just give you one example. if you look at senior citizens, people on medicare who go into the hospital, one in five of them return to the hospital within a month, one in five go from the hospital to the hospital within a month. in many cases they never saw a doctor, they never saw a nurse,

and we know that in the best medical care systems, one in five becomes one in twenty, and the difference between the average medical care system and the best medical care system is that they have information so they know who is in the hospital, and then someone follows up. >> they never saw a doctor or a nurse during their initial stay? >> in between episodes. no one ever checks in. if you have a nurse come visit them within two or three days or a week, you go from 20% readmission to 5% readmission. you save tens of millions of dollars if you do that. right now, there's absolutely no incentive to do that in the health care system. no one gets paid for doing it, nobody has it in their interests. what health care reform does is it says let's make things like that economically viable, and what we'll do, i believe, is we'll lay a foundation for

making the right care at the right time to the right patient financially and lower the cost. i really think we have an opening here that if we follow through it will lead to very, very good changes, and i would like to be optimistic. >> great, thanks. >> yeah, thank you. i'm not an economist, so i do run an interest company representing 40 employers, and i send a lot of time over the last few months negotiating with both health insurer and providers, and i represent employers. in answer to your question good or bad, i would say yes, it's good, and it's bad. when i speak to employers, everyone i speak to is happy about the uninsured problem being addressed. they think that's a positive,

and every one of them wants it explained to them likes the framework of the iom and patient centeredness and quality. i think those are considered very strong and very good. no one i've spoken to on the employer side, however, thinks it's going to save money, and let me quickly say when you speak about employers, and i think the audience knows this, large is different from small. those who cover from those who are not, those in the health care industry itself, but philosophically they are bound together by some thoughts, and i think in the short run, employers don't find cost savings because they had to expand coverage and because certain individuals are going to pay more tax and because the administrative savings of doing things that seem simple when in congress like reports of w-2s, covering people up to age 76 and those working inside the company understand what work that is in terms of just working with your

payroll systems, tieing them to the benefit systems, ect., ect., but i think david would agree with that. it was a coverage bill at first, and then cost more later, and i think that's fair, and i think that's really the interesting topic, so i think when it comes to the longer run and on the cost side, you know, i was trying to think of two words as i talk to employers to describe what they thought about it and it began with shock and awe, but i thought that was not explanatory enough, so i think it's uncertainty and concern, and there's tremendous uncertainty that i cannot overestimate. there's uncertainty about what parts of the laws will happen. there's uncertainty about exchanges in some states and not in others, and the idea that once again employers who have not had a deal in many years without a multisystem might have to because states have to do things above federal requirements, and there's

uncertainty with insurers and providers as well. again, we'll finding as employers everyone is spending their time in strategy sessions trying to figure out what to do which takes the eye off the ball today of dealing with the problems and manage care more effectively. in the longer range, employers look at this and they kind of bounce it against their own strategy, and really everyone who covers health insurance on the employer side is going down a road of consumerism, of trying to get their employees to be engaged, and they are doing this through education, lots of information about providers, and they are doing it through incentivings and benefit design changes. when you balance it up against there, you say really like those increased incentives you use on the premium side. that's a positive. on the negative side, a big

missed opportunity in the terms of price because we think that to get people to be active consumers, quality is not unimportant to them, but it's a little bit confusing, frankly, and they tend to trust doctors in hospitals. price is very meaningful, and so we think there's a big missed opportunity there, and then when i would say the last comment i make is we believe there's a big underestimation of the impact of the public sector impacting the private sector. my colleagues don't believe in cost shifting, but i tell you someone who negotiates with hospital ceos and health insurer all the the time when you fund a bill by medicare paying less, sooner or later the private sector pays more. when you tax manufacturers, sooner or later that comes here because medicare can't fix the prices, and the last thing, and i'll yield my time, but

hopefully we can get to it is the idea of social reengineering that i think the bill is doing with accountable care organizations and others which i think, again, had some positive concepts but from very worry smit realities when it comes to employees. >> great, thanks. >> that's where i'm coming from too. there's great themes, but below the headline level, we have to ask is it going to work? does it really make sense? do the pieces fit together? i would argue that they don't fit together. they counterfeit together, the legislative process bit off more than the country can chew, and the legislative process did not have sufficient open consultation with the health sector, with businesses, with everyone concerned, and really i think took on way too much. you'll find anybody in this country who would disagree with the idea that people ought to

have health insurance. the question is how do you do it? you wouldn't find anybody in the country who disagrees with the idea -- well, maybe you would. maybe the people in this room. that there ought to be -- that health spending ought to slow down. outside of this room, there's plenty of people who agree with that, but how do you do it? ultimately, those are the questions that have been plaguing us for many, many decades. i don't believe that the health legislation that passed gives have many good answers, and i think the evidence of that, the sensible response from hhs is to start to give waivers where things clearly don't work. the fact is that there are -- the themes we're talking about, in particular medicare, bob mentioned cost shifting and medicare cuts, what kind of cuts are there?

