Remarks by Administrator Seema Verma at the American Hospital Association Regional Policy Board Meeting
(As prepared for delivery – September 10, 2019)
Thank you for inviting me.
Today, America is at an inflection point – a crossroads of two profoundly different paths for the future of our health care. Our choices are clear, we can choose Medicare for All or a public option, doubling down on government and a one-size-fits-all, socialist approach, with government price setting…threatening our world-class system of innovation and top-notch care, and replacing it with long lines and rationing.
Or we can choose to put patients first by moving to a system of competition and value, giving patients the choice and control they want, the affordability they need, and the quality they deserve.
Our administration is upending the status quo to empower patients to be informed consumers of healthcare, seeking out high value providers…. those that deliver the highest quality care at the lowest price. That means transparency, value-based payments, and burden reduction.
Under President Trump’s leadership, we’re getting it done. CMS is activating the entire agency to focus on 16 initiatives with more than 500 deliverables. Instead of throwing money at problems, we’re solving them. We’re giving patients unprecedented cost and quality transparency, so they, not the government, can make decisions about their care. We’re lowering the cost of care by deregulating, reducing administrative burden, addressing high prescription drug costs, and moving to value-based payment.
Taken together, our actions are creating a fair market, where providers compete for patients on the basis of price and quality.
This isn’t just rhetoric; our results are tangible; we have delivered for the American people. Medicare beneficiaries have more choices, with 600 new plan options this year. With more plan choices, there’s more competition, and with more competition, prices have gone down. Medicare Advantage premiums have decreased by 6 percent on average and in some cases up to 40 percent to 70 percent in certain areas. Part D premiums have decreased by over 13 percent to their lowest level in years, saving beneficiaries and taxpayers billions of dollars. We’re even starting to see progress in the individual market.
Average premiums actually dropped by a small amount this year, for the first time since Obamacare started. And we’re seeing more issuers come back to the market, reducing the number of states with a single monopoly issuer and we expect the situation to get even better next year. Finally, we're seeing slower growth in prescription drug prices nationwide - one measure of drug price increases went negative in 2018 for the first time in 46 years.
This work and philosophical approach is critical to turning the page in health care, because without it, the system would continue to grow bigger, more bureaucratic, and expensive … too expensive for the average American. By 2020, healthcare is predicted to consume 20 percent of the entire economy. Our costs are simply out of control. The Medicare Trustees estimate that Medicare will become insolvent within the next decade. Medicaid is quickly becoming the top state budget expense. Premiums on the individual market have doubled and even tripled in some states since Obamacare’s main regulations took effect.
This means for a 60 year old couple living in Grand Island, Nebraska who earn $70,000 a year, the lowest cost silver plan would cost $38,000 a year in premiums, with an $11,000 deductible…. more than two thirds of their income.
With costs this high, many Americans can’t afford Obamacare, and many unsubsidized people are fleeing the market. Data indicates that between 2016 and 2018, unsubsidized enrollment on the individual market dropped by 40 percent. The ACA didn’t deliver affordability – it just threw money at the problem without fixing the underlying drivers of healthcare costs.
So, we’ve spent more and more – but that spending hasn’t been rational and isn’t sustainable. This is on display particularly in rural areas, where over 100 rural hospitals have closed in the last seven years. So, handing out insurance cards doesn’t mean anything if there isn’t a place to go for care.
Americans are fed up, not only are they paying more, but they aren’t being treated fairly. Like when they go to a hospital they think is in-network, and then receive bills from out-of-network providers. One in six patients have experienced surprise bills after a hospital stay, even when they have insurance. This is simply not fair to patients.
And we are learning the lengths to which certain not for profit hospitals go to collect the full list price from uninsured patients. These hospitals are referring patients to debt collectors, garnishing wages, placing liens on property, and even suing patients into bankruptcy.
This is unacceptable. Hospitals must be paid for their work, but it’s actions like these that have led to calls for a complete Washington takeover of the entire healthcare system.
The American people are demanding affordability, quality, and convenience, and the status quo isn’t delivering. Radical socialist ideas like Medicare for All and the public option have lurked in the background of public policy for years. But their newfound prominence isn’t based on their policy merits – it’s because the status quo has failed to deliver.
There’s an old saying: success has many fathers, but failure is an orphan. No one wants to admit it, but if we’re all honest, we can agree that blame can be shared across the healthcare system. So, before we can fix the system, we must face the situation with honesty and clarity. Gandhi said, “If you want to change the world, start with yourself,” so I volunteer to start with my purview: the government’s role.
