never been more excited about this whole world that we have been discussing, the smart mobility, the tremendous change that lay ahead of us. i wake up every morning so excited because i believe any company's purpose is to make peoples lives better. if it is not doing that, it probably should not exist. that has to be reinterpreted through every era we live in. i look back to the model t. prior to the model t, most people in this country did not travel more than 25 miles from home in their entire lifetime. all of a sudden, the model t enabled them to choose where they lived, worked, and play. it changed everything. then we had things like, obviously, ambulances and police cars and fire trucks. here we are at the threshold of a different age and so the challenge is, how do we reinterpret that heritage for this new era and make people's lives better in this new era? that is so exciting.

i've been around a long time, but to me it is the most exciting point because strategically, we have never been at a point like this. >> let's assume you stay, but you have no interest in serving full-time in government or anything like that? bill: i absolutely love what i'm doing. i feel if we do this right, we can truly make people's lives better around the world. to me, that is a very compelling thing. david: you are fourth-generation and the company -- virtually no fortune companies where they're chairman of the board, publically traded company. what about the fifth generation? what about your own children? bill: they are interested and nieces and nephews that are interested. they have to be qualified. this is not a family employment office. i work closely with them to make sure that the right credentials, both academically and they start at the appropriate place of the

company and work their tail off and they volunteer for all of the jobs nobody else wants. they have to really want to do it and they have to earn it. if they show they can do that, then that is great. you know, this is a tough world. they have to be as good or better than everybody else. david: in the detroit area, you've spent time trying to revitalize detroit. what do you think the progress is? bill: i am pleased. i am old enough to remember the riots in the late 1960's. i remember flying over and seeing the city literally on fire. i remember my dad -- he owned the detroit lions. and of the season tickets were safe and it was going to burn. at the time, there were no computers. if a ticket earned, it was like burning a dollar because there was no backup. he got in the van and got a couple of the players to meet him down there. great story. this gang came around, recognize d my dad and a couple of

players, they were carrying guns and they said, we will help you. they loaded all of the season tickets into the van. my dad gave them all tickets to games. they walked them to the border and the national guard was on every overpass. he went 100 miles per hour, breaking all of the laws to get back home with the tickets. i remember that. that era changed everything. from that point on, the city was in a many, many year decline. has a long way to go. school systems still not close to where it needs to be. having said that, there is tremendous energy. my son lives in the city. he never would have lived -- he is 25, he and his friends all live in the city. they never would have five years ago. i have a venture capital firm that i started. it is in the city. every week, new bars and restaurants opening up. i am more hopeful now about the city than i have been.

so when we built ford field 15 years ago, all of the advice i got from all of the business people was, you're out of your mind to build this in the city of detroit. the fans won't come. they won't feel safe. there's nothing for them to do before or after the game. you know, you need to build it up in the northern suburbs where the money is. i kind of gulped. the mayor at the time, dennis archer, he was a terrific man and i worked it out. it is been a great thing. for the early years, there was an element of what i described. david: was it hard to sell the naming rights for that stadium? [laughter] bill: that worked. it is ford field. funny how that works out. david: what would you like to be your legacy? if you look back and people openly say, here is what he did

with his life and career -- what would you like people to say about it? bill: i don't spend any time thinking about it. to me, it feels pretentious to think about that. i don't know what my legacy is. i hope people will say he treated people well and he cared about the company and he cared about the companies. david: thank you very much. bill: thank you. david: let me give you a gift. hold on. [applause] [background chatter]

>> keeping an eye on hurricane matthew, said to strike the u.s. tomorrow. the florida representative has a message. >> i am checking in. i want to make sure that everybody is taking precautions. if you need to get to a shelter, get there now. ratonis one at west boca high school and the red cross is doing a great job. for allgo to my website of the handy numbers you may need. and if you want to sign up for text emergency texts, you can 88877.prepares to thank you. >> and a view from astronaut

market kelly. -- mark kelly. a state of emergency has been declared for florida and the southeast. it authorizes homeland security and fema to coordinate relief efforts, necessitated the storm. it is a category four storm. in washington at the pentagon today, secretary peter cook updating reporters on hurricane matthew, the disaster relief support in the caribbean, and talked about mobilization operations in florida, georgia, south carolina and north carolina. you oni wanted to update hurricane matthew. tickets a carter has received briefings -- secretary carter has received briefings and will be tracking the storm in the days ahead.

in response to the impact in the caribbean and a request for international development, secretary carter has granted approval to expand up to $11 funds tof humanitarian provide support, including transportation support in the caribbean, as well as airfield operations support. and as was pointed out yesterday in a briefing with you, the task force will oversee military efforts in haiti. the team arrived in port-au-prince yesterday. meanwhile, north, is -- north -com is working with others to toure that dod can respond provide assistance as needed for the east coast, as well as the bahamas. in addition, they have

identified four facilities for installation bases, that will provide staging for trucks and other equipment and personnel. they are north auxiliary filled north of charleston. albany marine corps base in georgia, as well as fort bragg in north carolina. they continue to take prudent measures to protect people. and as you know, the national guard trains to make sure that they are ready to protect and assist citizens and disasters and emergencies. the national guard are prepared for mobilization and all 4500 guardsmen have been mobilized by governors in preparation for hurricane matthew. >> congress is out, but members and staff aides were briefed andy by noaa, the red cross

fema on hurricane matthew. aides were told that parts of florida could be without power for more than two weeks. they are worried about fuel. we will keep you posted as we get more information on the storm. >> the second presidential debate is sunday evening at washington university in st. louis, missouri. for alive coverage preview. at 9:00 p.m., live coverage of the debate itself, followed by viewer reaction. the second presidential debate, live on c-span. anytime on-demand at c-span.org. and you can listen live on the free c-span radio app. any of the vice presidential debate, go to c-span.org. on the debate page, watch the entire debate, choosing between

the split screen or the switch camera option. you can go to specific questions and answers, fighting the content you want easily. and use the video clipping tool to create clips to share on social media. on your desktop and tablet for the vice presidential debate. >> health care experts and executives discussed the successes and failures of the affordable care act and potential policy goals of the next administration and congress. this is about two hours and 20 minutes.

nancy: good afternoon. good afternoon. i'm nancy chockly. i am delighted to welcome all of you here today to discuss the future of health care in america. we have an incredible panel of business and policy experts who are shaping the future of health care, but doing it in different roles and with different perspectives. we believe that is really how you can transform health care in america. we believe it brings the evidence together and leaders together with different perspectives. part of the diversity of perspectives here today is what sits out in the room with all of you, so we are inviting questions at the end of the presentation. you all have a question card in your folder. if you will fill it out and hold it up and somebody from nihcm will pick it up and bring it to the front.

with that, let's get started. it is my great pleasure to introduce governor mike leavitt, founder and chairman of levitt parkers. he has served as a three term governor of utah and is the secretary of health and human -- was the secretary of health and human services during the george w. bush administration. as hhs secretary, he led the implementation of the medicare part d prescription drug program and 10 years later, 70% of medicare enrollees are now in part d. governor leavitt also has a unique perspective for helping presidential candidates. he led the transition team with romney-ryan, referred to as the gold standard by both democrats and republicans. and he continues to be a sought-after advisor. i know speaker paul ryan mentioned him as somebody he consults with regularly. currently, he is a volunteer

with the center for presidential transition, housing the partnership for service and is available to both parties for questions about how to run the transition team. please join me in welcoming governor leavitt to the podium. [applause] gov. leavitt: am i the only tom clancy novel fan here? have any of you read a tom clancy novel? can i suggest that one of my favorites is a novel referred to as executive order. it is a thriller that actually took place on capitol hill. the nation really gathered for the purpose of being able to celebrate the inauguration of a new president. regrettably, there was a terrorist event and bad things happened.