the standard cuts that congress duped take. congress has steadfastly, except for the first year, 2003, has steadfastly refused to take cuts on physician payments. precisely because the cuts are swipe against not just physicians, but also perceived as a swipe against senior citizens, and they vote, so faced with those political realities, what can we really expect from medicare, and what should have been done? i think that's the question. essentially, medicare has been left to its own devices. the money that is theoretically taken out of the program is recycled back into sub subsidies for non-senior citizens, whatever you think of that, the fact is that medicare is not

made more secure by the price reductions to hospitals and other providers. the failure to deal with the physician payment problem is another issue. the administration wants to say that because the physician payment problem existed before, therefore somehow it's not part of health reform, well, it wasn't part of health reform. it's $350 billion over ten years that we'll have to come up with or we'll have to steal ourselves to the reality that those cuts in some form have to take place, so where's the hope in this bill at least with regard to medicare? it's with the innovation center. it's with the dozens of ideas that are very much at the idea stage, that have yet to be proven. we can all be hopeful that those ideas will, in fact, jell in

some way, and we can be hopeful they jell in the medicare program which is, in fact, the one leverage point the federal government has. >> does dr. cutler raise an idea? after a noble person is discharged, there's a nurse coming to their home after a couple days and that brings the readmission down to 5%. what do you think about that idea? it's a simple thing, just one example of many things that could be done. what do you think? >> there's the distinction of being the state with the worst record which is maryland, short term readmissions. there's lots of reasons for that, but certainly the failure for follow-up is a big factor. it's a failure on both sides. it's certainly the failure of the health system. we don't have health systems that manage care very much in this country, and that's -- we should move in that direction. >> do you agree it's a good idea? >> that's a good idea, but to say that's what aco's will

necessarily do is i think a leap of faith. >> let's leave aco's alone for a minute. do you think people in general agree that's a pretty simple good thing to do? send a nurse -- >> well, i'm not sure it's simple, but i think a lot of people agree that there needs to be contact. it doesn't necessarily require that the nurse go to the patient's home. sometimes a phone call, a quick follow-up after a day or two to listen to the patient tells you everything you need to know. it doesn't have to be expensive. >> why doesn't it happen? why don't insurance companies do that? >> well, i think a large part of it is that the payments are fragmented, and so one -- again, the idea -- >> i get that part. i get that part, but if it clearly saves money, bringing readmissions from 20% to 5%, why not do it? if i'm an insurance company paying for someone's care, i'd

love that; right? >> you might love that. how much money are they willing to put into the management which suspect considered under the new law to be part of the benefit, and i think the new law will limit many of these kinds of innovations to the extent they are considered administrative costs rather than benefits. >> yeah, look, so i too think it's a great idea. i think readmissions and unnecessarily readmissions to hospitals is a terrible thing. i like it. i agree with joe, but i'd like to say that's a bad thing, we're not going to pay for it, and then let different ideas emerge so whether it's e-mail to some people who want to get it, a phone call, or better discharge instructions, however it works, it works, and the reason why it doesn't happen? that's a great question. you probably get asked that on your tours, and i don't think anyone can tell you. i can tell you that if you're an insurer with the hospitals, the

hospitals say that's not what i do. in other words, this is not easy doing what i do. >> you mean sending a nurse out or calling? >> yeah. i take care of them, tried my best to give discharge instructions, that's all i do. i don't get paid for anything more, and it is a whole different set of schools that really suspect my thing, and that's why the idea of coordination is really important. i think it's how that gets done, you know, where david and i might differ some. >> now, he brought up that one simple thing that could save money and possibly save lives. the two of you, what's your favorite? if you were in charge, what would you do? name one thing. >> talking about similar to david's thing? >> yeah, that would cut costs and improve care. >> look, i think the crux of changing the both of those is payment reform, and i think that is a type of payment reformment i think a second type of payment reform already instituted is

unnecessary complications in hospitals. i think that clearly is something that should never happen, and our payment system -- no one tries to make that happen in the hospital, but the payment system pays for it. >> pays to repair the mistake? >> yeah, it pays for the procedure that was the mistake and pays to repair the mistake so i think that's another immediate payment reform that makes the same amount of sense as the unnecessary reason. >> hasn't there been action on that? >> yes. >> has that worked since they went on to fix it? >> too early to tell. >> yeah, and i'll tell you it's so easy to sit up here and say it. being a physician and having practiced intensely for 15 years and still seeing patients, it is a wrong sided amputation is one thing. there's a couple things that are discreetly errors, but so many many that are so much more nuanced when in the heat of actually taking care of someone that it's going to be less than

people think it's going to be in the end. it's still the right thing to do for egregious errors that should never occur. >> give an example that should be nuanced? >> certain kinds of complications kind of related to surgeries so, you know, we just had a friend of ours who had valve surgery, and now ends up with a lung full of fluid, so 98% of people that have that procedure don't have that fugs after they have the valve surgery. this person was sick, ended up in the intensive care unit. was there a leakage before, or was this person's particular physiology and anatomy lead to it and it was something that was going to happen anyway? that's nuanced and complicated and a fairly common surgery, a valve surgery and a bypass.

it gets complicated. in-house infections are not really complicated. those are preventable. >> dr. antos, do you have a favorite? >> let me expand on this a bit because it illustrates the clumsiness federal policy has. there's a list of dozen so-called never conditions. it doesn't pay for the things. >> never events. >> sire, yeah. >> just wanted to be sure. >> maryland has a different approach. maryland is the only payer rate settings for hospitals, and instead of picking 12 things that we care about that the hospitals may have trouble dealing with or we may not fully understand, we have a much more complicated involved coding system, drg system, and so we have something like 80-90 conditions that we will not pay

for. hospitals, these are 80-90 conditions we've identified that had some probability of being questionable, and we want you to work on them. you pick the things that you can do. don't pick the things you can't do. you work to improve your system. this is a huge difference, one the few i point to with pride, between the maryland system and medicare because it's the sirches between the payers saying i care about this and you have to follow my orders, and the payer in this case saying we care about a lot of things, you pick the things that are most important and deal with this. having said that, this also illustrates where i be coming from in terms of innovation that's going to save money and improve health care, and that is we need a lot less micromanagement. the problem with micromanagement

is people aren't at the scene, on the front lines, have theories about how things work. we call those people congressmen. [laughter] so, you know, they are often well-intentioned. i say often, but they usually don't know what they are talking about, and so we need to be able to move the decision making down, but without moving the control over the money down, so the fact is that having some kind of a system that puts real best of my budgetary constraints on spending is ultimately where we have to go. >> a question from the audience, can you basically trust health care reform to people whose first priority is this is their wording, not mine, whose first priority is to get reelected? i mean, members of congress are

