save over 20% on their premiums. we're open -- [applause] we're open to doing more to help employers adopt and expand programs like this one. now, our federal government also has to step up its efforts to advance the cause of healthy living. five of the costliest illnesses and conditions, cancer, cardiovascular disease, diabetes, lung disease, and strokes can be prevented. yet only a fraction of every health care dollar goes to prevention or public health. that's starting to change with an investment we're making in prevention and wellness programs that can help us avoid diseases that harm our health and the health of our economy. as important as they are, investments in electronic records and preventive care, all the things i just

mentioned, they're just preliminary steps. they will only make a dent in the rising costs in this country. despite what some have suggested, the reason we have these spiraling costs is not simply because we've got an aging population. demographics do account for some rising costs because older, sicker societies pay more for health care than younger, healthier ones. there's nothing intrinsically wrong in us taking better care of ourselves. what accounts for the bulk of the costs is the nature of our health care delivery system itself. a system where we spend vast amounts of money on things that aren't necessarily making our people any healthier. a system that automatically equates more expensive care with better care. now a recent article in "the

new yorker" for example, showed how mcallen, texas, is spending twice as much as el paso county, twice as much, not because people in mcallen, texases -- mcallen texas, are sicker than el paso, not because they're getting better care or outcomes, it's simply because they're using more treatments. treatments that in some cases they don't really need. treatments that in some cases can actually do people harm by raising the risk of infection or medical error. the problem is, this pattern is repeating itself across america. one dartmouth study shows you're less likely -- you're no less likely to die from a heart attack and other ailments in a higher spending area than in a lower spending area. there are two main reasons for

this. the first is, a system of incentives where the more fests and services are provided, the more money we pay. and a lot of people in this room know what i'm talking about. it's a model that rewards the quantity of care rather than the quality of care. that pushes you, the doctor, to see more and more patients even if you can't spend much time with each. and gives you every incentive toed orer that extra m.r.i. or e.k.g., even if it's not necessary. the model that's taken the pursuit of medicine from a profession, a calling, to a business. that's not why you became doctors. that's not why you put in all those hours in the anatomy suite or the o.r. that's not what brings you back to a patient's bedside to check in or makes you call a loved

one of a patient to say it'll be fine. you didn't enter this profession to be bean counters around paper pushers, you entered this profession to be healers and that's what our health care system should let you be. that's what the health care system should let you be. [applause] let's start we forming the way we compensate our providers. doctors and hospitals. we need to bundle payments so you aren't paid for every single treatment you offer a patient with a chronic condition like diabetes, but

instead paid well for how you treat the overall disease. we need to create incentives for physicians to team up because we know that when that happens, it results in healthier patients. we need to give doctors bonuses for good health outcomes. we're not promoting just more treatment, but better care. we need to rethink the cost of a medical education and do more to reward student who choose to work in underserved areas instead of the more lucrative ones. [applause] that's why we're 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 aren't drowning in debt when they enter the workforce. somebody back there is drowning in debt. the second structural reform we 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 labs, the most advanced training of any nation on 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 finds its way into journals, it can take up 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, for example, found that only half of all cardiac guidelines are based on scientific evidence. half. that means doctors may be doing a bypass operation when placing a stent is equally effective or placing a stent when adjusting a patient's drug and medical management is equally effective, all of which drives up costs without improving a patient's health. one thing we need to do is figure out what works and encourage rapid implementation of what work into your practices thavepls 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, i want to clear something up here. identifying what works is not about dictating what kind of

care should be provided. it's about -- [applause] it's about providing patients and doctors with the information they need to make the best medical decisions. i have the assumption that if you have good information about what makes your patients well, that's what you're going to do. 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's why we need to build on the examples of outstanding medicine at 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 health care where deaths were dramatically