a lot of people died, including the president and the president-elect and vice president elect, and what unfolded in this novel was a question of who actually would be in charge in such a situation. i won't spoil the plot for you, you can read it and you would enjoy it. but what i will say is i suspect having read that book, it was of particular interest to me when i was sworn in as a member of the president's cabinet, that i was taken by very serious people who drive black cars to an undisclosed location where it was explained to me that i would be, as a member of the cabinet, in the line of succession. that i would have certain obligations under that task. and you were never in any

danger. i was a long ways down. [laughter] but it was a very serious task and it should be. but i was told two things. one, that i should always carry what you see here in this picture in my wallet. it was a card presented to me, that was a plastic card. i was told that if there was any moment where the wrong things happened and there was a likelihood that something could occur, i should find a telephone. i should break that card open and inside, i would find a telephone number and some numbers that i could authenticate in the right way. and if it occurred that would be the way to demonstrate that i was the person to next be chosen as the president. now, again, as i said, you were not in any danger. but the second thing is, because i was in that line, i would receive on a regular basis what all of the will mow to be the -- will know to be the

president's morning briefings. now, this is a process where the member of the intelligence community would come to my office and we would go to a specially prepared place where they would begin to describe for me what was happening in the world and they would take a document stamped "top secret." the process they used was very simple, really. they came up with a series of uncertainties and than they would collect information around the world and then they would put it in front of a bunch of smart people and say, when you look at the dots on the page of information, what picture do you see. and we can begin to tease out things that will help us understand what could happen in the future and if those are bad, how we could avoid them and if they are good, how we could take them as an opportunity. it's a process that is not just used in government. it is used in any kind of setting where decision-makers are dealing with any kind of uncertainty. it is obviously a very important

process. as a man who was a veteran and h said, we are trying to make sense of weak signals. if we are able to make sense of the weak signals, then we have the opportunity to take advantage of the opportunity, or to avoid disaster. this is a picture all of you will remember, having seen before. december 7, 1941, pearl harbor. it is a day the entire pacific fleet of the united states was lost. after that occurred, there were a lot of people who wondered, how could that have happened? how could we have lost such an asset at one moment and have been so unprepared? well, there were hearings that were held in places like this room, where testimony was taken, and studies were done, and there were pages of weak signals that were determined to have been missed. for example, it was determined that we knew that the japanese

were not allowing access to any of their naval facilities. we knew they were gathering targets of british of and dutch and american sites. we knew that in fact, there was a report from the secretary of navy in war saying, very easily, they could attack pearl harbor. the day before this attack occurred, a ship was seen in hawaiian waters. and maybe one of my favorites was december 7, the day of the attack at 6:40 a.m. there was actually a submarine that was sunk by the uss ward. and as they were coming back, they heard explosions on the other side of the island. and the commander said to the first officer, it sounds as though they are working on the

road between honolulu and pearl harbor. i think that's significant in the context of knowing the future because we often look at the future and try to put unusual events in the context of what we know and understand. so my purpose today is that i hope you think about what we are doing as a type of intelligence briefing, if you will, on the future of health care. where this is going, and the weak signals of what they are saying. i would like to talk about two things, long-term. will in fact, fee for service payment be replaced by value payment. in my judgment, one of the most significant changes that has happened in health care since the widespread adoption of health insurance. secondly, i would like to talk short-term, what are the issues that will confront a new administration and a congress in

despite the outcome of the election? what you see here is known as the fusion of innovation curve. this curve is used whenever there is an innovation, whether it is the iphone, or a change in the payment structure, as we are going through today. i would like to highlight this quote from bill gates. "we always overestimate the change that will occur in the next two years and underestimate what will occur in the next 10." his advice is don't be lulled into inaction. i would like to talk about what we all know about today as aco's, or accountable care organizations. a lot has been said about that. but the question is, what is actually occurring? this is a map in 2010. the splotches, the darker they are, the more there are. i'm going to run through this quickly. 2011, 2012, 2013, 2014, 2015.

it is very clear that this method of payment is becoming more prevalent. that does not mean it is predominant yet, but there is clear motion. this is the number of hospitals in 2010 that were actually involved. 2011, 2012, 2013, 2014, 2015. you can see there's a lot of activity. the smaller open dots are those who haven't. there's still a lot to do. this demonstrates the number of contracts and the growth that is occurring. you can't see it in the back, but you can see the convergence of the lines. basically what it says is, the weak signals are saying, there is still a lot of new contracts being let to do this by payers and providers. however, there are fewer new aco's being formed, but more contracts as we move forward.

this demonstrates a projection of how many lives currently we believe in the research we have gone that there are roughly 28.3 , million lives that are are currently on some kind of payment structure, other than just fee for service. now if you were to put this on this diffusion of innovation curve, you'd see we are right at the beginning of this process. and that's a very important point. we are just at the beginning, as much talk as there is, not very much yet has occurred, but it is clearly moving toward adoption. now this, again, it will be hard to see in this big room. but i would like to point out that we have broken this into 4 cases, as to how quickly it would occur and how complete it would be. the first one on the upper left is basically the base case, and if you can see a blue line and a red line, the red line is what we believe will occur and the blue one is what's happened thus

far. but you can see if things operate just as they were, we'll get to roughly 105 million lives by 2020 that will be part of this. to the upper right, this is a baseline without macra. i want to pause there and say quickly, macra was a very important piece of legislation, not just because of what it implemented, but because it demonstrated there is bipartisan support for a change in this payment structure. bottom left says, what happens if nobody makes any money off of this? obviously, that means people aren't going to adopt it. what happens if they're wildly successful? so, as you can see, there is progress being made. it will be somewhere between 40 million and 177 million lives. it needs to be tracked very carefully, but the weak signals

are clearly demonstrating that the change in payment is beginning to happen. now i'll just say we're not very good at this yet. there are a lot of people who are not ready for it and timing is the critical issue. but from understanding where the future is going, this, in my mind, is a very significant development historically. now i'd like to talk about what the weak signals are saying with respect to the new administration and congress. obviously we have a campaign going and we don't know who will control congress in either chamber and we're not certain who will be the president. but i'd like to suggest that there are at least three topics that i believe the new administration and the new congress will be dealing with early in 2017 without respect to the outcome of the election. the first is the fragile individual market. 10 million people now are in the individual market as a result of actions that have been taken in

the past. it is demonstrating currently to be fragile. i have lots of reasons for that. i think it's predictable that, at the end of this election, one party will say, see, we told you that would not work without a public option, we need to have a public option. and the other party will say, we told you if you did not organize this market correctly it would not function and therefore, we need to go back and either change the system or fix that problem. in the balance are 10 million people who have health insurance and it is my belief that first of all, it needs to be responded to. and the second of all, those of you involved in health care will be involved in this debate in early 2017. the second is the environment for medicaid expansion and 1332 waivers. obviously not every state now has adopted medicaid expansion. we're moving into a new administration.

the new administration, whoever it is, will not be wedded to that of the past. if we have a president-elect clinton it seems likely to me that we will, in fact, begin to see a push for more medicaid expansion. i think we'll begin to see more flexibility offered by the new administration as an incentive to do that and, frankly, i think we'll see state legislatures and governors who are willing to have that conversation. the 1332 waiver is a fascinating new development. it's coming effective in january 1, 2017, where there's a tremendous amount of new flexibility built into the law. that could be interpreted in ways that could make it a boon to medicaid innovation or it could be used in a way to say, we are not changing at all, time will tell. that is a conversation we will have, beginning in january.

and lastly, pharmaceutical pricing and i won't delve into that. i think everyone is aware that that is an issue both parties feel they need to be focusing on. it's very rare that i have an opportunity to speak to a group of people like you who are engaged in public service and as a person who has, in fact, spent a good chunk of my professional life in public service service, and i would like to take advantage of this moment to just give you a piece of advice. this is a picture i took in 2002. in 2002, the state i was governor of hosted the olympics, the utah winter olympic games. one of the great privileges of that is i was able to go to olympia, greece and see the olympic flame lighted. this is the scene. these olympic goddesses that you

can see walked out of the woods. and one of them, the one kneeling on the ground, held a torch. and she held it in an olympic salute, and then she put some flammable material of some sort into that bowl that you see. it is concave. suddenly, the sun began to beat down on that bowl and i could begin to see some smoke and then that woosh sound as the flame burst into being. it was the first time in many years of preparation i realized the olympic flame is actually the sun. but she lighted the torch and she held it high and then from the side came another runner. this one, wearing a uniform of the utah winter games. chills went up and down my spine, as you might expect, and that runner also held the torch and they held them up together. woosh, there was a transfer of

the flame. the runner then turned and began to run and that exchange of the flame took place almost 12,000 times and the run traveled over 13,000 miles. what was fascinating to me is that everywhere the torch went , people came by the thousands to see, essentially, fire on a stick. [laughter] gov. leavitt: one day, i am with the woman who is organizing it. i said to her, "i don't get this. why do people come to see fire on a stick?" she said, "you are right, governor, you don't get this.

