Keynote Remarks by Administrator Seema Verma at the Better Medicare Alliance (BMA) 2019 Medicare Advantage Summit
(As prepared for delivery – July 22, 2019)
Good morning – I am delighted to be here today to discuss the Trump Administration’s vision for the future of the American healthcare system. I recently had the honor to represent our nation as part of the official delegation to attend the Women’s World Cup in France. It was amazing to celebrate the incredible victory. I was so inspired by their skill and determination, and I even brought a few lessons home. Like soccer, we need government to be more hands-off. Now every time anybody dives into my office with a proposal to increase bureaucracy we’ll be handing out yellow cards. And there will be penalty kicks awarded anytime somebody tries to layer on more red tape. Red tape gets a red card.
President Trump and our Administration are committed to putting patients first, and giving people – not the government – control of their healthcare.
The Wrong Direction
As head of the nation’s largest insurer—Medicare, Medicaid, and the Obamacare exchanges—I see the day to day challenges of government-run programs, and am deeply concerned about the proposals we have seen to upend healthcare in America, particularly Medicare for All and the public option. These proposals are the largest threats to the American healthcare system.
Whatever you call it – Medicare for All, Single-Payer, or something else – what we are talking about is a complete government takeover, stripping 180 million Americans of their private health insurance and forcing them into a system where Congress and bureaucrats make decisions about their care.
Beyond that, Medicare is a program that seniors have paid into their entire lives. This Administration is committed to protecting and securing the program for future generations. Forcing its outdated policies onto every American would break our sacred promise and harm seniors’ access to care. Our seniors deserve a system that helps them get well, not get in line.
While the discussion over the future of healthcare has focused on who should pay for it, the real focus needs to be the cost of healthcare in our country. Unfortunately, the Affordable Care Act failed to live up to its name. Healthcare costs have only continued to rise at the same rapid pace as before it passed. Millions of Americans have seen their premiums and deductibles grow to levels out of their reach, with premium increases exceeding 200 percent in some states since Obamacare took effect. And by 2027, nearly one in every five dollars is projected to be spent on healthcare.
Supporters of the law know it has failed, which is why they are promoting new radical reforms. But doubling down on a big government solution is not the answer. Especially when that big government solution will cost $32 Trillion . The Medicare Trustees report projects the Medicare trust fund will run out by 2026. Medicare for All advocates say they want free healthcare, but in the end, someone’s always picking up the tab. In this case, it’s American taxpayers.
Under legislation that has been introduced to create a single payer program, central control of the healthcare system would double down on government policies that are already stifling innovation and thwarting competition.
Recognizing this, some proponents of this government takeover are trying to resurrect a tired, old idea that’s been rejected before: a government-run health plan or so-called “public option.”
I view a “public option” and Medicare for All as equally dangerous, and history backs me up. In a well-functioning market where insurers compete on price and quality, high-performers are rewarded for efficiency and innovation. A public option has no such drive, as governments have endless resources – they can simply turn to taxpayers when they run a deficit. That’s not fair competition.
And we’ve tried a version of this before. Among Obamacare’s biggest failures were the doomed Co-Op not-for-profit health plans. That experiment ended up doling out $2.5 billion in government-backed startup loans. Most of these Co-Ops have gone belly up, leaving taxpayers on the hook for their unpaid loans. But under a public plan, these ill-functioning plans would receive a taxpayer bailout to keep them afloat.
The secret of the public option is that it’s only cheaper because it uses the force of government to strong-arm doctors and hospitals into accepting below-market payment rates. But the government cannot wave a wand and impose lower rates on some providers while holding everyone else harmless. Today about 30 percent of doctors won’t even see new Medicaid patients.
Access will be compromised for patients, and reimbursement cuts in the public plan will shift more pressure to employer-sponsored plans to make up the difference, driving up costs for 180 million Americans with private insurance. Make no mistake – the public option is a Trojan horse with a single payer hiding inside. It would use the force of government price setting to crowd private insurers out of the marketplace altogether, and achieve the true policy goal of a government-run single payer healthcare system.
A Different Vision
The Trump Administration has a different vision, one that puts patients first and back in control of their healthcare. First of all, we will protect the Medicare and Medicaid programs and strengthen them for future generations. We believe that our role in government should be to promote a healthy and competitive free market where providers and insurers compete on the basis of cost and quality, and patients are incentivized to seek high value providers.
By unleashing the power of the American consumer, market forces – the same forces that deliver better cars, better phones, and better restaurants year after year - will address the underlying cost drivers in our healthcare system. Simply having the government pay for everything won’t do that: it will inevitably lead to a painful choice between higher taxes and rationing of healthcare services, which is what we see in other countries that have embraced socialism.
