America's Health Care at Risk: Finding a Cure
Ivan G. Seidenberg
Orlando, FL
September 18, 2008
As Delivered
“Our Common Health Care Challenge:
Finding Solutions that Work for All Americans”
Introduction by John Iglehart, founder of Health Affairs.
Thank you, John, and good morning to all the distinguished guests here today. I am glad for this opportunity to speak about a topic of vital interest to every American.
As you heard, I’m here as the head of one of the largest private employers in the country, Verizon, as well as the chair of the Business Roundtable’s initiative on consumer health and retirement. Our corporate stake in reforming America’s health care system is clear. More than two out of every three Americans – 177 M in all – currently receive health insurance through their employers. Verizon alone provides health insurance for 900,000 employees, retirees and family members at a cost of nearly $4 B a year.
In many important respects, the American health care system is among the best in the world. When it comes to scientific advances, medical technology and the quality of our doctors and medical institutions, the United States is without peer. But this country’s health care system is becoming increasingly expensive and burdensome to businesses and families – costs that, without some restructuring of the system, will put the benefits of this amazing medical expertise beyond the reach of an increasing number of Americans.
Business Roundtable CEOs consistently cite health care as their number-one cost pressure. Rampant cost increases in the medical system mean we’re paying more for less value. More than 45 M Americans have opted out of the system – either by choice or by necessity -- leaving employer-sponsored plans to subsidize those who fall through the cracks. With most Americans’ health benefits tied to their jobs, people worry that they won’t be able to afford coverage for their families if they move to a new job or retire early or try to start their own business.
American businesses are paying a steep price for an unsustainable, uneconomic health care system.
From our perspective, the problem with the health care market in this country is that it doesn’t really function as a market – leaving major consumer needs unmet, costs unchecked by competition, and basic practices untouched by the productivity revolution that has transformed every other sector of the economy.
Contrast that to the communications industry, for example, where we’ve seen technology and competition invigorate our business and ignite innovation. Information technology has revolutionized the interface between customers and providers. And the norms of the electronic marketplace – personalization, control, price transparency, and 24-by-7 availability – have become part of the customer’s expectations in just about every aspect of life.
Everywhere, it seems, except health care.
Health care delivery needs a new business model: one that puts customers in the center and uses the power of the market to lower costs, improve quality, create more consumer choice and expand accessibility.
The Business Roundtable has a plan that, we believe, will put us on the path to a competitive health care system. Our plan, which we announced yesterday, rests on four pillars:
- Creating greater consumer value and efficiency in the health care marketplace,
- Providing more affordable health insurance options for all Americans,
- Placing an obligation on all Americans to have health insurance coverage – everybody registers, everybody plays,
- And offering assistance to uninsured, low-income families to meet that obligation.
Let me say a word about each.
First – we need to create more value for the health care consumer.
The defining feature of the information-age economy is that the customer is in charge. Communications technology puts information about price, quality and choices at consumers’ fingertips and empowers them to choose their products and services with the touch of a button.
But the consumer revolution has not yet taken place as much as we’d like in health care. The fact is, it’s easier to find out the cost of repairing the valves in your car engine than the valves in your heart. For that matter, it’s easier to learn about the quality of your auto mechanic than it is your surgeon or even the hospital.
The BRT recommends several actions to empower consumers to take charge of their own health and use technology to make the system a lot more efficient:
- Consumers and insurers need more transparency and wider distribution of information about the cost, quality and effectiveness of the health care services they purchase. This will make the market function better, create better health care consumers and improve the quality of medical care.
- The current reimbursement system pays for activity, not outcomes. Private employers have tried to fix this through various partnerships and programs, but to get meaningful change we need all payers – including the federal government – to be included in the process. Therefore, for example, the Medicare payment structure needs to be changed to a “pay for performance” system that rewards value, not volume.
- The most egregious flaw in the current health-care delivery model is the woeful rate of adoption of information technology, which means that health care has failed to capitalize on the productivity revolution that has transformed just about every other sector of the economy. A heavy dose of IT has been shown to improve efficiency by 25 percent over three years every time it’s introduced. Health IT can save $165 B a year annually, reduce medical errors and usher the health care delivery system into the 21st century.
The good news is, we can do something about this – and we can do it immediately. Today, the U.S. Senate has before it the bi-partisan “Wired for Health Care Quality Act,” sponsored by Senators Kennedy and Enzi, which would establish the uniform, interoperable standards we need to create such a system. A similar bill is pending in the House.
Passage of this legislation is the Business Roundtable’s number one health-care priority for this year.