let me explain it to you." she said, "two weeks ago, we went to an area where we had a gap in the runners and i sent an assistant ahead to get a runner." and she went to an electrical and said to the school secretary, "quick, i need a runner up, but don't give me the student body president. give me somebody that will get a little bit of a lift out of this." the school secretary said, "i know exactly who you are talking about." and within about five minutes, they were addressing an undersized fifth-grader in the olympic uniform. well, they went to the street and the runner came closer and hasas they approach, there was a meeting of those two flames. "woosh," they lighted. he took it with both hands and began to run down the street with tens of thousands of people on the side, including his classmates. the woman said to me, "last week i got an e-mail from the school

secretary, who told me, what a great experience it was for their school." and then she said of the undersized fifth-grader, "he doesn't sit alone anymore." that, she said, is what the fire on the stick is about. it is about what it can do for the human condition. it is about what sport can to do bring us together around the world. i tell you that story in the context of the service opportunity you have because, as we talk about the weak signals, we are not talking about business models. we are talking about lives and we are talking about the opportunity that you have to be in a unique position to positively affect the lives of other people. so, my challenge to you is that

we keep the fire on a stick in our mind as we begin to think of the opportunity that lies ahead in the new congress and the new administration and that we begin to look for solutions and if we do, our country will stay prosperous and a good place. thank you. [applause] >> governor leavitt, i wasn't sure where you were going with your beginning with the tom clancy references, but certainly, everybody in this room is try to figure out those weak signals, and what an instructional way to end it.s -- way to end it. so, thank you. now, it is my honor to introduce bob coacher, a partner at a venture capital firm where he focuses on health care and i.t.

he's brings a unique perspective to today's discussion regarding the future of the affordable care act. he served in president barack obama's administration as a special assistant to the president for health care and economic policy, where he helped to shape the aca. he was the only physician on the national economic council. prior to working in the white house, he was a partner at mckenziemckinsey and company, where he analyzed health care delivery systems around the world. he is truly passionate and i have to say also, optimistic about improving health care in america. please welcome bob coacher. [applause] bob coacher: good afternoon. thank you for sharing your lunchtime with us. i think we have strong signals that health care is actually

getting better faster today than it ever has in america. and so, i am excited about both the care that we can all receive today and how much better it will get for more people over time. i say that for a couple reasons. i now live in california, where i spend my days working with entrepreneurs who want to bring product insight, bring data, bring technology, bring new ideas to health care to make health care better and i live in a place where we're seeing the hospitals, insurance companies, employers, and patients actually want to make health care better faster. so, i come to you with joy that we are seeing this happen. i've observed that in the last five years, there have been 1000 new startups created in health care and i.t. and services. there has been $10 billion of venture capital put into the health care economy. with technology comes data and one of the neat things that occurred is the health data initiative, which has liberated more data during the last year from hhs than in the entire history of hhs prior to last year.

now we can know prices, quality, referral patterns, which medications work for which patients, find people and get them engaged. there's amazing things happening with technology and data. two other things that give me great optimism are an influx of proven technology entrepreneurs who have said, i figured i had to track this, i figured out how to sell you an ad, i figure how to engage you in a game, and i want to work on something important like health care. we've seen executives from facebook, google, apple, linkedin, all creative companies. with them come people who know how to make great technologies to make health care better. the last thing we're on the cusp of a host of interesting technologies that have many applications to health care. whether it's big data and machine learning to look for irregularities or make sure you're on the right clinical treatment path or things like virtual reality to help train doctors, we have many things

that are just coming to the market that i think undoubtedly will change the way in which you experience health care in five years. let me look back a little bit to give you a sense of why i feel this way. first, the affordable care act, despite the angst it may have caused some of you working in this room, it's working. we've covered 20 million more americans and those americans, for the first time, can go to a doctor and not pay for it, access specialty care, are protected from catastrophic economic disaster should they get sick. this is a good thing. many people have medicaid, many

have commercial insurance. more people have health care through their work and take advantage of the tax deductible health care to gain access as well. on the cost side, despite lots of worries that we'd have great inflation, we've had this slowest five years of cost growth in really distant memory. and we have premiums today , despite what you may have read, that are lower than the cbo predicted when we passed the aca in the individual market. on quality, today when you leave a hospital with certainty you will have a discharge plan, appointment and medications and that's led to thousands of americans who haven't been readmitted for preventable things to hospitals and great attention and coordination of care. a lot more patients are on higher quality health insurance plans and there's more attention to data, evidence-based medicine and treatment guidelines than we had before, which is making us

learning and helping us not repeat mistakes we have made in the past. there are a bunch of things we can do to make the system work better. i'll talk to a few of those now. the four important policy priorities that we will all face for our next generation and the next congress will also face immediately is how to make the exchanges work better, how to make the market will better, how to deal with the marketplace, are the hospital market pricing power, in particular that leads toward upward price pressure without a demand side that can necessarily push them back down. governor leavitt talked about the new payment models. one of the central important parts of the aca is the movement over the next decade from fee-for-service payment models where doctors and hospitals are paid for each thing they do to systems where instead they're paid a lump sum or bundle or some form of value-based payment where they're rewarded for good outcomes at lower cost. how do we design those in ways that bring people in and doesn't create unexpected consequences? the last thing is, how do we save money faster? health care in america is crazy expensive. $15,000, more than that, for a family of four. that's nearly half of the median american wage. it's growing at 5% a year which is the new slower growth rate. we have to make health care more affordable. we have to make the system more productive. let me talk a little bit about what you might do is policymakers to make this work. on occasions, we should first

remember that if anybody has bought individual insurance before 2014, it was a terrible experience. you sent in forms, you might have had to have a medical exam, you waited several weeks, then you got a mysterious price and you couldn't really ask questions. the policy might have a name, but it meant nothing to you, and all the details were in 75 pages of 10 point font that you couldn't understand. today when you buy insurance, you can go to a web site which now works, you can select bronze, silver, gold, and it says what the price is, immediately, and you know what you're going to get. it's a massively better experience than the paper-based system we had before. that said, the market has not been as dynamic as one would have thought. it's not -- we haven't built an ecosystem like amazon or ebay where there's lots of choice and competition and downward price pressure. there's things we can do to make that better. when we passed the aca, we knew it would take a few years to have stability in the risk pools, get enough people in, get enough experience, so we had some policies designed to stabilize the markets and those were risk adjustment, reinsurance, and risk corridors. as you may know, there's been lots of contention over risk

corridors but my argument is we should extend these policies for a few more years to create stability in the marketplaces. another topic where we had great debate, and i think a tweak could help, is something called age bans. today when a young person buys insurance versus an old person there's a 3-1 ratio in those prices, which means, if you are older, you get a really good deal on your health insurance. that's good. older people have more health care costs, they're sicker, they need it more. you like to have affordable coverage for people who are older. the challenge is if you're young, like most in this room, you're paying more than you did before. if you created a broader spread you would have lower prices for younger people, that would bring more young people in, that's good for the risk pool, good for america, i think. the down side i think is we'd have to do something to make policies assurebly affordable for older people which would be more subsidy on the back end. the third thing, and this is economics 101, professor reinhart will teach this on the first day in his class, is that larger markets are better. and so we set up in the aca 50 state exchanges. and that's great because each state has some idiosyncratic

differences about how they think about insurance and how they want their markets to work. but some of them are very small. so larger exchanges are more attractive for people to sell policies so you will have more competition. you'll also have more stability because in a small pool if a few people are sick, you will get a lot of volatility in premiums. we need to think about how to create larger markets. it could be just changing the bidding areas for health plans. in california, we have several large reasons to bid on. that's led towards good competition and choice in a system where the plans make money and premiums have not grown as quickly. the final thing, and i doubt we will want to talk about this, but politically, it would not

hurt to think about the mandate and subsidies. because part of the challenge today is that the penalties to not buy are not anywhere close to as great as the cost to buy for many, many people. next topic i want to take a moment to talk about is hospital market power. if you think about health care, most of you will think about hospitals and the bid buildings they have with all of those beds and the amazing things that happen. and they are very important and they do a great job for many patients, but they are very expensive. one day in a hospital costs more than $5,000 on average in america. $5,000. that's more than any hotel you'll stay at and in fact for that much money, you could have me come to your house to take care of you for the day and we would all be happy. [laughter] dr. coacher: but hospital prices are growing between 5% and 10% every single year. there's no other price in the u.s. economy that's growing as fast as a hobble price. on like drug prices, which are easier to talk about, drug prices, which are easier to talk about, hospitals are a bigger part of the health economy. it's about $1.9 trillion spent in u.s. hospitals of the $3 trillion we spend, give or take. and that part of that, that slice of the pie, is growing faster. we don't have a system for

competition for hospitals. you have one, you go to it. very few patients will drive to -- drive far or fly to some other place to go. and so, with that consolidation we have had of hospitals often purchasing doctors and hospitals buil brchasing doctors and hosps building bigger buildings and markets, we have seen prices go up faster. this is an example of data from professor jamie robinson that shows you the effect, but in markets where there is not much hospital competition, prices are 30% to 50% higher for everything. that's problematic because you as a patient have a hard time shopping. and so, there are things you could do to mitigate that market power and make the demands. the first one is there's been lots and lots of mergers since the affordable care act of hospitals and doctors and systems becoming bigger systems and these are all promulgated on the promise that this is all being done for you to make your quality better as a patient and your experience better as a patient.

