Press release

Speech: Remarks by Administrator Seema Verma at the America’s Health Insurance Plans (AHIP) 2018 National Conference on Medicare

Remarks by Administrator Seema Verma at the America’s Health Insurance Plans (AHIP) 2018 National Conference on Medicare
(As prepared for delivery – October 16, 2018)

Thank you. I am honored to be with you and welcome to your nation’s capital.

Before we begin, I just want to say that our thoughts and prayers go out to everyone affected by Hurricane Michael, and we are working very closely with state and local officials to ensure that all of our beneficiaries have access to the healthcare services they need.  CMS has been in full response mode already and I have signed our blanket waivers allowing CMS to immediately begin helping providers by providing additional flexibilities.

The CMS team is working closely with HHS and FEMA and we will continue to provide support for as long as needed.

One of the advantages of being CMS administrator is that I have a unique vantage point. CMS, as an agency, not only serves the 130 million Americans on Medicare and Medicaid, but we also administer the healthcare exchanges…the individual marketplace created by the ACA…that serve an additional 11 million beneficiaries.  Our goal is similar to many other payers , we want to provide high quality, accessible health care at the lowest possible cost.

Today, I want to talk specifically about Medicare, which is one of our most important programs for seniors and the disabled.    As you know, President Trump is committed to preserving and strengthening Medicare for the people the program serves, and every action we take at CMS has been aimed at delivering on our nations’ promise to provide high quality services to seniors who have earned that benefit by paying for it throughout their lives.

Let’s start with talking about two critical Medicare programs:  Medicare Advantage and the Medicare prescription drug benefit – Part D. 

We have taken steps to strengthen Medicare Advantage…which are our highly popular private plans that many in this audience offer. Thirty-seven percent of Medicare beneficiaries now participate in Medicare Advantage, up from 15 percent just two decades ago.

As Open Enrollment gets underway this year, we’re projecting all-time record enrollment of 22.6 million beneficiaries for 2019.

We’re excited to see this growth in MA enrollment – a projected increase of 11.5% this year. 

Medicare Advantage represents value for our beneficiaries and taxpayers.  CMS provides a budget for plans, and plans structure competitive benefit packages within this capitated structure. 

Private health plans compete for our beneficiaries on the basis of cost and quality. And they are attracting more and more of the Medicare population.  Medicare Advantage plans often provide supplemental benefits beyond what the traditional program offers like dental and vision, and these plans are often available at a lower cost than what fee-for-service beneficiaries pay for Medigap and Part D. 

Medicare Advantage also caps out-of-pocket costs for enrollees. The program gives seniors choices and lets them enroll in the plans that best fit their personal needs.

The lesson here is a basic law of economics: choice increases competition, and competition drives up value. 

And this Administration has taken critical steps to modernize Medicare Advantage by providing additional flexibility to plan sponsors to offer innovative benefits and services that respond to the needs of their customers.

We made changes to the “meaningful differences” rules so plan benefit packages could be more precisely tailored, giving seniors more choices to pick form.

And for the very first time, starting in 2019, we have made changes to give plans new discretion to offer a broader array of supplemental benefits.  This is one of the most significant changes made to the Medicare program and will have a major impact on improving health outcomes for our Medicare Advantage patients.

Our vision is for plans to be able to design new benefit packages and provide services to keep people healthy and independent.  Advantage plans will be better able to address the social determinants of health and   increase access to important supplemental benefits beyond dental, vision to over-the-counter items, meals, nursing hotlines, transportation.  They could provide adult day care services, in-home support services, caregiver support services, and home-based palliative care. 

So far we’re seeing nearly 270 Medicare Advantage plans take advantage of this flexibility in the very first year it’s available.  But we expect the offerings to grow and attract more beneficiaries over the long term.

And under the President’s leadership, we have been intensely focused on giving plans greater flexibility to negotiate drug prices.

For the first time, Medicare Advantage plans can now take advantage of an approach developed in the private sector known as "step therapy" to ensure that patients get the highest quality and lowest costs for physician-administered drugs.  Now, plans must pass the savings from using this new approach on to patients.  This again is a historic step for the Medicare program which for the very first time will create competition and negotiation for Part B drugs.

With these changes in place, I’m very excited with the results we’re seeing as open enrollment for 2019 gets underway.

Premiums are down by an average of six percent, and nationally, the number of Medicare Advantage plan choices will increase by 600 this year.  And more choices, will lead to greater competition quality and lower costs for our beneficiaries over the long term.  And I want to thank our health plan partners in this room who contribute every day to this success. 