We can and must do this now, and I challenge the U.S. Congress to put aside partisan politics and make this happen before they go home to campaign for re-election.
So the first step to reform is to put the consumer in the driver’s seat with more information technology. The next step is to create a functional private insurance market that offers consumers greater choice in health coverage. We believe that competition and innovation can be very powerful weapons in the fight to provide every American reliable, affordable health insurance.
So why aren’t those forces operating in the market today?
The answer has to do with the structure of the market itself – state-by-state, overly prescriptive, and afflicted with dueling mandates, rules and regulations. In the communications business, we learned firsthand how an inflexible regulatory structure can inhibit competition and – conversely -- how opening up the market can unleash innovation and investment, to the benefit of consumers and the economy as a whole.
Five years ago, for example, cell phone rates were high, in large part because the market was broken up into small geographic areas. As the cell phone market went national, we saw a new pricing model emerge -- with family share plans, bundles, and rapidly declining prices for consumers.
We believe the same thing can happen in health care.
We want to break down the barriers to innovation by creating an open, all-inclusive market for health insurance. In our plan, the current state-based system would be replaced by multi-state markets so insurers could sell their products to individuals, small and large employers across a much larger area. The Department of Health and Human Services would establish the regions and create minimum standards so that insurers would have one set of rules -- not 50 -- when it comes to designing their products.
We’ve seen this multi-state model work. The most recent example of this regional approach is the Medicare prescription drug bill, which has lowered costs and increased the variety of prescription plans far more than originally thought.
The result of this reform will be a more rational insurance system that encourages new competitors to enter the market with a wider variety of insurance products. Consumers will have more power to shop for the policy that suits their needs. And the expanded pools will spread risk, lower costs and permit greater mobility for consumers who will be able to move from job to job, state to state, without losing their insurance.
A big step forward, we believe, toward the sustainable, affordable and portable system of health insurance that American consumers want.
The third pillar of our plan is requiring every American to accept the obligation to have health care coverage, either through their employer or the private market – which, today, some 45 M Americans do not. Reducing that number does not lend itself to a “one-size-fits-all” solution. That’s because this uninsured group is far from monolithic:
- Between 4-5 M are college students,
- More than 10 M are non-citizens,
- More than 8 M are eligible for assistance programs, such as Medicaid or S-CHIP, but have not enrolled,
- And more than 9 M have household incomes in excess of $75,000.
As these numbers indicate, the problem for many uninsured Americans in obtaining coverage isn’t so much financial as it is structural. If we are going to require these consumers to buy coverage, we need to have a competitive system that provides them with affordable options suitable for their families. A more functional private insurance market that encourages insurers to innovate around the needs of these consumers will go a long way toward filling these holes in the safety net.
For some low-income uninsured families, however, this will not be enough.
The fourth pillar of our plan is that the government would provide financial assistance so that low-income individuals and families can purchase coverage from the private market. These targeted subsidies would be funded from the cost savings that will be generated by a more competitive and efficient health care system and by the large risk pool created from everyone being covered.
The government, after all, is the country’s largest purchaser of health care services. The potential savings from adopting health care IT in such programs as Medicare are immense – savings that can be captured and used to achieve the important public policy goal of making sure every American can afford the health insurance they need.
The Business Roundtable plan is our attempt to use the power of the market to drive down costs, drive up quality, and improve access to health care for all Americans.
You might think of this as the “business” perspective on this issue, but in fact this goes beyond what’s good for Verizon, the Business Roundtable, or even the millions of Americans who rely on their employers for insurance.
The challenge of reforming the health care system goes to the very heart of American competitiveness and innovation:
- When Americans are afraid to switch jobs or start their own business for fear of losing their health insurance …
- When American-made products carry a health-care premium that foreign-made goods do not …
- When America is not leading the world in technological innovation in health care delivery …
- And when, year after year, we’re spending more money and getting less value …
… then America’s very place in the global economy is at risk.
It will take a broad coalition of interests from across the political spectrum to achieve the kind of systemic reform we need. Every constituency represented in this room today must be part of the solution. The Business Roundtable is committed to being part of the solution, and we’re working with groups like AARP, SEIU and the National Federation of Independent Businesses in the “Divided We Fail” coalition to see this through to the finish line.
We do understand there are many perspectives on this issue, and many facets to the problem. But we deeply believe that true reform of the health care system must emerge from the uniquely American principles that drive our economy: competition, innovation, choice and a market that serves everybody.
I promise you that we intend to be at the table – and stay there – until we get a common-ground solution that works for all Americans.
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