not experts on this. they do have the goal of being reelected. love your thoughts. >> it's interesting because if you look at the medicare program, it's in many ways quite out of date as joe was saying and bob galvin. it doesn't do what it should have. one example, not paying for never events was an idea that arose in an oim report in the late 1990s, and throughout the 2000s in the bush administration, the department of health and human services never acted on the recommendation even though they were wasting tens of billions of dollars a year, and if you asked them why they were afraid of congress, they were afraid that congress would yell at them, so

there was a determination that having 535 ceos was a bit too many for the insurance plan, so what's interesting is one of the things the affordable care act does is it has a lot of secretaries. everyone heard about the 2000 instances, the secretary show. what those are doing there is saying as congress, this is the way we want the system to go, and you, you single ceo are responsible for carrying it out, and we're not going to try and micromanage it, and so my hope is that what that reform turns into is a system where congress is at a broad level looking at what itments to do and -- it wants to do and broad policy and so on and at a detail level delegated it, and in return what

the payment systems do, and if you come back to what bob and joe were saying, they say, look, we're just going to give you one price for the hospitalization and the readmission, okay? don't come to us needing more money. whatever you need to do to get the readmission rate down, you do it, but don't ask us for more money when the patient returns to the hospital. it's a way of delegating from the hospital to congress to the administration to providers saying you deal with the problem, we are not getting in your way. i'm hopeful that's the dynamic that plays out so that it really looks like a system where on the ground people are figuring it out. >> well, thank you. any questions you can e-mail them to questions@worldcongress.com. let's move on to talk about aco's, accountable care organizations. do they exist? does anyone belong to them?

they've been talked a lot about, but i don't know if i know anyone who actually belongs to one. you're laughing, you can begin. >> well, every medical practice in california seems to be an aco. you adopt the name first and figure out what it is later. >> you tell us. what is it? what's it supposed to be? >> well, i haven't had a chance to read the 300-odd some page regulations that came out a couple days ago. >> my version had 429 # pages. >> is it 429 pages? i'm not sure what cms -- >> i read most of it. >> you have, very good. thinking about let's say the -- aside from the relations that haven't been digested by the health system, what can we really expect aside from marketing? one of the ideas here is essentially managed care except

a gentler care of managed care. if we can accomplish that, that'd be a great thing. >> we know managed care, but that's gentler? >> the contrast may be in the 90s, in the early 90s when a lot of employer plans, medicare moved very much towards traditional hmos, and mmo being -- hmo being an organization that you have to enroll in, and there was -- that form of managed care had a lot of mother may i's in it as well. if you were going to go to a specialist, you had to go through a primary care physician. if you were going to be admitted to the hospital, you needed approval and so on. some of those ideas probably didn't work, many of them did. >> you mean, there were movies where characters made fun of it. it was a popular thing to --

>> right, that was unfair. by the mid-90s nobody wanted it anymore, and the reason was for the threat of the recession going away, business was good, employers were willing to contribute more to the benefit plan, and in the medicare case, congress had its own ventures starting in 1997 that pretty much undercut whatever the program was called at that time. what are we looking at now? well, some people think these essentially could be hmos without explicit enrollment, that people would be somewhat assigned in some way that i don't understand, but depending on say which primary care doctor they go to, but they are not necessarily limited to the network of providers who are in that specific aco. that raises some interesting

questions. first of all, if you don't know you're in a network, then how can the network manage its business? if you do know you're in the network, are you happy about it? i think given the state of the economy, people may, in fact, embrace the idea, especially if these networks have sensible managed care which i don't think we necessarily saw in the 90s. this is one of those experiments that remains to be worked out. >> you know, let me speak in defense of aco's kind of. >> can you define what they are? >> sure. keiser, group health, health systems in minneapolis. >> is it a closed hmo basically? >> it's an organization of providers accountable for the entire spectrum of care for a patient, for an individual that is paid kind of in the best of worlds not by the drink, but on kind of a prepaid per person

rate. >> when you write your check for the premiums, it goes to the same people providing you the service? >> not necessarily, but the payment still could go to an intermediary, but the payment from that intermediary to the provider system in its best form goes as a whole, so if you know anyone who belongs to cree, which you probably do, they belong to an aco. >> if i want to go elsewhere for treatment because i think there's a better person across the country, i mean, i suppose i could do it a mother may i, but basically i can't do that? >> exactly. this was not easy for hhs to try to solve for this because the very thing that helps you manage care means you stay within the walls, the very thing our population is not ready to accept, restriction on choice. you know, that if i know or i'm

told or my cousin who is a nurse told me that the absolute best person for this shoulder surgery is here, but it's not in my network, then i can't go, i think the population really doesn't like that. i think what cms is trying to solve for is kind of in between. they don't want to alienate people. on the other hand, they want to try to promote coordination. i think joe is right. i don't know or have an answer to it, but i do think that's going to be pretty tough to pull off. >> throwing something else that could get me in trouble. this is not my opinion, just an idea. if you are rich, you get a mercedes, if not, you get a hyundai. if you are rich, go for it, enroll yourself in the program where you get the best surgeon. if you don't have money, you're in a system where you have here's the list, these doctors,

and that's it because you're paying, obviously, these are made up numbers, $100 a year, and the guy paying $1,000 a year gets to go where he wants. we do that with other things, schools, groceries, we do it with all other things, why not with this? >> we do do it today, and it's the uninsured. the question you're asking is in the future, and david, you can have your word, is do we want to construct the system that way? >> and be clear about it. here's an aco, if you don't like that idea, i think we do do it, but not that clearly. >> within -- so you need to distinguish between medicare and private insurance. in medicare, the way that the law is still written, you cannot deny a beneficiary of a choice of any provider. that's what bob said they are working around. if you look inside of medicare,

in massachusetts, where i come from, small businesses are buying limited network plans, and what a limited network plan is is it has a set of preferred hospitals, let's say, so if you want to give birth, the preferred hospital is the mt. auburn hospitals. if you don't know you have a complication, then you pay $2,000 for that. not that you can't go, but you have to pay more for it. >> in advance as a premium or you mean -- >> at the time you want to go there, if it's not one of the preferred organizations, then you have to pay extra for going there. >> do people pay the extra? choose to pay it? >> they are happy with mt. auburn. people will have seen here a recent study about blue cross-blue shield with an alternative quality contract where they give fixed amount to money to the provider groups.

