there are two main reasons for this. the first is a system of incentives where the more tests and services are provided, the more money we pay. . >> that is not why you became doctors. that is not why you put in all those hours in the anatomy sweet

or in the operating room. that is not what brings you back to a patient's bedside to check- in or makes you call a loved one of the patient to say it will be fine. you did not enter this profession to be been counters and paper pushers. you entered this profession to be healers. that is what our health-care system should let you be. [applause] that's what this health care system should let you be. [applause] that starts with reforming the way we compensate our providers. doctors and hospitals.

we need to bundle payments so that you are not paid for every single treatment you offer a patient with a chronic condition like diabetes, but instead pay well for how you treat the overall disease. we need to create incentives for physicians to team up because we know when that happens, it results and a healthier patient. we need to give doctors bonuses for good health outcomes. so we're not just promoting more treatment, but better care. we need to rethink the cost of a medical education and do more to reward medical students who choose a career as a primary care physician who choose to work in underserved areas and set of the more lucrative paths. [applause] that is why we are making a substantial investment in the

national health service corps that will make medical training more affordable for primary-care doctors and nurse practitioners so they are not drowning in debt when they enter the workforce. [applause] somebody back there is drowning in debt. [laughter] the second structural reform need to make is to improve the quality of medical information making its way to doctors and patients. we have the best medical schools, the most sophisticated laboratories, the most advanced training of any nation in the globe. yet we're not doing a very good job harnessing our collective knowledge and experience on behalf of better medicine. less than 1% of our health care spending goes to examining what treatments are most effective. less than 1%. even when that information find its way into journals, it can take up to 17 years to find its

way to an exam room or operating table. as a result, too many doctors and patients are making decisions without the benefit of the latest research. a recent study found only half of all card the guidelines are based on scientific evidence. half. that means doctors may be doing a bypass operation when placing a stint is equally effective or placing a stand when a rare -- or placing a stand when adjusting the patients management is equally effective. all of which drives up costs without improving patients' health. one thing we need to do is figure out what works and encourage rapid implementation of what works into your practices. that is why we're making a major investment in research to identify the best treatments for a variety of ailments and conditions. [applause] let me be clear -- identifying

what works is not about dictating what kind of care should be provided. [applause] it is about providing patients and doctors with the impression they need -- with the information they need to make the best medical decisions. i have the assumption that if you have good information about what make sure patients well, that is what you are going to do. [applause] i have confidence in that. we're not going to need to force you to do it, we just need to make sure you've got the best information available. still, even when we do know what works, we are often not making the most of it. that is why we need to build on the examples of outstanding madison in places like the cincinnati children's hospital where the quality of care for cystic fibrosis patients shot up after the hospital began incorporating suggestions from parents.

in places like the tallahassee memorial healthcare where deaths were dramatically reduced with rapid response teams that monitor patients' conditions and multi-disciplinary rounds with everyone from physicians to pharmacists. in places like guys in our health systems in raleigh -- in rural perils -- and roll pennsylvania were high quality care is being provided at a cost well below the national average. these are islands of excellence and we need to make the standard in our health-care system. replicating best practices, incentivizing excellence, closing cost disparities, any legislation sent to my desk that does not achieve these goals in my mind does not earn the title of reform. but my signature on a bill is not enough.

i need your help, doctors. because to most americans, you are the health care system. the fact is americans, and i include myself, michelle, and our kids, we just do what you tell us to do. [laughter] that's what we do. we listen to you, we trust you. that is why i will listen to you and work with you to pursue reform that works for you. [applause] together, if we take all of these steps, i am convinced we

can bring spending down, bring quality up, we can save hundreds of billions of dollars on health care costs, while making our health care system work better for patients and doctors alike. when we align the interests of patients and doctors, then we will be in a good place. now, i recognize that it will be hard to make some of these changes if doctors feel like they're constantly looking over their shoulders for fear of lawsuits. i recognize that. [applause] don't get too excited. [applause] i understand some doctors may feel the need to order more tests and treatments to avoid being legally vulnerable. that is a real issue.

hold on to your forces. [laughter] i want to be honest. i am not advocating caps on malpractice awards. which i believe, i personally believe can be unfair to people who have been wrongfully harmed. but i do think we need to explore a range of ideas about how to put patients safety first, how to let doctors focus on practicing medicine, how to encourage the broader use of evidence test based guidelines. i want to work with the ama so we can scale back the defensive aspect of medicine at reinforces our current system and shift to a system where we are providing better care simply -- rather than simply more treatment. this will be a priority for me. and i know, based on your response is, is a priority for you.