and it's true that in some place , delivery systems have done a good job of that. we talk about the magic of a health system in pennsylvania or the amazing things happening up at the billings clinic in montana, or kaiser in the west. and you can get some but a lot of times what happens when you merge these systems is you raise prices first well before you coordinate care and create better quality. so one thing that would certainly help mitigate the pricing tendency to do these mergers would be to say above a certain threshold hospitals should accept medicare prices for all payers so they can't just jack up the prices and wait a long time to make quality better. another important policy is today if you go get an mri or x-ray or colonoscopy screening for your cancer at a hospital you'll get two bills and one will surprise you. you'll get a bill from the doctor that does the procedure, you expect that bill. but then you have a second bill called a facility fee which could be thousands of extra dollars.

if you did that at an outpatient center you might get a second bill but it would be orders of magnitude lower cost. so today in medicare and other health insurance they have two payments, site payments and doctor payments. if you made the sites neutral you would create more dynamic market because hospitals make a ton of money on those outpatient services. third thing is there's a bunch of patients that get access to special drugs called 340-b drugs that can't get them on the outside. that makes no sense. we could change that. the fourth is when the justice department and federal trade commission looks at mergers they look at a big geographic area called a hospital referral region which makes sense for the atlas but it doesn't make sense given the shopping radiuses patients use to shop for health care. when we looked at data, most patients use a five-mile search and get their health care in that circle. well, a five mile radius is much smaller than the entire california bay area so we can use zip codes to figure out if we're limiting competition.

then the last thing is we have in the affordable care act a requirement for not for profit hospitals to do an assessment for the value they create and they write a report and you could read them and you should. you'll be chagrinned by the subtlety of the quality in public health benefits created by hospitals. we need to have a way to hold them accountable for what they said they'd do around quality improvement. so those are thoughts on how we could make the hospital market more dynamic from a price quality and value perspective and put pressure on the hospitals, like every other product company has, to make their product better every year.

next i want to talk about payment models. this is data from the most recent cms aco data release on savings generated. and when you look at the savings generated by acos thus far and i agree with governor leavitt, we're in the knee of the curve and we'll have more adoption of these models. if you look at where money has been saved, nearly half are by physicians that are independent of the hospital. that's not surprising. when you're running a hospital, your job is to fill it up. when you're running an aco, your job is not to use a hospital. so this is the zero-sum payment system. there's a benchmark for the medicare patient. if we can take the patient for less than the benchmark you get half or more than half of the model you're in. that savings comes from hospitals, specialists, and most of it comes from hospitals so not surprisingly when a hospital runs an aco they have angst, they're not sure what they want to do because they lose revenue today to get it back later in shared savings but they share it with the payer. so we have to think about that when we're designing alternate payment models to design them in ways that we don't misalign the incentives at the front. the issue with fee for service is that we miss the line of incentives from the point of view of patients and those who pay because the current system pays for more stuff. an alternative payment model would have to make sure we are aligning incentives with those delivering care so they're better off if they perform better from a cost and quality perspective.

some thoughts on how you would design these are the following. the first is the aco program is a -- it was often called an escalator. you can get on and move up in complexity and risk. most people today are on one-sided risk, which is basically a very good bonus payment program. so if you don't save money, you get paid whatever you get paid. but if you do, then you'll split the difference with medicare and get a bonus payment at the end. and that's a good way to learn, but you don't redesign your system of care completely and adopt technology and think about it from the point of view of a patient and how you would engage them successfully in the fullness that you need to without eventually moving to a two-sided risk model. so i believe there should be a duration and a graduation to more risk as we think about this policy. the next issue, particularly for independent doctor groups is that you can lose much more than you were paid by medicare today. if you here in a two-sided risk model today, a primary care doctor might be getting 5% or 10% of all of the revenue of the patient but they're on the hook for 100% of the losses so they could lose more than they were paid which makes it hard for

groups that don't have balance sheets and reinsurance and capital to do this. we should think about how to cap losses for those that don't have access to the rest of the money so they can afford to be in these two-sided models that i suggested they should be in. the third thing, and this is something that when we created the aco program we had a lot of discussion about and angst from doctors is that the way it's currently designed is that you have a three-year benchmark and then you do your three years, then the next three years you reset to however you did before. so if you did a great job at saving money in the first three years, your new benchmark will be reset at your new kind of lower price care and you have to beat it again. and maybe you can because there's a lot of improvement opportunity in health care but over time you're racing against yourself and that doesn't make a lot of sense to keep saying to the best providers "get better." so we should think about readjusting to market averages or some other benchmark after the first go round.

then the last thing that's amazing is the rate at which upcoding occurs in our health care system and every talk that everybody -- all poolsy talks we always have a line saying let's root out fraud, waste and abuse in u.s. health care and we all say of course we should. but the most -- the most egregious areas are in the coding system. so we all passed icd-10 to make sure patients are coded accurately but you give more codes, that's how you get paid more. it's breathtaking how quickly you can take admissions out of hospitals and suddenly see patients that are sickener codes than in reality. examples are patients with urinary tract infection being coded as sepsis. it's a $40,000 difference. but it's the same treatment. so today we don't a good system to hold anybody accountable for this and it's one at a time and not systematic enough to protect against this. in medicare data every year you might read the inpatient rule of a line called coding intensity adjustment.

that means adjusting for coding, upcoding, which reflects patients aging more than one year by virtue of the codes they get. we need to think about how to adjust for coding intensity in the future. the last thing i would add and there's been discussion about this is having some system where we can reward patients for engaging in their care. one of the most important health care measures is actually something called patient activation measures, a pam measure, which talks about how active is a patient in knowing what their outcomes are and knowing why they're taking their meds and wanting to get follow-up visits done and sleeping and walking and doing the stuff we tell you to do before you leave my office. and the more i can get a patient's eyes to light up and care, the better they do. and not enough time is spent in american health care making sure the patient actually knows what they're doing and why. bufz when but when that happens

better outcomes occur so having some mechanism to reward, whether that's through cost-sharing differences will be important to make these new models work better. they require cooperation. the last thing i want to touch on for a moment is what should you do to bend that cost curve down? what are the next set of things to do? the first thing is labor productivity. this is a tough one. america loves middle-class jobs, jobs with benefits, jobs that pay well. health care jobs have been good jobs. but we're hiring at a rate that's faster than the demand is growing and the most expensive thing in health care is actually the labor, the people. so for every doctor there's 16 fte's running in the health system, nine are administrative. the number of non-clinical labor jobs has doubled in the last 20 years. that's the opposite of what you'd expect in a system that's getting more productive. usually the ratio of non-productive to productive labor gets smaller every year as we get more efficient. we aren't seeing that yet in health care so we have to think about how to simplify the administrative processes and how to redesign them to have,

frankly, fewer people in them and more reliability so you don't have to check and fax so many things back and forth. i believe we should tackle medical malpractice. we haven't tackled it yet. wherever i talk to doctors the first seven questions are versions of "why don't we fix medical malpractice" leading to angst and defensive medicine by doctors. there are things people can do to make it work better. i favor doctors for following evidence-based pathways is one mechanism but there's lots of ways you could do it. the last thing is we have to think about substitutes for hospitals. they're super expensive. n would use the e.r. for to create competition on the supply-side. i want to leave you with the following four comments. the one is despite lots and lots of discussion and angst and the worst web site launch in the history of the internet, the aca is actually working.

when you walk around to hospitals, insurance companies, patients, you see change. there's millions of people who have access, who are experiencing technology, who are seeing systems that care differently for them. it's working. the next thing i'd say is exchanges are a good idea. they can work well. they require some tweaks to make them work better and more dynamic but i don't think anybody wants to go back to the old way we bought insurance and underroad it. and so we can make them work better. cover california is a shining light for how to make this work and there are a lot you can extrapolate to other exchanges. the third thing is the problem is cost. if health care cost a lot less, we'd have less angst about getting people into the markets. if health care were as reliable as any other product you bought, if it were more than one for quality, we'd have a lot better for the product that people would want to follow through with more. and the last thing is the policies we passed over the last few years, the aca, the high-text act to wire us together and macra as governor leavitt said are monumental. they definitely have moved everybody from the old model to a new model, we're early in the adoption.