Our efforts to increase plan flexibility on the Part D side are significant as well. 

We made changes to the Medicare Prescription Drug program to allow for greater use of lower-cost generic drugs and biosimilars, to lower costs for our beneficiaries and promote innovation in these markets.  And the results of our reforms to Part D are showing – Part D premiums are also lower this year than they were last year, and they are projected to decline again next year.

The President’s efforts to lower drug costs for our beneficiaries didn’t stop there and last week President Trump signed bipartisan legislation ending the practice of "gag clauses," which prevent pharmacists from telling patients how to get the best deal on prescription drugs. 

And just yesterday, CMS issued a proposed rule to require drug manufactures to post their list prices in television ads.  Patients typically pay their cost sharing or coinsurance off of a drug's list price, so providing price transparency and including this data point when a patient is first hearing about a medicine would be an important step towards empowering patients with the information they need to make informed decisions.

We are not done with our work to lower drug costs.  The President has been very clear about this being a top priority for his Administration…and we know this means giving Part D plans more tools to negotiate better rates with drug companies on behalf of beneficiaries.  We are working towards additional regulatory flexibility in this area. So stay tuned.

And while we have made tremendous progress in lowering costs, expanding choices and services for our beneficiaries, there are significant challenges in Medicare, and our focus must be on strengthening the program, improving its outlook, and its sustainability for future beneficiaries.

Expanding Medicare to everyone, as some are suggesting, will dilute the focus of the program and divert limited resources away from those who rely on the program today. 

There has been a lot of talk about Medicare for All.  But we only have to look at some of Medicare’s major problems to know, it’s a bad idea.  Medicare faces many issues, including a slow response to new innovations, a plethora of misaligned financial incentives that work to increase costs for taxpayers and beneficiaries, and challenges with fraud and abuse and all of these problems, together, threaten the solvency of the entire program.  

While many actions have been taken in the last 20 months by the Trump Administration to strengthen Medicare, and improve benefits and choices, as the Administrator of CMS and head of the Medicare program, let me tell you about the challenges we face every day in Medicare.   

We face tremendous barriers to supporting and bringing innovation to Medicare …it literally takes an act of Congress to add new types of benefits for the Medicare population.  For example, we’re grateful Congress acted to open up telehealth benefits in Medicare Advantage, but that legislation took years, and seniors won’t even see these new benefits until 2020.  But, the private market had these benefits available much earlier. 

We see challenges and the inability for Medicare to make nimble changes and adapt new technology play out time and again.

Now, sometimes, we can figure out a way to shoehorn new devices into the Medicare benefit design – you saw the Trump Administration do this when we clarified policy to ensure access to popular continuous glucose monitors that let people with diabetes get readings and data on their phones.  But again, this was not easy.  It took years.  Meanwhile, patients went without new technology that could improve their health.

And there are other devices that we can’t find a way to cover, so seniors have to look to Congress.  Not an easy process, and our seniors deserve better. 

Medicare is also extremely regimented in how we pay providers, and the lack of site neutral payments in Medicare distorts competition and choice.

We have more than a dozen different payment systems in Fee-for-Service Medicare, meaning we can pay vastly different amounts for the same service, depending on the site of care.

This means that patient cost sharing can vary by location, for the exact same service. This is not fair to patients or taxpayers. It is also a prime example of Medicare’s misaligned financial incentives.

And while we are talking about misaligned financial incentives, let’s talk about how the law requires Medicare to set prices.  Medicare reimbursement is based on provider costs, which means that we reward inefficiency, and give Congressionally mandated annual raises whether the provider is  improving patient outcomes, delivering quality, and value. Or not. 

And so, profit margins vary dramatically across Medicare providers, but when some providers are making more than 10 or 20 percent off of seeing Medicare patients, we have a problem.  A problem that can’t likely be resolved for years or without Congressional intervention. 

Medicare's payment for physician administered drugs in Part B presents additional examples of misaligned incentives.  Under current law, Medicare is a price taker for these drugs and does not negotiate at all.   Moreover, physicians are paid an add-on payment in Part B that is calculated as a percentage of a drug's price, so the more expensive the drug that a physician chooses, the more money the physician makes and the greater  the incentive is for manufacturers to increase their prices.

In addition to misaligned incentives, Medicare also suffers from inadequate oversight of fraud and abuse.  And I can tell you that I am personally committed to improvement in this area. 