[laughter] i look forward to working with you and it is going to be difficult. all of this is going to be difficult. all of it is going to be important. i know this has been a long speech, but we have more to do. the changes i have spoken about will all need to go hand in hand with other reforms. our health care system is so complex and medicine is always evolving, we need a way to continually evaluate how we can eliminate waste, reduce costs, and improve quality. that is why i am open to expanding the role of a commission created by a republican congress called the medicare payment advisory commission which happens to include a number of physicians on the commission. in recent years, this commission proposed $200 billion in savings that never made it into law. these recommendations have now been incorporated into our

broader reform agenda, but we need to fast-track their proposals in the future so that we don't miss another opportunity to save billions of dollars. as we gain more information about what works and what does not work in our health care system, as we seek to contain the cost of health care, we also have to insure every american can get coverage they can afford. [applause] we must do so in part because it is in all our economic interests. each time and an injured american steps foot into an emergency room, with no way to reimburse hospitals for care, the cost is handed over to every american family as a bill of about $1,000. it is reflected in higher taxes, higher premiums, and higher health-care costs. it is a hidden tax, a hidden

bill that will be cut as we insure all americans. as we insure every young and healthy american, it will spread out risk for insurance companies, further reducing costs for everyone. but alongside these economic arguments, there is another, more powerful one, and it is simply this -- we are not a nation accepts nearly 46 million uninsured men, women, and children. [applause] we are not a nation that lets hard-working families go without coverage or turns its back on those in need. we are a nation that cares for its citizens. we look out for one another. that is what makes us the united states of america. we need to get this done. [applause]

so we need to do a few things to provide affordable health insurance to every single american. the first thing we need to do is protect what is working in our health-care system. just in case you did not catch of the first time -- if you like your health care system and your doctor, the only thing reform will mean to you is that your health care will cost less. if anyone says otherwise, they are either trying to mislead you or they do not have their facts straight. if you do not like your health care coverage, or you don't have any insurance at all, you will have a chance under what we have proposed to take part in what we are calling a health insurance exchange. this exchange will allow you to one-stop shop for health care plan, compared benefits and prices, and choose a plan that is best for you and your family. the same way, by the way,

federal employees can do, from a postal worker to a member of congress. [applause] you will have your choice of a number of plans that offer a few different packages, but every plan would offer an affordable basic package. this is for people who are not happy with their current plan. if you like we were getting, keep it. nobody is forcing you to shift. but if you are not, this gives you some new options. and i believe one of these options need to be a public auction that will give people a broader range of choices and inject competition into the health-care market so that we can force waste out of the system and keep the insurance companies honest. [applause]

i know there is some concern about a public auction. even within this organization, there is healthy debate about it. in particular, i understand you are concerned that today's medicare rates, which many of you already feel are too low, will be applied to broadly in a way that means our cost savings are coming off your backs. these are legitimate concerns. but they are ones i believe that can be overcome. as i stated earlier, the reforms we propose to reimbursement are to reward best practices, focus on patient care, not on the current peace worked reimbursement. what we seek is more stability in a health-care system that is on a sounder financial footing. the fact is these reforms need to take place regardless of whether there is a public option

or not. with reform, we will insure you are being reimbursed in a thoughtful way that is tied to patient outcomes instead of relying on yearly negotiations about the sustainable growth rate formula that is based on politics and the immediate state of the federal budget in of it -- in any given year. [applause] and i just want to point out the alternative to such a reform is a world where health care costs grow at an unsustainable rate. if you don't think that will threaten your reimbursements and the stability of our health-care system, you have not been paying attention. so, the public auction is not your enemy. it is your friend, i believe.

let me also say -- let me address and a legitimate concern being put forward by those who are claiming that a public option is somehow a trojan horse for a single payer system. i will be honest -- there are countries racing appear system works pretty well. but i believe, and i have taken some flak from members of my own party for this belief, that it is important for our reform efforts to build on our traditions here in the united states. so when you hear naysayers' claims i am trying to bring about a government-run health care, know this -- they are not telling the truth. [applause] what i am trying to do and what a public auction will help do is put affordable health care within reach for millions of

americans. and to help insure everyone can afford the cost of health care option in our exchange, we need to provide assistance to families who need it. that way there will be no reason at all for anyone to remain uninsured. [applause] indeed, it is because i am confident in our ability to give people the ability to get insurance at an affordable rate that i am open to a system where every american irresponsibility for owning health-insurance. so long as we provide -- [applause] so long as we provide hardship waiver for those who cannot afford as we move toward the system. the same is true for employers. while i believe every business has a responsibility to provide health insurance for its workers, small businesses that cannot afford it should receive

an exemption. small-business workers and their families will be able to seek coverage in the exchange if their employer is not able to provide it. here is some good news -- insurance companies have expressed support for the idea of covering the uninsured. they certainly are in favor of a mandate. i welcome their willingness to engage constructively in the reform debate. i am glad there at the table. but what i refuse to do is simply create a system where insurance companies suddenly have a whole bunch of more customers on of sam's dime but still fail to meet their responsibilities. [applause] we are not going to do that. [applause]

let me give you an example of what i am talking about. we need to end the practice of denying coverage on the basis of pre-existing conditions. [applause] the days of cherry picking who to cover and who to deny, those days are over. [applause] i know you see it in your practices and how incredibly painful and frustrating it is. you want to give some the care and you find out the insurance companies are we going out of paying. this is personal for me also. i have told the story before. i will never forget watching my own mother as she fought cancer in her final days, worrying about whether her illness was a pre-existing condition so they get out of providing coverage. changing the current approach to pre-existing conditions is the least we can do for my mother and every other mother, father,