but that new model will be one that cares more about your outcomes, engages you more, thinks about it from a product perspective and leverages technology and all the ways we have in the rest of the economy to make it work better so i'm optimistic for our future. i thank you for your time and attention. [applause] >> you can see bob is truly passionate and optimistic about changing health care and has such a rich understanding of the issues. now it's my pleasure to introduce our next speaker, j.d. hickey, who is president and ceo of blue cross/blue shield of tennessee, a nonprofit health plannen serve enserving more than three million members. j.d. has an unusual background for a health plan ceo, having previously led tennessee's medicaid program, known as tenn care.

the governor tapped j.d. to turn around tenn care and to control the soaring cost and try to preserve the coverage. j.d. led that effort successfully and i think is very proud of the work that he did on that. prior to that, j.d. was a consultant -- was a partner with mckinsey and company. he continues to be a champion for the residents of tennessee as ceo of blue cross/blue shield and we're so pleased to have him with us today. j.d. hickey: good afternoon. so i've got the privilege of telling you about tennessee's new employment and community first program. before i do, i just want to give you a little history, a little background in tennessee on why this is so important. so there's a number of reasons why, when we think about the future of health care, we should be focused on the highest cost populations.

so one of them, obviously, is that's where the money is. if you looked a medicaid, that's now a 70 million person program, the largest federal health care program by enrollment. over $350 billion worth of expenditures, but if you look at it, you've got 20% of that population, less than 17 million people, who are responsible for 70% of those expenditures. about $245 billion and it's that senior and disabled population in the middle. the second reason to focus on these populations, particularly, by the way, if you look at the two top bars when you talk about the institutionalized group, the efficiencies are so high, the spending levels are so high it gives you lots of room to innovate. you can provide a lot of hands-on care in a small setting and stay below that $106,000 benchmark. the last reason and probably the most important one is health care is one of those perverse industries where our most loyal

customers, our biggest highest spend individuals in any given year are also our least satisfied. it's not because they have health needs, it's because the quality of care is so low and if you talk about the medicaid institutions, the care levels in some of those have been so low for so long that you have people demanding and asking for change literally for decades. so i'm going to take you back in time. go back to 2006 in tennessee. this is a medicaid program that simply wasn't focused on home and community-based services or long-term care at all. it wasn't that they didn't pay for them, they did. they had for it wasn't they didn't pay for them. they had for years. accessing the services was so difficult and services so peace meal wasn't enough if you look at the data to overcome profit drivers in patient and institutionalized care. i can be hard on this program and leadership team because i was medicaid director in this window. it wasn't that we didn't care, wasn't that we weren't aware but we had so many other things on our plate we simply sadly weren't capable of systematic comprehensive reform this type of spend pattern demands.

i will tell you as an aside, it was early in 2006 we got protested by adapt rightfully so if you look at the numbers, a disability rights group. they came and handcuffed our doors and locked us into our building. i can remember looking down from the fourth floor as the protest team paraded in front of our group. they were dragging an effigy of long-term care director behind in wheelchairs. about the time they lit it on fire, longtime care director said, j.d., i put my resignation on your desk. i said, it's about time. i often thought no more pure example of democracy in action. thankfully there were people cap able of systematic reform. it came after i left. the individual, at the bureau, one of my personal heroes, she came up with choices.

what makes choices unique, certainly unique at the time a systematic comprehensive set incident graded available statewide, a single point of entry. importantly, a managed care structure, full incentivized with strong financial incentive to keep people out of institutional care. if you flip forward to 2014, you can see the dramatic results that are in the data. this is a national story to a degree. i believe 2014 was the first year it took institutional spend overall across the nation but no state improved as fast or as dramatically as tennessee. i will tell you as a managed care ceo we were not good at this at first if you think about the skill set required it's as different as you can possibly

get but core competency now. we have hundreds of nurses. they don't do anything except work out of members homes. they provide meals, do wellness checks, oversee home modifications, provide pest control services. if you think about the demographics of this program in tennessee, we've got nurses going into some of the toughest neighborhoods, some of the most remote geographies in tennessee and together i'm very proud to say we're changing lives for the better. also saving money. those that saw quick at math long-term spending budget from 2006 to 2014 actually went down by $12 million. excuse me. that's not typical for federal

health care program as you can imagine. over that same period of time the budget went up by 20%, enrollment up by 15 to 20%, so a tremendous accomplishment. ♪ >> i just feel like i've been blessed with being there. it's great to know we've made a difference in people's lives and made a better place for them. a lot of people we see are in a bad situation. sometimes we can change that. we go out to see these members in their home and we sit down and visit with them, make sure

they are getting what they need. they get to feel like family because they might be the only visitor we have outside of our provider. each and every time we see them we encourage and let them know we think they can get better. i'm sure that gives them peace of mind to see they are living a better life and see relief in members of their family's faces is priceless. mr. hickey: looking ahead, the same rock stars who came up with the choices program came up with a new program, employment and community first. these are for individuals with intellectual disabilities. these are individuals who have a serious cognitive impairment. it's been apprehend since infancy or birth. in tennessee most states with asset requirement in tennessee it's $2,000. think about that number. we've got over 6,000 individuals in tennessee who meet those criteria, on a wait list for services in some cases for decades. nationwide 300,000 to 400,000, and that's intellectually disabled we know about. some estimates 50% of people meet those qualifications aren't known to the state system. if you think about being on a wait list for decades you can

understand why. there's a couple of things that make the story more pressing. one is the majority of individuals live with a family caregiver who is going to age beyond the capacity to provide care over the next 10 years. it's estimated two-thirds don't have a plan in place for what happens when that primary caregiver passes away or becomes incapacitated. another pressing part of this story is the lack of employment opportunities, which is core to this program. over nearly 70% of intellectually disabled are unemployed. that was true in the 1970s and '80s and still true today. the way the system works in every state, the only way to get off wait list is have a crisis usually culminating in the emergency department. if you think about it, it's a setup for institutionalized care. the good news, one of the silver linings here, most states over the last 10 to 20 years have shut down big state run institutions. we've got 30 years of very good data that says individuals are happier, healthier, report more

control over their lives if they live in a small setting. being placed in the community is not the same as being part of the community and having meaningful employment is a big part of this. i won't go into detail but the program is structured around three tiers of support, waiver approval for 1800 individuals in the first part of the program. there is a specific part of the program tailored for those developmentally disabled graduating out of the school system. if you think about it, that's a particularly difficult time for disabled as they are out of the system entirely. if it seems expensive to provide hundreds of hours of home-based care, remember $100,000 benchmark in the first slot. this is great work. we are privileged to be a part

of it. this is not charity work for us. this is big business. a new program. the choices program that i talked about a minute ago we've got revenues over $500 million a year. we earn a rerespectable margin on it, being as sustainable as it is. i'm going to close with a profile of ryan, his grandmother kim and care coordinator kristen. ryan is one of our first members who lives in red bank, an olympian. he has two jobs. he works at a grocery store and at walmart. what does he want? he wants a promotion. he'd like to get paid well enough in one of these jobs he doesn't have to juggle two of them. he would like to date. ryan wants what we call want for our families. ♪

ryan: i was a football manager for my high school, too, when i was in school. we had a golf tournament. it was full. i ended up having my own team, which was me, my dad, and one of my friends and his partner. we came in first place. they say i work hard. they wish there was more people out there that was like me that would be able to work like i do.

being able to drive, getting a ryan: being able to drive, getting a promotion at work and getting my own -- being able to get out and get my own place, i want to live out on my own, where i can meet other people around my age.

maybe dating after i get used to driving. ♪ ryan: i wanted to be treated the same way other people like to be treated. mr. hickey: this is kristen. kristen is one of our new employees. she has 20 years experience as a family care supporter in the intellectually disabled community. if you think about it, we've got 6,000 people who work for blue cross of tennessee. we're really good at wellness, really good at claims of adjudication but we don't have anybody, or we didn't before this program, who fits kristen's

profile. if you check back in with us a few years, we're exceedingly optimistic. this is going to become core competency for us, big business. most importantly we hope to change lives and save money. thank you. [applause] >> you can see j.d. is both very analytic and compassionate a problem solver in trying to make change happen. so now it's my pleasure to introduce jeff, ceo of the largest health plan in pacific northwest, serving 2 million members in washington state and alaska. jeff is leading the transformation of primera to a consumer centric company. as you'll hear he has a unique perspective working with large, innovative west coast employers you know their names, amazon, starbucks. he's bringing this consumer

obsessed culture to health care to make it easy for members to understand their health care benefits and navigate their health care options. jeff actually began his career here on capitol hill in the office of senator slade gordon from washington state. we're delighted to be welcoming him back to the hill today. jeff. [applause] jeff: good afternoon. thank you. it's great to be here with you and to be a part of this important discussion. this is really an esteemed panel i'm honored to be part of it you've heard a lot about health care policies, insights that have been provided are really excellent. as we move this discussion forward, though, i'm going to move in a slightly different direction and that is to step way outside of the box of policy and examine the issues from a fresh and totally different perspective.