reduced with rapid response teams that monitored patients' conditions and multidisciplinary rounds with everyone from physicians to pharmacists. in places like geisinger health system in rural pennsylvania and intermountain health, where high quality health care is being provided at a cost well below the national average. these are islands of excellence we need to make the standard in our health care system. so 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 and michelle and our kids in this, we just do what you tell us to do. that's what we do. we listen to you, we trust you. that's why i will listen to you and work with you to pursue reform that works for you. [applause] together, if we take all these steps, i am convince wed can bring spending down, bring quality up, 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're going to 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. don't get too excited yet. [applause] now, i understand some doctors may feel the need to order more tests and treatments to avoid being legally vulnerable. that's a real issue. just hold on to your horses here, guys. i want to be honest with you,

i'm 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 patient safety first, how to let doctors focus on practices -- practicing medicine, how to encourage a broader use of evidence-based guidelines. i want to work with the a.m.a. to scale back the excessive defensive medicine that reinforces our current system. and shift to a system where we we are providing better care simply -- rather than simply more treatment. so this is going to be a priority for me. i know, based on your responses, it's a priority for you. i look forward to working with you, and it's going to be difficult. but all this stuff will be difficult.

all of it's going to be important. now, i know there's been a long speech, but we got more to do. the changes that i have already spoken about, all that needs to go hand in hand with other reforms. because our health care system is so complex and medicine is always evolving, we need a way to continually evaluate how to eliminate waste, reduce cost and improve quality. that's why i'm 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 roughly $200 billion in savings that never made it into law. these recommendations have now been incorporated into a broader reform agenda, but we need to fast track -- fast

track the proposals in the future so we don't miss another opportunity to save billions of dollars. as we gain more information about what works and doesn't work in our health care system. as we seek to contain the cost of health care, we also have to ensure that every american can get coverage they can afford. [applause] we must do so in part because it's in all of our economic interests. each time an uninsured american steps food into an emergency room with no way to reimburse the hospital for care, the cost is handed other to hever american family as a bill of about $1,000. it's reflected in higher taxes, higher premiums and higher health care costs. it's a hidden tax, a hidden bill that will be cut as we insure all americans weasms insure every young and healthy

american, it will spread out risk for insurance companies, further reducing costs for everyone. alongside these economic argets, there's another, more powerful one. it is simply this. we are not a nation that accepts nearly 46 million uninsured men, women, and children. we are not a nation that -- that lets hard working families go without coverage or turns its back on those in need. we're a nation that cares for its citizens. we look out for one another. that's what makes us the united states of america, we need that get this done. -- 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's working in our health care system so just in case you didn't catch it the first time, let me repeat. if you like your health care system and your doctor, the only thing reform will mean to you is your health care will cost less. if anyone says otherwise, they are either trying to mislead you or don't have their facts straight. now, if you don't like your health care coverage or you don't have any insurance at all, you'll have a chance under what we've proposed to take part in what we're calling a health insurance exchange. this exchange will allow you to one stop shop for a health care plan, compare benefits and prices, and choose a plan that's best for you and your family. the same way, by the way that 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. again, this is for people who aren't happy with their current plan. if you like what you're getting, keep it. nobody's forcing you to shift. but if you're not, this gives you some new options. and i believe one of these options needs to be a public option. 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. now, -- [applause] now i know there's concern

about a public option, even within this organization that's healthy debate about it. in particular, i understand that you're concerned that today's medicare rate which many of you already feel are too low, will be applied broadly in a way that mean ours cost savings are coming off your books -- your backs. these are legitimate concerns. but they're ones i believe can be overcome. as i stated earlier, the funds we propose reward best practices, not on the current piecework reimbursement. with what we seek is more stability and a health care system on a sounder financial footing. the fact is, these reforms need to take place regardless of whether there's a public option or not. with reform, we will ensure that you are being reimbursed

in a thoughtful way that's tied to patient outcome instead of relying on yearly gaucheuations about the sustainable growth rate formula that's based on politics and the immediate state of the federal budget in any given year. [applause] i just want to point out, the alternatives to such reform is a world where health care costs grow at an unsustainable rate and if you don't think that's going to threaten your reimbursements and the stability of the health care system, you haven't been paying attention. so the public option is not your enemy, it is your friend, i believe. let me also say that -- let me also address an illegitimate