Over several decades, government has concocted a complex system of rules – a time-sucking morass that has contributed to obscene administrative costs and stifled innovation and competition. And so, every week, I’ve been tweeting about these regulations with the hashtag "Red Tape Tales" to highlight outdated policies demonstrating the problems of government-run healthcare.
Take for example, Part B physician-administered drugs, where the government pays the average sales price for a drug and also pays physicians a percentage of a drug's sale price. The incentive is clear for drug companies to set prices higher and for physicians to prescribe more expensive drugs – because that leads to a higher payment. Government policies have fueled the drug pricing problem.
The effects of big government on innovation are particularly concerning, where the government can take years to pay for new treatments appropriately, creating access problems for our beneficiaries. We are experiencing this today, with CAR-T cell therapy. CAR-T has the potential to revolutionize cancer care, but when the product arrived on the market, CMS's outdated payment rules forced hospitals to take steep losses. Now, we have tried to make some accommodations, but the reality is that government can’t keep pace with innovation. Forcing new technologies through antiquated, bureaucratic government processes limits patient access and stymies innovation. Imagine if every new product was reliant on the government to determine coverage and pricing. Imagine what that would do to innovation in our country.
That’s not all. There plenty more examples of failed government rules that have increased costs, contributed to and exacerbated the problems in our health care system. I am sure you have a list as well. It might be the outdated Stark law, to the ballooning number of duplicative quality measures, to inequities built into Medicare’s payment system that disadvantaged certain providers based on geography, to payment distortions for procedures that have led to primary care shortages.
One of the hallmarks of bureaucracy is a regulatory hodgepodge, requiring armies of expensive experts to untangle. Central planning can never match the free market’s efficiency, so bureaucrats continuously tinker, trying to attain regulatory perfection. It never works.
So, the Trump administration is forging ahead with our Patients Over Paperwork initiative. And we appreciate the AHA’s active support.
Our administration has listened to you. And we got it done. We’ve revised the RAC audit process to reduce burden – and we’re doing it while reducing improper payments. We’ve eliminated less useful and duplicative quality measures for hospitals by 32 percent. We’re reducing unnecessary billing documentation of visits, streamlining reporting; giving hospitals staffing flexibility. We’ve fixed problems with Medicare’s Wage Index for rural hospitals and even with our recent changes, all states saw and increase in overall payments.
All told, our Patients Over Paperwork initiative has yielded savings of an estimated $5.7 billion, with a reduction of 40 million hours of burden through 2021.
But we’re not done dismantling antiquated government rules. Our new CMS office on burden reduction will focus on several areas. First, we’ve heard your concerns about the Stark Law’s, and a revision to the rule is in process. We’re also aware that prior authorization is a difficult issue. It is an important tool, but it can result in delays in patient care as well as burden.
So as we work on untangling complex government regulations, it is hard to believe that people would want the government to be more involved in health care. But, they do want the government to ensure they are being treated fairly, which leads to our efforts on price transparency. Under the status quo, patients have little idea what a service will cost. But President Trump’s historic Executive Order makes it clear that patients should no longer be kept in the dark and they have the right to see and compare prices.
I’ve heard the doomsday warnings about price transparency and they typically come from those who want to protect the status quo….because it works for them. But, it doesn’t work for patients. When they are facing prices that may vary by 400 percent, keeping prices a secret just isn’t fair. In other industries, price transparency has been shown to accelerate competition to lower prices and we see similar evidence in healthcare.
When New Hampshire launched a transparency website, consumers who shopped around for services like MRIs and x-rays selected lower cost providers, which meant millions of dollars of savings. And it’s not only the patients that use the tools to save money. Providers lowered their prices to stay competitive, reducing overall healthcare costs.
I want take time today to acknowledge that many of you are leaders in transparency, pioneering the development of innovative consumer tools that helped CMS develop our proposals. Thank you for leading.
Quality transparency is equally important. As part of our Meaningful Measures initiative, we’re ensuring patients have the quality data they need to consider pricing and select providers. Our star ratings are key to this. We recently announced that we will be revising the way we calculate the Hospital Compare star ratings, addressing issues like comparing peer groups and allowing customization. We heard your calls for change, and we look forward to working with you to refine the ratings.
As individuals shop around for high value providers, they must have the ability to take their health information with them. Patient data belongs to the patient and should be available at the point of care, and to that end, we are driving interoperability, the free flow of data across the entire healthcare system. We led the way with Blue Button 2.0, making Medicare claims data available in an API format. And now we are proposing to require insurers in Medicaid, Medicare and the Exchanges to do the same thing and share claims data with patients.