as nancy just said i spent four years on capitol hill. i found one of the great values i benefited from when an outsider came and shared perspective from a place other than washington, some might call the real world. so i'd like to talk about three seattle-based companies that are well-known throughout the world for the tremendous success they have achieved in three very different industries. success that's been driven by technological innovation, operational excellence and perhaps most importantly by providing a great customer experience. they are, as nancy said, amazon, starbucks and microsoft. i'd assert there's a lot we can learn about the potential future of health care from these companies. all three, by the way, are clients of primera blue cross. join me for a few minutes as we consider these questions. what if amazon, starbucks and microsoft ran health care.

what kind of system would they create? let's start with amazon, the first of these. we have served as amazon's health plan since 2012 so we feel we know them fairly well. amazon first of all is obsessed with its customers. they have worked relentlessly to put power back in the hands of consumer. not pithy anecdotes but hard statistical evidence, and they combine these two great obsessions, customers and data to deliver an unequaled customer experience, one that makes every interaction with their customers simple and easy, fast and integrated. so at amazon as you know, you can buy just about anything in the world in an environment all about transparency. amazon customers are given information they need to compare products by cost, by quality, by user reviews, thereby helping a

consumer to make purchases that's right for them. you can get really low prices at amazon but you can also pay more for products that provide superior quality and value. the choice is yours. they do all this without requiring their consumers to do much more than simply access the internet. the product does the work not the consumer. this dynamic makes amazon suppliers compete and complete aggressively. bob brought this point up as it relates to health care. so let's contrast this level of transparency, which is so fundamental to a well-functioning marketplace with what consumers are subjected to in health care. prices are completely opaque, the consumer leaves a provider and later opens an envelope with an explanation of benefit in it after the fact of what a service cost. as one person remarked at

primera, there's a surprise in every envelope. reports on the quality of care are highly complex and confusing. providers compete mainly on the basis of their brand name and convenience of location, not on service excellence and certainly not on the quality of their outcomes. that lack of transparency permits dramatic health care, something a well functioning marketplace would not tolerate. we have providers who oncharge 30% more than market average even for basic routine services with quality that is just average, if that. it's simply not justified and yet provider reimbursement rates often are presented as a take it or leave it proposition, particularly in those markets bob highlighted.

you pay more and get less. in any other industry consumer would never tolerate such treatment. so competitive and transparent marketplace wouldn't sustain such significant differences in prices for any services. another thing about amazon, a customer phone call there is considered a defect. think about that for a moment. if a customer feels a need to call amazon to discuss an issue, amazon considers that a defect because amazon failed to provide a process that is seamless and simple enough for a customer to not need additional assistance. yet if a so-called defect occurs, amazon is available immediately to help the customer get the issue revolved. so in contrast, at health plans today, phone calls, including my health plan, by the way, phone calls are the primary way consumers get questions answered. amazon's so-called defect is our

primary mode of interaction. as an industry we still use paper, forms, prescriptions and so forth. let me say that again. it's 2016 and we still use paper and fax machines in health care. it's unbelievable. if amazon ran health care, i believe we'd see an integrated marketplace platform that would seamlessly connect patients with right providers, giving patients cost and quality information they need to make an informed decision about the care they deserve. so i ask, is it all a bit too conceptual for today's discussion? i don't think it is. i say that because at primera we've already started the process of trying to behave like an amazon. let me give you a few examples how this thinking is

transforming the approach to health care right now, today. as we all know, navigating health care is too darn difficult. it's complex, it's confusing, it's burdensome. in response at primera we've developed an innovative new tool called coder ring. coder ring, like amazon's echo like, which you see on the screen, simplifies the process immensely. with this new technology our customers can use mobile device or amazon echo to ask questions like, is my knee surgery covered? what will it cost? immediately they get an answer. no more phone calls or wading through an immense benefits booklet that has been the form for decades. the other thing about amazon is they are amazingly customer obsessed. we need to adapt that obsession. i went in for a procedure,

pulled into the facility's garage and encountered a sign reading first two floors reserved for doctors. that's not patient-centric. by the way, that's not unique to that facility. at primera we've launched another service called primera listens. in fact, it was developed by a former amazon employee. primera listens allows us to quickly make improvements to service based on realtime online feedback collected from consumers. perhaps the best part of of the entire project, it went from concept to launch in four months, which at amazon is normal but in health care is light speed. as we look ahead at primera, we're designing products, networks, provider compensation models, analytical tools,

transparency capabilities, and so forth all with the intent of creating a more competitive environment where providers actually have to earn consumers business. if amazon ran health care, i believe that's what they would do and that's what we're trying to do at primera. let's turn to starbucks for a moment. they have been a primera customer since 2009. here is a customer that sells a commodity at almost twice what others are charged. we all are subject to that. so how do they do that? as most would say they sell an experience, not just coffee, right? they offer a familiar place, a warm, inviting environment, and atmosphere where there's likely an emotional connection and a quality product made to your exact preferences. at starbucks, i spent a lot of time down at their headquarters,

they talk about the third place their stores provide. there's work, there's home, and there's starbucks. and people pay a premium for that experience. it's what's behind the experience, though, that most impresses me about starbucks, operational excellence. they have made a science out of running their stores with an extremely high level of efficiency. because of their emphasis on customer experience you rarely hear the company discuss operational metrics. contrast that with most health plans. again, primera is in that group. we focus on metrics like average speed of answer or claims turnaround times. you'll probably never hear starbucks talk about grinding beans in 30 seconds or less, yet we hang our hat on that every day. without this foundation of operational excellence starbucks could not produce such a predictable, high-quality, and

yet personalized experience. you get your cup of coffee at any starbucks, anywhere in the world, and the experience will be exactly the same every time and in every location. the only thing that may differ is the language spoken. let's compare that to health care. health care works when lives are saved, well-being enhanced, the experience can be nothing short of amazing. too often it's just ok at best or maddening and frustrating at worst. a major driver behind dichotomous experiences is the major lack of standardization. the variation in care patients receive is tremendous. take cancer care, for example. it isn't unusual for cancer patients to seek a second

opinion. most of the time they will get exactly that, another completely different opinion. this will often occur even with two doctors in the same institution. for a health condition rife with such emotional and physical burdens, patients should not have to struggle with the confusion that leaves them wondering if they are truly getting the best therapy for their problem. as part of the future we envision, we're working with seattle cancer care alliance comprised of seattle children, university of washington and fred hutchison cancer research center. they are international leaders in cancer care and we're working to ensure our members get consistently the best care recommendations for their particular care of cancer from a team of true experts. along the way we're partnering with institutions to provide primera members with an advocate who will ensure all patient care

needs are met in a way that suits them. that way they and their families can worry less about the process and focus more on themselves and their own well-being. standardized yet personalized health care starbucks style, we would contend. another area starbucks excels is convenience. they have more than 24,000 stores worldwide. starbucks is practically everywhere. in a sense they bring the starbucks experience to you. if starbucks ran health care, i'm sure they would make health care more personal and convenient as well. the act of providing care to patients would be the same no matter where the location, but the experience would be tailored to each individual patient's needs. that's what we're starting to do at primera.