they run various clinics, okay, and they said we'll be responsible for managing the care, take the money and manage the care and every time someone's in the hospital, they deduct the cost they pay the clinic. the clinic realized they sent their admissions to the most companyive hospitals, and if it was across the street, they would save a lot of money, so that's what they did. took two-thirds of their 10,000 add admissions crude -- across the street. other than the very specialized services, you're not going to be very expensive hospitals, and that's an example where in that case, i don't think they even charged the patient anymore for going to the expensive hospital. you can charge the patient, make the provider pay more, and you can do both, but one way or the other, that's a lot of what's happening in private insurance

where medicare is going because they can't use the price mechanism at the patient level it's going to the provider level, so it will say, you are managing these people, and if you can get them to go to the better hospital, the one across the street and it's cheaper and you have a better relationship with them and you convince them it's as high as quality, you'll save a lot of money. if you keep them out of the hospital, you save more. >> there's a difference between medicare and its 45 million and employer-sponsored insurance with the 160 million, so i don't think there's any question that's the system we'll going to end up with. it's basically as this law as you know far beyond medicare, but as it set up exchanges within the states, there's going to be an existential health benefit package, and they have the freedom above that to add mandates of their own or to have

more benefits added. i think part of what the country struggled with is a two-tiered system where the lower tier is clearly getting health care. i think to the extent that there's now an essential health benefit package, a good thing coming out of the legislation, as long as that benefit package is going to be acceptable, which i believe it will be, i think you're now in a different game in terms of having a two-tiered system, which the country, although it has it, will feel better about saying it's okay. >> it's one thing to theoretically have an essential health benefits package and another thing to get benefits. with your animal sigh what car you buy depending on your income, we also address if you have no money you walk, but what about the people who takes bus? in other words, medicaid patients. we're going to sub substantially increase the role of medicaid, and it's all the case that it's

difficult. if you're a medicaid recipient to be seen by a a primary care physician or anybody other than a public hospital where you can spend a lot of time in the emergency room, so, you know, to talk about essential benefit packages without asking yourself is there going to be delivery is a major issue especially for medicaid because those are, in fact, the people we're not paying attention to. we are focusing a lot politically on the uninsured, and there's 20 million people who will be uninsured in 6-7 years for a lot of reasons, some them, some us. but medicaid, we solved that problem, that's what the congressmen believe. it's gone now. especially in washington, the states will take care of it. i don't think they will because they've done a poor job so far. >> a question about gdp. what percentage of our gdp do we spend on health care?

>> 17. >> about 17, okay. is 17 too high? is this too high? is 10% good? is 2% good? is there a magic number in here anywhere? >> 100% is the top. [laughter] and 0 is the bottom i suppose. economists don't think that any single share is the right number or not. what matters is what are you getting for your money? you may spend a lot on a car, and it may be worth it to you. the real question is not is 17 too much, but what level should we be spending given what we're getting, and the -- that bulk of policy analysts think that we are overspending relative to what we could spend for the same or better outcomes, overspending

anywhere from a third to a half, so that is we could be spending 10%-12% of gdp with roughly the same outcomes if we did it right. >> can i ask a dumb question from a noneconomist to economist? which is, suspect it possible if it -- let's say you are getting value, and it's unbelievable this is a healthy population. every town has hospitals and doctors, and it's 30% of gdp. doesn't it crowd out other things that we need to spend? that really is a legitimate question to be honest. >> right, right. the real question is that worth more than than whatever else? the biggest problem is in the public sector where we are unwilling to raise money. suppose we had an incredibly proficient health system and the way to do it was to put everybody on medicare because it's the beacon of the health care system, and we refuse to

raise the taxes to pay for it, and we crowd out everything else that's valuable, that's the biggest problem where we go into a recession, we cut massively because that's the only way to deal with it. in some global sense if we tax ourselves saying this is worth it, let's do it, spend the money there, it would be fine, but it's just a problem of, you know, both do we feel like we're getting our money's worth, and can we get the money to where we need it to be to pay for it? >> well, that assumes we know where we need it to get to be and it's up ahead somewhere, and that assumes an incredibly degree of efficiency not just in the delivery of care, but in the sense that bob was talking about that people get what -- now, what is it? want or need? there's a really tough question in this country. is it want or need? i think there's a lot of want.

there isn't necessarily a high proportion of need in all of this, and so what bob said i think is exactly right. you begin to -- whether it's efficient or not or whether we get value for it or not, you begin to close off other options. raising taxes also closes off other options. raising taxes is not a spur to economic productivity. it's a spur to government spending, and in the economy that we have not been enjoying for the last three or four years, you have to ask first not how do we spend more money for health care, well, again, maybe outside this room, but how do we get the economy going? how do we get the economy back to the kind of growth that we once saw that we thought was normal? i don't think taxes are the way to go. once we get to that point, then maybe we can talk about taxes, but until then, it seems crazy to hobble us further. >> but isn't the problem that

it's one person's want is another person's need? the same event can look different from two different people? for example, i know young people who hurt themselves playing tennis, and they want an mri of the shoulder. others say do physical therapy and you're fine, but the patient feels mri's are important. it's possible that mri could be a waste of money, but it's possible the mri could yield really important findings to help the patient. >> what happens if they pay for it? what happens if the answer to them is not because there's a shoulder problem, i examined it. you need physical therapy. no, i want an mri. that's great, here's the choices, that's $1,000. it's your $1,000 to spend because that's the way the benefit assignments work. benefits show clearly the want goes back to need very, very quickly. >> you mean need goes back to want? >> whatever.