concern being put forward by those who are claiming that a public option is somehow a trojan horse for a single payer system. i'll be honest, there are countries where a single payer system works pretty well. but i believe, and i've taken some flak from members of my own party for this belief, that it's important for our reform efforts to build on our traditions here in the united states. so when you hear the naysayers claim i'm trying to bring about government-run health care, know this -- they're not telling the truth. what i am trying to do -- [applause] what i am trying to do, and what a public option will help do, is put affordable health care within reach for millions of americans and to help ensure that everyone can afford the cost of a 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's because i'm confidence in our ability to give people the ability to get insurance at an affordable rate that i'm open to a system where every american bears responsibility for owning health insurance, long as we provide -- [applause] so long as we provide a hardship waiver for those who still can't afford it 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 can't 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's some good news. insurance companies have expressed support for the idea of covering the uninsured and they certainly are in favor of a mandate. i welcome their willingness to engage constructively in the reform debate. i'm glad they're at the table. but what i refuse to do is simply create a system where insurance companies suddenly have a whole bunch more customers on uncle sam's dime but still fail to meet their responsibilities. [applause] we're not going to do that. let me give you an example of what i'm talking about. we need to end the practice of denying coverage of this e-- on

the basis of preexisting conditions. [applause] the days of cherry picking who to cover and who to deny, those days are over. i know you see it in your practices and how incredibly painful and frustrating it is, you want to give somebody care you find out the insurance companies are wiggling out of paying, this is personal for me also. i've told this story before. i'll never forget watching my own mother as she fought cancer in her final days, spending time worrying whether her insurer would claim her illness was a preexisting condition so it could get out of providing coverage. changing the attitude toward preexisting condition is the least we can do for my mother and every mother, father, son,

or daughter, we need to put health care in reach for millions of americans. now, even if we accept all of thee economic and moral reasons for providing affordable coverage to all americans, there's no denying that exup and downing 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 deficit. i've said that -- i've set down a rule for my staff or my team and i've said this to congress. health care reform must be and will be deficit neutral in the

next decade. now there are already voices saying the numbers don't add up. they're wrong. here's why. making health care affordable for all americans will cost somewhere on the order of $1 trillion over the next 10 years. that's real money, even in washington. but remember, that's less than we're 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 lower 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're calling a health reserve fund. over half of that amount, more than $300 billion, will come from raising revenue by doing things like modestly limiting the tax deductions the wealthiest americans can take to the same level it was at the end of the reagan years. same level it was under ronald reagan. some are concerned this will dramatically reduce charitable giving, for example, but statistics show that's not true. and the best thing for our charities is the stronger economy that we will build with health care reform. but we can't just raise revenues. we're also going to have to make spending cuts, in part by examining inefficiencies in our current medicare program. there will be robust debates about where the cuts should be made and i welcome that debate.

here's where i think the cuts should be made. we should end overpayments to medicare advantage. [applause] today, we're paying medicare advantage plans much more than we pay for traditional medicare services. this is a great deal for insurance companies. it's 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 doesn't 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. second, we need to use medicare reimbursements to reduce preventable hospital readmissions. right now, almost 20% of medicare patients discharged from hospitals are readmitted within a 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 a way that boosts profit bus drives up costs for everybody else that will save us $25 billion over the next decade. third, we need to introduss generic biologic drug into the marketplace. [applause] these are drugs used to treat illnesses like anemia, but right now there's no pathway at the f.d.a. for approving generic versions of the drugs.

creating such a pathway will save us billions of dollars. we can save another roughly $30 billion by getting a better deal for our senior -- poor seniors while asking well off seniors to pay a little more for their drugs. that's bulk of what's in the health reserve fund. i've 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 advances 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 uninsured people. i know hospitals rely on these payments now, legitimately, because of a large number of uninsured patients they