To address healthcare cost, it is important to first understand what’s driving it. A recent study in JAMA showed that healthcare utilization is not significantly different between the US and comparable countries, but prices are much higher in America.
Now, some will argue that this discrepancy represents a failure of the market, necessitating a turn to more government intervention and price setting. But the reality is the opposite: we’ve never had a truly competitive market in healthcare – and a large share of the blame for that falls squarely on the government.
How the Government Thwarts Competition
Today, the government pays for about 45 percent of the nation’s health expenditures. Because of this influence, government policies have long set the standard in America’s healthcare system. Our outdated government payment polices and central planning have stifled the competitive forces that could bring down cost and improve quality.
Let’s consider the Medicare fee-for-service program, the model for the public option and Medicare for All proposals.
Medicare’s payment policies have distroted the market. We have incredibly talented public servants administering the Medicare program and I am honored to work with them, but Government price setters can’t possibly access all the information in the market, leading them inevitably to set rates either too high or too low from time to time, leading to surpluses and shortages.
For example, Medicare’s payment policies for specialty care and primary care were locked in place decades ago, and generally result in greater payment amounts for specialty care. The role of the primary care doctor has become more complex and important over time, but Medicare’s payment policies have not kept up, and we continue to pay less for primary care than the value that these doctors are providing. The all-too-predictable consequence has been a shortage of primary care doctors – and this gap in our system has led to less coordination, more fragmentation, and higher costs.
Additionally, for decades, Medicare has employed a hospital-centric payment model, even as an ever-increasing number of services can be performed just as well and at a lower cost in the outpatient setting.
Medicare actually pays more for many services when they’re performed in a hospital. This has led to a surplus of hospital beds in the country; and hospital spending is the largest driver of healthcare costs. Shortages and surpluses—these are the hallmarks of government price setting.
And what’s worse is government policies are leading to the creation of monopolies, further thwarting competitive forces, resulting in an upward trend in provider consolidation. Hospitals are buying up physician practices, and mergers of large health systems and health plans are a common occurrence. But without competition in a market, consumers have fewer choices, prices go up, and incentives to improve quality go down.
Obamacare is adding another lesson to the history of monopolies. Since Obamacare took effect in 2014, many insurers left the market leaving large portions of America with just a single, monopoly insurer. Over 50 percent of counties in 2018 had just one insurer. With no competition, these monopoly insurers hike rates. Research now shows that Exchange premiums are 50 percent higher, on average, in rating areas with a monopolistic insurer compared to areas with more than two insurers.
A public option and Medicare for All would further entrench government policies, inhibiting competition – and encouraging consolidation.
Well intended government rules and regulations—whether under MACRA or Meaningful Use—have exasperated many physicians, leading to more physician burn-out, or moral injury, a big problem when we’re adding 10,000 people to the Medicare program every day. It becomes an easier decision for an independent physician to take her shingle down and sell her practice to a large health system.
And these health systems have every reason to acquire physician practices, because the government has created payment incentives that financially reward hospital systems for doing so. A patient today pays more for the same healthcare service if they visit an office owned by a hospital system than if they go to an independent physician office. To address this, the Trump Administration changed Medicare’s payment policies to promote site-neutral payments.
Another example, the 340B program, was meant to lower drug costs for safety net providers, but its rules incentivized hospitals to buy up doctor’s offices to generate additional payments. We’ve reduced this incentive, but much damage has been done, with many outpatient practices now owned by hospitals.
Until the Trump Administration, these kinds of outdated rules and misaligned incentives have been business as usual for decades. And under the public option and Medicare for All, you could expect more convoluted government policies that contribute to higher costs for patients, and taxpayers.
Turning the Tide Toward Competition
Luckily, we have a President who isn’t afraid to challenge the status quo, and take on special interests to put the American patient first.
Following President Trump’s direction for all federal agencies to ‘Cut the Red Tape’ - one of the first initiatives I launched was “Patients over Paperwork,” which involves updating regulations that are outdated, duplicative, or overly burdensome.
Through this effort, we’ve already rolled back 40 million hours, 20 percent of unnecessary process-focused measures, and $5.7 billion worth of unnecessary regulation on providers, to give them more time to spend with patients and reduce administrative costs.
To further promote competition, we’ve been working to ensure that patients can receive procedures outside hospitals when it’s safe, appropriate, and less expensive – such as by expanding the number of surgical procedures that Medicare will pay for at Ambulatory Surgical Centers.