>> the thousand bucks makes them say i'll do physical therapy. >> they don't need it, just wanted it. >> it makes them opt out. >> yes, it changes the balance between what want is and what need is. >> let's say, making this up here, let's say that person is not a person of great means, and they say, $1,000, are you kidding? i can't afford that. that's my rent or whatever. i'm not going to. i'll go with the physical therapy. six months later, thing are not well, there's an mri, and wow, man, if he had that six months ago, we could have seen the problem was x instead of y, and it would have been better to have that mri six months ago. >> that's why we have evidence-based medicine and guidelines so although nothing is perfect, no one is treated differently because of what they afford or cannot afford. >> what's interesting is that in that scenario, he really did

need the mri, and his outcome was harmed because he didn't get it because you asked to pay $1,000, but in the scenario the physical therapy works, it's a waste of money. >> i can answer that, but i'm taking up too much of the stage. there's means testing of what they with afford. those are the plans that make sure that the amount that anyone pays in any year is proportion to their income. >> i just want to cop trass two -- contrast two examples, the mri and the shoulder and then the hospital readmissions. the hospital readmissions has the future that nobody is better off by using the care if you prevent it. the mri says maybe it's valuable or maybe it's not. whenever the president did a town hall about health care, the first question asked is the

equivalent of the mri on the shoulder. it's if your mother were 88 and needed an expensive chemotherapy, do you want her to get it and so on. what most of the analysts or at least what i think is that when i said that we were overspending a third to a half, i think approximately a third to the half is closer to the readmission to the hospital and not the mri on the shoulder and that our first priority is to get rid of the third to a half. once we've done that, there is then this issue about the mri on the shoulder, the chemotherapy on the 88-year-old. as a society, we were unwilling to deal with that. that's what the death panels were about in august of 2009, and i think the charitable interpretation is that people were saying don't confront me with that question until you've figured out how you are going to get rid of the readmission. >> in dollar-wise, what costs more?

the admission issues or mri? >> readmission is much, much more. another example, rates of imaging in the medicare population has not changed. they tripled in the past decade. we had no sense they were too low a decade ago. we have no sense we're doing the right number now. if you look, you say, okay, i see the patient once a month. rather than any real sense about what's the right number, are you killing the patient by too many images? where the vast bulk of money, wasted money is i think in the stuff that you could eliminate and people could be better off. >> dr. aptos? >> you know, every health service has a probability of being useful, ranges from 0%-100%. some are obvious, most of them, very few are obvious, most of

them you are not sure about. one of the things that doesn't happen in the doctor's office is a frank discussion with a patient about what's the likelihood that that test is actually going to reveal anything? part of it is that a lot of patients come roaring in with someone else is paying for it, so i want the mri. some of it is that the doctor's worried about going to the next patient. some of it is that the doctor hadn't really thought about it and never gives patients any choices, so we've got problems in the way health care is delivered that make this problem very difficult to solve, and you can't solve it top down. we need special societies, medical schools to get with it and recognize that it's a broader, psychological, a sociological issue than the mechanics of health care.

>> you mean, the discussion that goes something like this with dr. galvin's patients. mr. smith, you can get the mri. this is what it costs you, personally, out of your pocket, and frankly, studies show that an mri is only necessary in this kind of injury 5% of the time. is there a chance the mri will help? sure. but there's a 95% chance it does nothing, and you forked over money for nothing. you mean that conversation? >> right. there's at least one physician in the country who does this, and then if the patient says, well, i guess i won't do it, then you have to get the patient to sign a note that says this has been explained to me and i agree because of course the legal system then could cause a problem. >> i would have that same conversation, but start it by saying, mr. smith, you're going to be okay, and you explain to him and here's what happened to your shoulder, and i think good

physicians do this. you take out a model and say this is what's going on. now, at the end of the day i don't believe you need an mri. the experts don't believe you need one, ect.. i think the right conversation in the right way. >> maybe it's cancer. maybe that's what's going on with my shoulder. >> there's an interesting thing about cancer. >> what do you say to the patient? >> anything's possible, but it's not likely, and so i would just say there's no reason to believe that that's possible, and you would try to talk to the person. again, i think that's why i like that little price there. >> yeah. >> they absolutely have the right to an mr, but there's no way that kind of an insurance pool should have to pay for something that unnecessary that's outside of clinical guidelines and evidence. >> now let's talk about men and prostates. >> men with localized prostate cancer where in most cases it grows slowly and you don't need to do anything, but you can do

surgery and radiation and so on. surgeons and radiologists are aggressive saying we have to radiate it or take it out. when you give patients ology the information, forget about price, when you just give them the information, show them testimonials from men and families and so on, people choose to be less aggressive than their doctors. they say, why don't i wait to see if it gets worse. i don't have to do this right now. the price would up that further, but, in fact, a lot of this people are knowing things. >> patient's pain thresholds are lower than the surgeon's. [laughter] >> you mean they will opt for -- >> it's obviously them getting sliced up and they really understand, they opt for the less enviesive. it's decision support, and you talk about that in your book, but i think that's the advance that you really do need to do,

and one thing that joe said i want to speak in defense of primary care physicians because i am one, it really is the way that primary care physicians are paid. the fact that they have so little time to spend with patients, the fact there are not many of them anymore, i think the bill in a min ma'am way tried to do something about it, and it did, but if we are going to reconstruct the system, aco, not aco, you need a strong base of primary care physicians paid in the right way to have those exact conversations with parents. >> well, let's see, there's a question here. not sure i get that, do you guys get that? i think guidelines, talking about evidence-based medicine. i get this now. this is a great question. you're in the room, dr. galvin, we'll start with you. how much of what your advising

is based on your personal experience as a physician? you know, what happened to you yesterday, 15 years ago, and how much is based on studies you read that say someone is presented with this, this treatment usually works. >> you know, look, it's usually a come by in this combination. it's a great question about guidelines. ..