for our members with the greatest need, the 5% of our members who account for 50% of the cost, j.d. highlighted that in his remarks, we marine that with a special team of providers who bring it to patients in their homes, especially tailored to their needs. doctors, specialists, all ready 24 hours a day to help our sickest members to get exactly the care they need when they need it. that's what convenience means in health care. what that convenience translates into is a better experience for the patient that also happens to provide higher quality care at a total lower cost. i hope from there you can see it's easy to imagine a future where patients visit a brick and mortar hospital only for trauma or surgeries while all other care is conducted in the home, online or at convenient

neighborhood locations. so finally the third company to profile here is microsoft. a company primera has been privileged to serve. so we're part of their culture. a quote from bill gates, when i think of microsoft, i think of empowerment. 40 years ago bill gates famously said, his goal was to put a computer on every desk and in everyone's home. in achieving that goal microsoft computers have made consumers and businesses vastly more productive and efficient. in my view health care needs and microsoft like moment right now

in better delivery of care. in health care we're buried in data yet many cases doctors lack the information necessary to empower them to clearly understand their patient's needs. we're not microsoft at premiera. but we've built a pretty sophisticated tool to analyze and dramatically improve the care they received. it's called one view, and it aggregates all members claims and medical information from emr, reviews it for consistency and analyzes any gaps in care that may exist like prescribing your irregularities. it presents critical objectively analyzed information digitally at the point of care, that is to the doctor and in the exam room. this powerful interpretive tool eliminates potential problems that can arise when a patient's care is fragmented among a

variety of providers. it gives each of them a complete view of that patient's history. in the process it empowers the best possible care possible driven by the power of technology. so in conclusion i'd say this, amazon obviously doesn't run health care and probably doesn't want to. starbucks and microsoft probably feel the same way, but the fact is health care needs awesome companies and needs the same kind of perforation they brought to other industries. as you're hearing today many blue cross and blue shield plans are working to make that happen. thank you very much for your time. [applause] >> so you can see jeff has the a

vision and drive in humility to bring the best practices from these other industries in the health care. now, it is my great pleasure to reinhardt, the james professor of political economy at princeton university, where he is one of the most popular and respected professors. he is a prolific author m original thinker. -- and an original thinker. as the physician commission. and many others. he continues to inform policy in the public as a frequent speaker and guest blogger for health affairs, and also appears in the new york times. he is the longest serving advisory member and it has been my pleasure to be working with

him for over 20 years now. uwe? [applause] nancy, that is my role. i want to talk about value because what i learned from the speaking circuit and the blog sphere is that we are moving from whatever we were doing towards value. that is the future of american health care. true, if you reach my age, we have always had some matter about which we marched. in the 80's, it was the competitive strategy. remember that? we deregulated everything and that was supposed to control health care costs and improve quality. it did the opposite, but we marched for it for a decade. the came managed care in

90's, and everyone was in managed care, but we read from the institute of medicine that a% of american health care is waste, so managed-care must've have had some limits in doing it, doing what it is supposed to do, and now it is value. my wife and i are both immigrants. english is not our mother tongue. it's natural for immigrants to inquire into the meaning of english words. we all do that as immigrants. now you can just look it up, but you obviously, have an ipad at breakfast to look up all these words. so that leads me to this talk. what do i do here? [applause] uwe: how do you advance this? ok. [laughter] uwe: all right. thank you very much. [applause] uwe: how does that go?

do you know? i had to turn it around. i held it this way. [applause] uwe: ok, now it makes sense. so i've said these things. ,so when you go to the , conference circuit, you hear about value-based health insurance, value purchasing, value pricing, value maximizing, innovation for value, value chain in health care, and then you make your own concepts. you can put any noun in there, "value integration" sounds good. "value paradigm," always good. i like "value inversion." i haven't a clue what that means, however, like any professor, i could probably give a good 45 minute lecture on the topic. [laughter]

uwe: nancy, maybe next year i'll do that one. i saw this on the web because i wanted to look at what is the value chain? this is it. you'll find this on the web. i have no clue what this means. the people had drew it didn't either, obviously, but they thought it was worthwhile putting on the web -- the patient isn't even in there, as you may notice. this is not the patient-centered. i was thinking of conference call value valuing. because if it is really true that so far we never moved to value in health care, we should be taught how to value value and you could have a good conference around, that is some clues. so i sort of went back, because i'm an economist, and we concern ourselves with value a lot. it's really about half of what we teach people.

so when you actually do that, it goes back all the way to antiquity. you will find in the code of hamurabbi, you will find in the code, chiseled in, 1700 b.c., you will find a fee schedule and it's value base. [laughter] uwe: no, there is a fee schedule and it's value-based. it said if the babylonian , patient is a nobleman, he has so many shekels. if he or she is free man, it is cheaper, lower fee, and a lower, much lower, lower fee. interesting when you sit back and say what a weird fee schedule, then look at new jersey, that's exactly how we price pediatric care. if you are on medicaid, you get $36 as a pediatrician. if you are commercially insured $120. -- thethe hummer robbie

hamurabbi code. so some things last. canada doesn't do that, by the way. plato and aristotle wrestled with this. adam smith, david ricardo, all these great guys in the 19th century wrestled with it. now, of course, we know the answer and teach it correctly. they had it wrong. they made a distinction, aristotle did, and should have, between value and use. what is a thing worth to me or to you and value in exchange, how much money or other stuff do we have to give up to get this thing that i want? it's another word for price. and aristotle and adam smith, all of these people could not really figure out why are there two concepts of value and how do they relate? well actually, it's nowadays , quite simple. you've all had this econ 102. if not, shame on you. [laughter] uwe: we have a demand curve, which is really the value curve.

those are the maximum bid prices different consumers would bid if push came to shove, and you have a supply curve. where the two curves cut, that's value in exchange. that's price. but up there i have jones value and use. jones would have paid a lot more for this thing if push had come to shove on ebay. but because you can go to macy's, you get this stuff cheap. generally, i've never bought a shirt that was actually the value in exchange was equal to my value in use. because usually, you go and say it's on sale. i didn't know. you get 20%, 30% off. but you would have bought it at full price. that is a surplus, a psychic profit consumers get, which is not taxable, which is one of the , you know, i think donald trump would like it. [laughter]

uwe: what complicates values in health care is that very often people that get a procedure like epipen, any procedure, are not the people who pay for it. there's a real difference there. what is something worth to me , and what is it worth to me that somebody i don't even know , might even be in jail, gets it. such the case. so it's very, very complicated to know what does value mean and whose eyes should actually be making that determination? do you ever think about what does that actually mean? most of the people benefiting were actually poor people that couldn't pay for it. so there any such drought, you , run into this problem. now, we have management consultants who know the answers

to things professors don't, which is why they charge so much. [laughter] when you read what they say, is the following. they say value equals outcome over cost. when you don't think about it, which is always a safe thing to do, that makes sense. but when you think about it as an economist you think, that doesn't make sense. because cost never figures in value. what something is worth to you is independent of the cost. you never ask how much does something cost? you buy a painting. do you ask, how much does it cost to make this thing? you buy epipen. never do costs enter value considerations in economic theory, and yet these managements make a ton of money selling this. one is the outcome is , multi-dimensional. you can eat, have an appetite. you can play golf. you don't have pain. it's multi-dimensional.

but we can solve that. by the way, i would say harvard professors, this book "redefining health care," michael porter, he has it right on page 5 that value is outcome over cost. that's where i get this idea right there. i'm quoting it. page five. the whole book is about value. now, one of the problems, the multi-dimensional thing, we can solve this by converting outcome into quality adjusted life years. if you don't know what this is, i mean basically, it says you , have an extra life year but you may not have high quality. how many, supposing a procedure gives you 10 more calendar years in a not great health status, then you ask people, how many years of that life would you

give up to have only really healthy years? if that person says, i'd give up three years to have seven really healthy years, then that life in less than perfect health status is quoted as 0.7 of a healthy year. that's quality. so, this is a concept, one-dimensional, that can take quality of life and life expectancy into one number. so you could solve this problem. i have that on this slide, explained. so it's basically value. this is the management consultant's equation, value equals the number of qualities the procedure yields divided by the cost of that procedure. re: now happy as economists -- are we now happy as economists?

the answer is no. we are always complaining. my second problem is that cost shouldn't be in there. what you should do with this -- we go by latin dictum. [speaking latin] i don't know if the romance -- the romans actually spoke like that but that's all i can do. the thing is worth what you can sell it for. cost isn't in there. whatever i can get for something, that's what it's worth in the market. so let me now turn this expression around and put it on its head. in economics, if you don't know what something means, invert it, see whether you can see would it mean something then. [laughter] uwe: if you actually do that, you get what's known as cost effectiveness ratio, people who do technology assessment use, which is what is the cost per additional quality a procedure buys you? which is -- all i did was make management consultant's definition and put it on its head, invert it. when you do that, imagine a

procedure that gives you three additional quality adjusted life years, but it costs $150,000. now 10 years ago, you would have said "you are dreaming." nowadays that's a normal thing. , it could be a specialty drug that costs that much. what does that really tell you? is that value? i would argue, unless you know what a quality is worth, this doesn't tell you anything at all. what do you do with it? if i turn it on its head and make it the cost effectiveness ratio, then i learned that for fority, this procedure -- qaly it is worth -- does this tell you what it's worth? it doesn't. it tells you what it costs. whether or not you do the

procedure depends on what a qali y is worth. here in the u.s. we would do it but some countries they wouldn't do it. even in england they might not. the management consultant's definition of value tells you nothing about value. you can sometimes use it that if two procedures, one with more qalies than the other, the one is more valuable. you don't know how valuable because we don't know what it's worth. if we americans -- i should ask in this room what is a qaly worth? i really should, just to torture them. you wouldn't be able to tell me. is it mine or someone else's? a democrat or republican? in this town, surely you would ask these things. i don't want to dwell on this so much, but there were these doctors who wanted to use that

expression to say what is the high value and low value procedure. i say these doctors are dead wrong. they shouldn't get into that. in fact, they shouldn't listen to management consultants on this point. now, why are people confused? whether management consultants actually are thinking about a process of comparing cost to value. they do not define value, they think about how would i go about this as i just did. two procedure, same cost, different qualities, or two alies, but, same q lower cost for one. it is not value they are give you. face,al problem that we and the next one, i think i will click over, what we really like to know is the net value that a procedure would give you after cost. that is what these consultants are after.