son, and daughter if the u.s. suffered under this practice have been paying premiums and not get care. we need to put health care within the reach for millions of americans. [applause] even if we accept all of the economic and moral reasons for providing affordable coverage to all americans, there is no denying that expanding coverage will come at a cost. at least in the short run. but it is a cost that will not, i repeat, will not add to our deficits. i have sat down -- i have set down a rule for my staff, for my

team, and i have said this to congress. health care reform must be and will be deficit-neutral in the next decade. there are already voices saying that the numbers don't add up. they are wrong. here is why. making health care affordable for all americans will cost somewhere on the order of one trillion dollars over the next 10 years. that is real money. even in washington. [laughter] but remember, that is less than we are projected to have spent on the war in iraq and also remember, failing to reform our health-care system in a way that genuinely reduces cost growth will cost us trillions of dollars more in lost economic growth and low wages. that said, let me explain how we

will cover the price tag. first, as part of the budget that was passed a few months ago, we put aside $635 billion over 10 years in what we are calling a health reserve fund. over half of that amount, more than $300 billion, will come from raising revenue by doing things like modesty limiting the tax deductions the wealthiest americans can take to the same level it was at the end of the reagan years. same level was under ronald reagan. some are concerned this will dramatically and reject dramatically reduced charitable giving, but statistics show that's not true. the best thing for our charities is a stronger economy that we will build with health care reform. but we can i just raise revenues. we will have to make spending cuts in part by examining inefficiencies in the current medicare program.

there will be robust debates about where these cuts should be made and i will come at the day. but here is where i think those cuts should be made. first, we should and over payments to medicare advantage. [applause] today, we are paying medicare advantage plans more than we pay for traditional medicare services. this is a great deal for insurance companies. it is a subsidy to insurance companies. it's not a good deal for you. it's not a good deal for the american people. by the way, it does not follow free market principles for those who are always talking about free market principles. that's why we need to introduce competitive bidding into the medicare advantage program. a program under which private insurance companies are offering

medicare coverage. that alone will save $177 billion over the next decade. just that one step. [applause] second, we need to use medicare reimbursements to reduce preventable hospital readmission. right now, almost 20% of medicare patients discharged from hospitals are readmitted within one month. often because they're not getting the comprehensive care they need. this puts people at risk and drives up costs. by changing how medicare reimburses hospitals, we can discourage them from acting in the way that boost profits but drives up costs for everyone else. that will save us $25 billion over the next decade. third, we need to introduce generic biologic drugs into the marketplace. [applause] these are drugs used to treat illnesses like anemia. right now there is no pathway at

the fda for approving generic versions of these drugs. creating a pathway would save billions of dollars. we can save another roughly $30 billion by getting a better deal for our poorest seniors while asking are well-off seniors to pay a little more for their drugs. so that is the bulk of what is and help reserve fund. i have also proposed saving another $313 billion in medicare and medicaid spending in several other ways. one way is by adjusting medicare payments to reflect new offenses and productivity gains in our economy. right now, medicare payments are rising each year by more than they should. these adjustments will create incentives for providers to deliver care more efficiently and save us roughly $109 billion in the process. another way we can achieve savings is by reducing payments to hospitals for treating the uninsured people.

i know hospitals rely on these payments now legitimately because of the large number of uninsured patients that they treat. but if we put in a system where people have coverage and the number of uninsured people goes down with our reforms, the amount we pay hospitals to treat uninsured people should go down as well. reducing these payments gradually as more and more people have coverage will say this over $106 billion. we will make sure the difference goes to the hospitals that need it most. we can also save about $75 billion through more efficient purchasing of prescription drugs. [applause] we can save about $1 billion by rooting out waste, abuse, and fraud threat to health care system so no one is charging more for a service that it's worth or charging a dime for his service they did not provide. let me be clear -- i am committed to making these cuts and a way that protects our

senior citizens. in fact, these proposals will extend the life of the medicare trust fund by seven years and reduced premiums for medicare beneficiaries are roughly $43 billion over the next 10 years. i am working with the aarp to uphold the commit an. for those of you who took out your pencil and paper, all together, these savings mean we have put about $950 billion on the table. that does not count some of the long-term savings we think will come about from reform from medical i.t, for example. so that stuff is not score will in congressional jargon. the congressional budget office will not count that as savings. so we are saving -- we are setting that aside. we think it will come, but suffer from that, we put $950 billion on the table.

taking us almost all the way to covering the full cost of health care reform. in the weeks and months ahead, i look forward to working with congress to make up the difference so that health care reform is fully paid for in a real, accountable way. let me add that this does not count longer term savings. i just want to repeat that. by insisting the reforms we are introducing our deficit-neutral over the next decade, and by making the reforms that will help slow the growth rate of health care costs over the coming decades, ending the curve, we can look forward to faster economic growth, higher living standards and falling instead of rising budget deficits. let me wrap up by saying this -- and that people are cynical whether we can do this or not. i know the will be disagreements about how to proceed in the days ahead. there is probably healthy debate within the