you simply don't have and secondly patients are diverse. now we call it a genomics and personalized madison as something we've always known. so i think we have to follow guidelines that still allow professionalism and discretion and that's the balance we a defined. estimate is that possible to say follow the guidelines and have discretion? on and goes a little bit contradictory? >> guidelines are guidelines. they are not strict rules you must do this you may not do that and this is the tradition of modern medicine. this isn't a new idea. the specialty societies create the guidelines and continuing education and so on triune to keep up with changes in technology it's a good thing to do. >> gentlemen, thank you so much. this is been an exciting and informative discussion thank you. [applause]

author and researcher charles murray. >> george culberson, chairman and ceo of the kaiser permanente. we also have jonathan pullen, president clinical physician services and chief medical officer and ceo and president of aetna. >> and good morning. how were you doing? it's a great pleasure to be here i am going to talk a little bit about health care reform issues and the issues we are facing in this country today. starting with the fact health care in this country is consuming a massive amount of

resources. he was health care consume $2.7 trillion of revenue last year. so the fastest-growing part of the economy. to put it in perspective by itself, the american health care economy is larger than the total economy of every other country in the world except china, japan and india and germany. as we spend more money on health care the of the other countries spend on everything they do. to put it in a different perspective, the average premium in this country right now for a family, kaiser family foundation research, is $14,000. a full-time worker who earns the minimum wage in this country makes $14,000, sweet to the point the full-time worker spending all of their money on health care will not be able to pay their premiums next year. to put it in another perspective, the complete salary and benefits for a system

engineer in bangalore is $12,000. so we clearly have an affordable issue and cost issue with american healthcare. we need health care reform in america because we need much more affordable care. so what should health care reform look like? health care reform to be done well has to have four elements to it. one of them is coverage. we are the only industrialized country that doesn't cover everyone. we need to do that. we need to fix care. there shouldn't be 1.7 million people a year getting infections in hospitals. we need safe care, better care, more effective care, have as many people dying in hospitals and half as many people who need heart transplants and we can do that with better care. we need to fix the cost of care and i will return to that in the second. but if we have half as many transplants that's going to bring down the cost of care, and we need to improve population

health. if we leave health of the equation, we are making a huge mistake. we need to do this in a strategically. we need to focus attention on achieving affordability by making the care better and a lot smarter. when we look at the focus opportunities, the first focus opportunity that is obvious is 75% of the cost of care come from people with chronic conditions. only 25% come from acute conditions. as we were talking about the various costs of cancer care and the prior conversation. cancer care is less than 5% of the total health care dollars if we eliminate breast cancer as a disease we would save less than 3% of the total health care dollars, and when you will get diabetes, diabetics consume 32% of the spin of medicare. the opportunity if we are going to be thinking about this in an intelligent way is not on those very few high-cost things, it is on the vast number of people in

the country who have chronic conditions and utilize a lot of care. we also need to look at who is replacing health care. it's not an even distribution. 1% is about 30% of the cost and those people spend a lot of money on care, and then 10% of the population is about 80% of the cost and that is a huge opportunity because if we can focus on that 10% and intervene appropriate ways to keep them from moving down the care continuum to the 1% category, we can save a lot of money. so we need to think about this systematically and strategically and not just assume we're going to continue spending the same rates and the same ways delivering care the same way. we need to focus on better care. we also need to look at prices of care in america. this is the will of congress and going to share some places from other countries. we have the highest unit prices for care in the world.

overwhelmingly higher than anyplace else in the world the factor of two or three. we pay more for each piece of care than anybody in the world. we have an office visit in canada, the doctor gets paid $40 they charge $41 they lose their license to practice in canada. in the u.s. an office visit is anywhere from 60 to $150. if you get physician fees for normal delivery of a doctorate in canada gets the $500. doctor in france, more than twice that, but in the u.s., the number is triple and quadruple the amount doctors could place any in the world for the same procedure. if you look askance and imaging fees', one of the bizarre things in this country is we are talking about rationing access to scams when we are paying two or three times as much per scan than anybody else in the world for this and equipment, technology and the same outcome

rationing before re-engineering and pricing is an absurd strategy to really get great opportunity and if you look at the price continue in the u.s. there's more than enough range an existing prices to make the care affordable if we move the prices further down the existing range. we don't have to have new price levels for care we just need to get it into the right price range. ct scans the same kind of destruction, two or three times as much as anybody else in the care. hospital charges, one of the myths is that we hospitalize people too much if to many hospital beds and to much hospital care in the u.s. the truth is we get fewer hospital beds than anyone, fewer admissions than anyone, shorter lengths of stay and the highest price per day of anyone in the world so the hospital costs are higher than the rest of the world and there's not one country in europe the charges more than a thousand dollars a day for a hospital stay and

there isn't one state in the u.s. where the average is less than three so if we're spending three times as much per day that's why health care costs more in the u.s.. bypass surgery is particularly interesting. incredibly important surgery, very important, has agreed outcome when you look at the pricing on that surgery, most of europe is charging had a very low number. no one is going over 20,000, most are under ten and if you go to india, bangalore, turkey, greece hospitals having good outcome surgery doing it for five. in the u.s., the range is up to 150, and the averages quadruple the rest of the world. since surgery comes an outcome from same safety levels and different price range. when you look a drug prices of the demos the difference of drug prices because that's been talked about in congress but the same is true that point to surgeons and say we only charge