Now don’t get me wrong, there are a lot of successes in Medicare. What works in the Medicare program is Medicare Advantage – because plans are competing on the basis of cost and quality, driving towards value and increasing choices for beneficiaries. Many of you are driving success in Medicare Advantage, and I thank all of you for the important work that you do.
The Trump Administration has rolled back regulations in Medicare Advantage that have previously stifled plan innovation. We have provided an unprecedented level of expanded telehealth benefits and we're allowing new supplemental benefits that can be tailored to address the social determinants of health. We are ensuring that Medicare Advantage plans can do what they need to do to lower cost and improve health outcomes, without the government getting in the way.
And because of this reduction in regulation, we now have 600 new plans in Medicare Advantage, and with more choices, comes more competition and lower costs under the Trump Administration. Premiums in Medicare Advantage are at their lowest level in 6 years, having declined 6 percent since just last year -- and even declining by 40 percent or 70 percent in certain areas. With greater competition and lower costs, it’s a win for seniors who continue to report high satisfaction with Medicare Advantage. This year, enrollment increased over 10 percent to an all-time-high of nearly 23 million beneficiaries actively choosing Medicare Advantage. We expect the upcoming year to be no different, and later this year, we will be launching a redesigned Plan Finder for the very first time in ten years, making it easier for beneficiaries to compare their plan options, which is especially important with all the new supplemental benefits that will be offered. This coupled with last year’s Medicare price and coverage comparison tools, the Trump Administration is empowering seniors to make informed healthcare decisions about Medicare Advantage.
Our work to increase competition does not end with Medicare Advantage.
To help the millions of people who have left the individual market because rates are so high, we’ve taken a number of steps to provide more affordable choices. This year our new regulations have resulted in the first reduction in premiums on the individual market since Obamacare took effect. In addition, more insurers are entering the market, bringing more competitive pressure to drive premiums even lower.
We also recently finalized a rule to allow employers to fund individual market coverage for their employees through HRAs, which should substantially expand the individual insurance market and create a more competitive market.
These are important changes designed to eliminate government barriers to competition and innovation – barriers inherent in the public option and Medicare for All proposals. Unlike those who want healthcare prices set in Washington by bureaucrats, the Trump Administration believes the key to unlocking innovation and quality in healthcare is to empower patients as consumers.
This means ensuring patients have all the information they need to make a choice that’s right for them. And we believe patients have a right to know the price and quality of healthcare services before they receive them, and that their medical records belong to them.
Just last month, President Trump signed a historic executive order taking bold action to ensure that patients have information on price and quality when making decisions about their healthcare. This will mean that hospitals and insurance companies will need to provide more transparent pricing information to patients on the front end.
In addition, the Trump Administration is giving Americans control of their healthcare records to ensure they are able to move freely through the healthcare system as they shop for services. Earlier this year, CMS proposed a new rule to ensure that Americans have access to their claims data, and our rule would allow 85 million patients across Medicare Advantage, Medicaid, and health plans sold on the federal exchanges to access their claims data in an electronic format. We did this already in Medicare through our Blue Button 2.0 program; we made claims data available using technology that allows beneficiaries to connect their data with apps of their choosing. There are now over 2,000 app developers building new tools to help patients understand their health data, empowering them, for example, to share their claims history with their doctors and generate medication lists and reminders for care.
As we break through the old, creaky government-centric status quo and empower patients, our payment systems must change to reward providers that offer the best value – we can't just pay for the volume of services delivered.
The Trump Administration is doing everything we can to accelerate the transformation to a value-based system.
Earlier this year, we announced new payment models on primary care and kidney health that will transform healthcare. I would encourage all private plans, including Medicare Advantage, to participate in these models.
Today we have discussed many examples of how government policies have distorted the market and contributed to higher costs. There are many more, and so I find it baffling that some are calling for more government. And so starting this week I am going to tweet out more examples of government policies gone awry. I will call it hashtag Red Tape Tales – so follow me on Twitter.
Ladies and gentlemen – America is at a crossroads. In the words of President Reagan, “we have come to a time for choosing.” We must choose between free markets and patient-driven healthcare or government control. Between restrictions and freedom.
There’s no doubt where the Trump Administration stands. This Administration has been absolutely committed to free markets and freedom by empowering American patients so they have access to the high quality, affordable care of their choosing. You can expect the Trump Administration to continue to enact market-based reforms that put patients first; protect people with pre-existing conditions; address the real cost drivers to lower the price of care, and create more transparency to ensure that all Americans get access to the highest quality of care. Across the board, and as the President said at our kidney health event, we’re getting it done.
With your help, we can keep Americans in charge of their care, and protect and strengthen the Medicare program to keep our promise to America’s seniors.