We recognize that clinicians and providers on the front lines also need data to understand their patients better. CMS just announced our Data at the Point of Care pilot, which will allow providers to get a claims history on their patients. Providers will be able to review medications, visits, and previous testing. More than 500 organizations representing over 50,000 providers have shown interest in this pilot.
And finally, in order to deliver lower cost higher quality care, we must move past the status quo, and past a fee-for-service payments to a system in which we’re paying providers to keep people healthy, reduce costs and deliver better outcomes.
Value-based payment under the Trump administration is the future, and our Administration is doing everything we can to accelerate the implementation of financial incentives to drive costs down and improve quality.
We have rolled out a series of new payment models that run the gamut from kidney care to primary care to models for the seriously ill and for cancer care. We’re also considering a new model to ensure rural providers aren’t left out, providing some seed money and technical help for system redesign. A one-size-fits-all approach won’t work and we need to support local communities in their efforts to create a sustainable system of care.
The data shows that time and again, providers that take on risk deliver better results, so we want every provider in America to participate in value-based payment.
As we rollout new models, CMS is focusing on creating more multi-payer alignment, coordinating with other payers on our models with a particular focus on Medicaid.
The Medicaid program now covers even more people than Medicare, so as we develop new models to test value-based payment methodologies, we are providing states with guidance on how those same models can be deployed in their own programs.
More and more providers are showing interest and participation in value based care and recent changes to the ACO program are a testament to this movement. Last December, we launched "Pathways to Success,” which places ACOs on a quicker path to taking on risk while creating even more flexibility, through allowing telehealth services and beneficiary incentive programs.
We heard predictions from the naysayers that our policies would discourage participation and set the clock back on value based transformation. However, let me correct the record – the ACO program has actually grown under Pathways to Success to include 400,000 more Medicare beneficiaries.
We have approved 206 ACOs so far this year, and we have one more start date still to come, so we expect even more applicants. The set of new entrants that has already joined this year has increased the number of Medicare ACOs taking on risk by a striking 10 percentage points. This means that the ACOs in the program will have a better chance of producing positive results for patients – CMS is on track to generate $2.9 billion in savings over ten years from the program redesign. And our other new models are generating strong interest as well – we received over a thousand letters of intent for our Direct Contracting model, which allows primary care providers to take on risk.
We appreciate all of you who are putting in the hard work to redesign your systems to drive towards value. It is not easy! You are pioneers, and your commitment to making America’s healthcare system sustainable is truly laudable.
CMS’s focus over the next year will be to consider how we can provide even more flexibility to providers taking on risk, with new waivers. We will encourage more systems to shift their focus to value instead of volume and will create a strategy to increase participation in models.
In 2017, hospital care represented a third of all health expenditures, the single largest portion of healthcare spending. So, in order for our healthcare system to drive down total costs, our models will have to get at hospital spend. So, make no mistake - if your business model is focused merely on increasing volume rather than improving health outcomes, coordinating care and cutting waste, you will not succeed under the new paradigm. As the market moves to more value based payment, and as participants demonstrate success, at some point models will no longer become optional and will become standard payment policy.
This Administration is empowering patients by promoting price and quality transparency, doubling down on value-based payment incentives, and reducing unnecessary regulatory burden….all to lower the cost of health care and to increase quality and accessibility for all Americans.
This is what you get from an Administration that understands medicine works best when government gets out of the way – and we must remind ourselves that government created these problems, and that putting the entire system under government control would make it worse.
Medicare for All, the public option, and other radical socialist proposals simply double down on the same old Washington-first policies that have failed patients for years. They will increase taxes without fixing the underlying issues. They won’t lower costs – they’ll shift who pays. They won’t reduce burden, they’ll pile on new rules. They won’t pay for value, they’ll just pay less. They won’t empower patients – they’ll assume Washington knows best for everyone.
The Trump Administration has chosen a different path, one that centers on giving patients the control and choice they want, the affordability they need and the quality they deserve. So, I’m asking you to join us.
Join us, so together we can reject the status quo and work to solve the problems hurting patients. Join us, so that we can provide patients unprecedented quality and price transparency. Join us, so we can move to value, to improve quality and lower cost. Join us, so we can break down the rules and regulations standing between patients and providers. Join us, because we are a stronger force for good when we stand together.
As we leave here today, let’s think about the patients we serve and how we can make the system work for them. These patients could be you or me – my loved ones or yours. Let patients’ stories – their struggles – their journeys through the healthcare system – be our focus and our motivation.