twice as much of the church four times as much, we are underpricing. not likely to use that argument but they could make that point because drug prices are also significantly higher and if we paid in this country the price is the dutch or the swiss pay for drugs we not only could fill the doughnut hole for nothing we could give seniors $50 a month of take-home pay the dues for vitamins. so prices make a difference. how important are the fees'? if we paid the same they do in canada and what we deliver the same care and office visits and scans, the same tests, same drugs, same everything, same hospital days we can take the percentage of gdp stood on this country from 18% to 12 and resolve the care issues. so what we do about that? we need the couple things. we need to start buying care by the package rather than the peace basis where there is incentives to raise the fee for

each piece to it makes little sense. multiple perverse incentives built into that model. and if we are going to continue to put these to pay for care we should do it like the french and have a flat amount and if the ct scanner wants to charge more than the $500 of the benefit to church six or seven or 15 the customer pays out of pocket and what that does is force is the market to the $500 scanners and as people in this country making a profit of three or two so that isn't going to think of the market but what we've done instead is the deductibles where we hiked the difference between the 500 to 1,000 or the $2,000 can and the consumers have no reason to go to each to replace and the providers have no reason to bring down the price of the benefit package is wrong. if we are going to be by the feet of space by fi in a reasonable way and even better thing to do is to buy care by

the package, the the package and not for care and let the caregivers do the right stuff. i would just mention the kaiser permanente in the things we've got the lead could done to bring down the number of broken bones by half for seniors and all six caregivers and three of them there is no bill that we could charge if we were going to charge something. the we are prepared to submit to use the resources and not have to be delivering care and dictated fees and i'm going to close with this. we also need to improve health. we have a population that is increasingly overweight come increasingly inactive but we have chronic conditions growing every single year and the primary driver of health care costs and chronic conditions and we need to improve the health of the population. i'm here to tell you that it can be done. healthy eating is important. we need to move in the directions of getting our kids to eat better and societies to

eat better and healthier food, but we also need is a collectivity and physical activity is the sweet spot. and walking is our very best hope and best strategy. if as a society what we can do to make this population of the year, we need to look to walking as an outcome, scandinavian countries have gone from finland, one from the sltt police will be in europe to the most of the in a decade by getting physical activity levels and to their world but the walking is the best strategy as the most accessible thing to do. you can walk anywhere. it's the most likely to the ku likely to succeed because it works and the chemicals generated by walking or pleasurable and then your of chemicals by dieting are not pleasurable. when you're swimming upstream against merrill chemicals it is a fast stream so the benefits of walking have huge value. when you walk, walking actually

prevents and manages diabetes, heart disease and stroke, it prevents and treats depression and exciting, helps manage asthma and actually lowers the rate of a couple of cancers and you don't have to walk for hours a day. this isn't like the old days, no pay and no game and you need to run. booking by itself creates all these benefits and basically walking 30 minutes a day five days a week can cut the new cases of diabetes in half. we could save medicare if we could cut the cases of these in half, and losing 10 pounds as well cut it by nearly two-thirds. and you can see some of the data, they're really good news and the thing that makes the strategy even more practical, more functional is that the new science so shows you can do the

30 days in 15 minutes. it functions better when we walked, but the biochemistry of the body is better when we walk. everything about it is more functional when the body gets up instead of being an art and the 215, one in the morning, one am i, one at noon if you break the data into the 50 minutes for the walking you can get the benefit from walking. so i'm going to -- so we need a national agenda for walking, and we need our kids to walk, school buses, we need our cities to be walking friendly and the work places to be walking friendly and encourage workers to walk, walking has incredible benefits and it is the only logical thing we can do that actually will change population health in any big way that we can get our mind behind as a society. so i'm going to close with we need affordable health care in this country. we can't afford to be on the peace we are on and we need to make the care affordable by having better care.

it also need to step forward and for the first time in the history of health reform in the country look at creating a price competitive care. people think that the care fees are absolutely off the table whatever to any health care reform agenda that and people believe there are some inherent legitimacies to the prices. there is no inherent legitimacy except the prices from the multiple care organizations. i know the process. every caregiver knows the process of every caregiver now has half a dozen different prices depending on the pay and the patient. there is no inherent legitimacy to because. thank you very much. [applause]

>> will george walks back to his seat, we would love to get the perspective of mark on bending the cost curve. >> good morning who. i have three headlines for you and i will spend a couple of minutes on each. the first headline as health care reform didn't happen to the industry. it was absolutely necessary. secondly, the affordable care act is a reasonably good approach to creating market based access to health care insurance not necessarily the health care, and third and probably more importantly is the affordable care at is quite frankly an action forcing evin to change the shape of the industry going forward. let's talk about the first. the small group in individual markets in the united states

have an extra will decline for the last 15 years. more employers and individuals have dropped insurance and the cost has risen dramatically over that time. so there was no other way to impact those markets unless we reform them. as a matter of fact, with the underpayments of medicare and medicaid, and the cost shifting going on as well as the decline of the small group and individual markets, the large group employer based market was in trouble as well. it just didn't know it yet. $84 billion a year as the cost shifted for medicare and medicaid on the back of employers who pay for insurance. and individuals who pay part of their premiums for their insurance. so the market needed to be changed and as a matter of fact, aetna, back in 2005, came up with what was then considered an insane notion of having an individual coverage requirement and calling for it across the industry. and in 2006 came out with a

ten-point plan calling transforming healthcare in america which has been a blueprint that we have been putting forward to the administration, both administrations and congress for the last six years. so that leads us to the affordable care act, which we believe to be a good market based approach for providing access to health insurance. it does nothing to address quality and affordability. and if you saw the news this morning on medicare and the changes on medicare, while we change the financing of the health care system, unless we get the underpinnings of the quality of portability will still be on affordable. the cost would be shifted to americans. as a matter of fact in this country over the last five years, more than half, almost half of the increase in health care costs to employers has been shifted to employees through