again, the best way to explain that to you is to talk about the qaly supply curve. the health care sector tells the rest of society through the insurance companies saying, we can buy for you additional qaly's that someone gets. some are very cheap. immunization for kids, some art spencer, if you go -- some are very expensive. cost $300,000 a year. if you get a curb like this, of course, if you are not on the curve, you are inefficient. that is of course what cost the insurance companies now try to do to get us onto the curve. once you are on it, should you go from b toc? you get-- b to c?

the health care sector says this is what we, the health sector can do for you, the citizens. whether you want to buy on his curve, or you tell us know, we're not buying anymore. in england, they say this is about 50,000. beyond that, they complain and say, maybe we will not cover it. in the u.s., we cannot even discuss this topic. if you do, people really get angry at you. i tried this once, in testimony, blamed fory got that, blast messages and talk about what a qaly might be worth. we have thrust this under the rug. withis one of the problems what we are now faced with, specialty drug industry since we do not ever want to discuss what a qaly what the value of

is to us. if you refuse, you will reveal to us your value, or the maximum value you assign to human life. the -- gets that. you immediately revealed the evaluation you put on human life, and that is what makes this so difficult. concept we come to this of value-based pricing. that of course, i guess we talked about this. ofre are several concepts pricing. people who talk about it mean we are not paying for junk. we are not paying for stuff that s, stufful to patient that doesn't do anything, and stuff that is only marginally beneficial. however, we will pay extra for superior quality. that is what the insurance industry is trying to do, the

second one used by the drug industry is saying, if we actually, you already are spending money on an illness. if we come in with a drug that is cheaper, the value added is the difference between the cost you already are incurring, and what we can deliver. that is the kind of value pricing so value was price that way. that is why it is a bad illustration for, shall we say, greed, because all they ever did was say we are going to make it roughly the same that you have already been spending, and here is the price. now, as a board, whatever have voted for making a bill $1000? no. at $1000, journalists will notice it. if you had made it $885, it would have never been noticed. who would write an article about --about that? th

the value you attached to that. when you come to life saving drugs, that is a difficult thing. how much do i sign to my life? the image i invoke for this from a students is to say, think of someone in the sahara desert, dying of thirst, this guy is literally on his last leg. along comes a caravan of merchants, loaded with rugs and water, and one of the merchants takes a bottle of water and says, what would you pay me for this bottle? this dying man would say, everything i own. everything. possessions.all my he figures out life is more valuable than everything he owns. that is value pricing. the deal is done. possessions. he figuresthat is value pricings clearest sense.

yes paid the price of the value on this procedure to the patient. rather, it seems to me, the from cynical sector is not totally there yet at this higher model. they have slouched in that direction considerably. i think that is a dangerous path for the industry to follow. you just look at the hearings, maybe even in this room on epipen. the average american does not like this value-based pricing model. that is, it should be based, you have a kid who could die unless you have an epipen, and therefore i will charge whatever i like. the very reaction against that suggests to me that the drug industry is walking a very dangerous path, politically. not economically or theoretically, politically. concluding

observation that i have is, in general, the national conversation about health care would be better if we use the word "value" less often, and if we do use it, that we define what we mean by it so that people know what that is. fuzzy language begets fuzzy thinking. there is a lot of fuzzy thinking on the speaking circuit as all of us know. in the meantime, i would give you this advice. if you plan to attend a health care conference, there is a nifty device that you could take with you. [laughter] on that happyd note. [applause]

nancy: don't you all wish you could be in his econ class? for those of you who need to leave, please go ahead. if you would like to say, you can ask question. razor hand. -- raise your hand. to get us started, i will go ahead and ask the first question and i will carefully avoid the word "value" although it would be tempting to use it in this sentence. we has had -- we have had a smorgasbord of different perspectives and i would like to pull it together with one question, which is, as this incredible panel thinks about the future, what gives you optimism that we are going to improve on the three measures of access, cost, and quality? i would love for a volunteer to go forward.

bob? and then mike. bob: one of the most exciting things i think is what i refer to, as a doctor i remember the first time i got a report card from the health prime when i was in boston, i got a report card that said you are a harvard doctor. you are average. i remember calling the chief medical officer trying to ask for the data because it must be wrong, i cannot possible leave -- be average. i am far above average in my mind. they send the data. the data was right, and i was average on a bunch of majors. i got better quickly. i took that observation many years ago with me. i am a professor at stanford. if you get sick in california and you have cancer or bypass surgery, you are told by the insurance company to go to stanford. think about what happens when that happens.

you might get me. you do not know if i am above average or below average. you are told that stafford is -- you arerd is all told that stanford is awesome. look at the data in california and every possible state, there are four doctors and stanford that do more than 80 surgeries per year. three of them are awesome. risk-adjusted, well below average mortality, i would assure you that your outcomes would be great and i would go to them, but one of them is terrible. one of the most interesting things i think is the idea that we will start doing this doctor-patient matching much more carefully. i would tell you as a doctor that we are all good at some things and not good at other things. if you saw me for what i'm good at, i am awesome. wasthing else, i up-to-date, but average. the most important thing is this caring and it allows us to have it.

i do my best to send you to the right doctor for you. my brain is not google and not a database that looks at the actual outcomes and now you can. so that is something i'm excited , about seeing applied. i think health plans, if amazon did it, it would be like, that are a lot more informed. that will save a ton of fragility, a bunch of mortality, and a lot of money because better outcomes are cheaper. that is one of the coolest things about health care, cheaper to do the right thing than pay for the outcomes. i am excited about that. around leavitt -- governor leavitt? most in the health business have mastered the payment system how to, optimize, which is another word i am confident and economists could have a deal day with. they have learned how to optimize the coding and the payment any system and therefore, we get what that

produces. figuring out how to change that is hard. figuring out the relationships on where people are in the system, figuring out systems like bob mentioned to evaluate whether a person is average or above average or below-average. it is hard. we are pioneering in the same way jeff mentioned, businesses that have invented new processes, mentioned bill gates and his capacity, his goal to put a computer -- what may that happen is the internet and we have now figured out in society how to do very hard things. i think, given the fact we are being driven, not just by a noble purpose, but by economics now to do hard things, there is reason for optimism. it will not happen quickly but it is happening, and i think we will ultimately end up with a uniquely american health care solution.

it will make a better system to serve people. nancy: anyone else want to take it? jd? >> we were laughing earlier, we found an article of a mother who was charged for holding her baby during the delivery and it showed up as an itemized bill, $39 -- whatsmart was it? $39 for skin on skin contact. the inefficiencies in the current system are dramatic that it is reason for optimism. you know it, you have it in your life, my wife and i had a baby and got charged $6,000 for the audiology test, in a network hospital and it turns out the audiologist is an out of network troll. we can perform the test by clapping, and the whole thing took four minutes and a $6,000 bill you get. you have all had those experiences, i guarantee, in your family lives. it is that level of efficiency that you can improve on for sure.

[no audio] >> that leads to more unconventional approaches. we are on the verge of heavy lifting. the ecosystem of health care, that is, our participants are [inaudible] date toa session -- day todayta examination of the data. >> do you want to take it as well? your mic!

abouthear all this talk it going to hell and a half back -- in a life has gotten better and health care has gotten better. it gets better every year i think. there are some strange things we do which i hope will be so uniquely american. i told nancy yesterday, think of writing a blog post, what if i took a random sample of princeton freshman, got them drunk and at 4:00 in the morning had them design health policy, would they ever come up with something so stupid as to pay oncologists 6% of the price of a drug they use so that the more expensive the drug, the more money they make, even a bunch of drunken freshman of princeton would not come up with the. they are not that ridiculous.