both the reduction of benefits and the increase in the premium out-of-pocket that they pay. the employee trends are currently running at 31% year over year for the health care costs in the united states. so more of that will continue unless we get the quality and affordability. so, we believe that the affordable care act must now focus on the quality of portability and we believe the action forcing event is its bringing insurers and providers together in unique ways to create whatever version you want to call with of the accountable care organization. now if you have seen one aco, you might have seen one aco. they are very loosely defined as you know the rates were released last week we are still poring through them. if you want to see some interesting video go out on youtube and look at the avatar videos around the accountable care organizations for hospital executives talking to the consultant and house look sick of talking to physicians come

still ill-defined, but aetna and other organizations like ours across the united states is very active in trying to find the opportunity to create a different level of relationship with the provided community. so, for example, why negotiate when we can share intellectual property around managing risks and doing capitation or we will call it a global payments, how do we work together to help with data, intellectual property around risk-management, nurse case management and health information exchanges and technology to be able to provide the data to mss over time. >> would be unique and a potential that we could have not a health plan man on an exchange in 2014 or 15, pick your date, but it could be a hospital system powered by the health information exchange. redefining the notion of keeping

what you have where you get to keep your hospital and physician instead of keeping your health insurance plan. would redefine the health insurance model where we would no longer be negotiating with providers but partnering with them much like intel and insight to use the notion and we wouldn't be selling members, we would be converting patients to their local health system and to their physicians. the problem -- and this is where the affordable care act doesn't go far enough, is we have increased access to health insurance but we haven't increased access to health care. as george noted eloquently in the slide managing the chronic care is a very important aspect where most of the costs are. however we are short 160,000 primary-care physicians over the next decade with little hope of catching up. so how do we design the system through the patient centered medical homes or count organizations to provide the

care necessary to individuals who need access to health care once we turn on the spigot and place 30 million more people into the system? if you think we have a two-tiered health care system now, if we do not address the issue of capacity, there will be people who will pay handsomely to get to the front line to get access to health care paid and by the way they will get it. so we need to do a lot in the way of capacity and the organization of health care delivery to make a change. the second piece of art of the affordable care act is to have payment reform so that we can put the proper incentives in place where we can have indeed a win-win situation and we are experiencing this chris the country. finally, in my last point, for 80% of the people that use the health care system today they use a commodity like service and use of prices that george noted

on his slide. another example in the city of san francisco a routine colonoscopy costs anywhere from 1,000 to hundred $50 to $7,300. now i'm not sure when you get for 7300 dollar kowalski. [laughter] media movie? [laughter] but it shouldn't be that way. so what we need is complete transparency in the system. think of open table for restaurants, think of open table for physicians come for lab tests and x-rays and vaccines, flu shots. as an approach of allowing people to redefine quality as convenience for the routine services that they got. it will do more to redefine between the aco and the consumer marketplace more to redefine the shape of the system and cost structure and pricing of the

system than anything with the affordable care act contemplates today. with that i will turn it over to the next speaker. [applause] >> while dr. bertolini is coming up, we have a real opportunity here to ask questions of the panelists and so please a few questions put to congress, and submit questions and we will answer as many as we can. thank you. john? >> good morning. both previous speakers spoke to the importance of prevention and transparency and the need for that transparency yielding improvement in health care as well as the system where the incentives are aligned to produce that and i want to thank the world of congress for bringing us together to call the question on the cost curve because of what to speak this morning directly to the issue of the relationship between the

cost if we could have the first slide i want to talk specifically about the case of the billion dollar babies and help if everyone used the best evidence that exists today held a billion dollars would be saved on not to be callous about the savings, more importantly, would save the unnecessary. great distress and potential harm to babies and their families so i want to talk about why quality is the best business case, and what can occur in creating a learning system when the value is the driver and how that learning can in turn drive down the cost that was devoted to in both of the previous discussions. if you look at the top, that is a normal distribution of terms. well, where did the evidence for the term comes from? it comes from an authoritative

that may not completely the scientific it was defined at least for the western societies of the bible. it's terrific but in the days of ultra film, the marker of nine months or lunar cycles from the last minstrel. it may not be the best definition. and indeed if one looks at the normal distribution in the top brass, over the last three decades one sees the normal distribution is moving to the left from average about a little over 39 to 40 weeks back to 38 weeks and back to 37 weeks. so a normal distortion but in fact anything but normal. and in fact, if one looks at the risks for bad outcomes, the graph on the left one sees the mortalities actually decrease those as one goes to term, and so there was this question the

preterm delivery if postponed if the holding the deliveries were possible for 39 weeks result in better outcomes for the babies and their families there was some early data to that effect and so the march of dimes and american college of obstetrics and gynecology came to our organization and said if you will deliver about 220,000 babies more than the continent of australia can you put some data together, so over a three month period will get a number of hospitals with frankly representing the population of more heterogeneous than the united states population at large and look at nearly 18,000 deliveries, and in fact we found that the delivery early preterm delivery was in fact not and i will show you momentarily not the most efficient. in fact, they had early preterm that is either induction or induction resulting in c

sections at 37 weeks. there was a 400% chance greater risk of going to the newborn intensive care unit. 200% greater at 38 weeks than if one went full term 49 weeks. suggesting that we need to revise the definition of the term that there really wasn't term earlier than 39 weeks. in fact, looking at the the the what one found is the risk for the hospitalization and special newborn intensive care correlated with that early delivery because the in maturity of longs and the fetal distress resulting in more newborn intensive care units, and in fact we have to ask the question now or their potential water consequences, and certainly the nicu and it is a whole lot more expensive than a regular postpartum sort out service delivery.