Now, advocates of government-run health care like to point to Medicare’s low administrative costs, a sort of wink and nod to the idea if you remove profit motive, it costs less to administer healthcare. Well, I don’t buy it. 

The Medicare program has extremely low administrative costs, but this isn’t exactly something to brag about.  The reality is we aren’t focusing enough on critical program oversight functions like medical reviews of claims. 

We review less than two tenths of a percent of the over 1 billion claims that Medicare receives a year.  Given the scope and size of the Medicare program, that is ridiculously low.  We also lack adequate legal authority to do the types of prior authorization reviews that have become routine in the private sector, leading to a high frequency of improper payments, and more fraud and abuse.

The private sector moves much faster than a public bureaucracy…which means innovations can come to market that don’t fit into a specific benefit category for Medicare beneficiaries.  It means payers in the private sector can align incentives to increase competition, quality and value for their enrollees.  It means they can act quickly to stop waste and fraud. 

History clearly shows us that when government becomes central to the delivery of care…when its edicts and mandates chase insurers out of the market, and doctors out of networks… that care costs more to deliver, quality diminishes, and patients wait longer for it.

Unfortunately, some are still clamoring for a single-payer, government-run system, euphemistically called Medicare for All.

I find it ironic that in the face of the facts – people, whom I assume are well-meaning, are calling for more government healthcare. 

Spending on a single-payer, government run healthcare system at the federal level will crowd out other priorities, from national defense to infrastructure to spending on education.

If you find yourself skeptical about the negatives of more government control, just look at the history of Obamacare.

Whether you supported the ACA or not…there are certain results since implementation that are simply, observable fact.  After the law forced people to buy a one-size-fits-all government designed health plan, premiums increased drastically, average premiums shot up by 105 percent between 2013 and 2017 with many states experiencing far higher increases, 190 percent in Arizona, 201 percent in Oklahoma, and a whopping 223 percent in Alabama  

The ACA didn’t live up to its promise of preserving your plan or your doctor, as an estimated 4.7 million Americans saw their plans canceled in the first year; and, we’ve seen a big drop in enrollment among people who don’t qualify for generous subsidies … unsubsidized enrollment declined by 20 percent between 2016 and 2017.  

On top of that, this year people living in more than half of all counties across America have access to just one insurer, which is essentially no choice at all.

So costs have risen dramatically, and choice has been curtailed.

Now, with the Trump Administration’s Market Stabilization Rule, getting rid of the individual mandate, and providing waivers to states, along with other steps implemented by President Trump, it is true we have stabilized premiums in the exchange. In fact, for the very first time in the program’s history, they are set to go down slightly…and insurers are re-entering markets they abandoned in individual states.

These are good developments. However, though rates have stabilized, rates are still far too high.

So, when the same voices clamoring for “Medicare for All” promised the ACA would lower costs, allow you to keep your doctor and your plan …and none of that has proven to be true…then I think we have to pay attention to that.

“Medicare for All” compounds the challenges we already face in Medicare by adding tens of millions of Americans into the mix.

To understand the world we would live in under government-run Medicare for All, you have to understand the market dynamics in place today.

Doctors receive less from their Medicare reimbursement than they do from private insurance for the same services. In essence, 170 million Americans in private insurance subsidize the care provided to 60 million Americans in Medicare.

Under “Medicare for All” you either take private insurance away from those 170 million Americans, or greatly restrict access to it, meaning there is no relief valve for physicians facing up to 40 percent payment cuts.

This would decimate physician networks, creating a permanent physician shortage. It would leave medical students with no hope of paying off their loans.

And the cost of Medicare for All has been projected to be as high as $32 Trillion…that’s Trillion with a T.

Basically, if implemented by 2022, Medicare for All would mean healthcare spending would take up 58 percent of federal spending, compared to 28 percent today.

It’s fiscally unsustainable.

But to make matters worse, it would destroy Medicare for the seniors who have spent their whole life paying into it.

A promise made to those who paid for it would become an entitlement for all, destroying an important program for those it was intended for.

Medical innovation would take a back seat. We would give up our status as the world’s leader in medical innovation. Imagine placing every American under a system where an act of Congress is required to add benefits or make routine changes.  Health care is changing rapidly – we need to have a system that is nimble to respond to it.

The reason people are calling for Medicare for All is not because the ACA has worked in remedying what ails our system, but because it has not.

But their solution is literally to do more of what’s not working. It’s like the man who has a pounding headache, who then takes a hammer to his head to make it go away.

If government-run, one-size-fits-all programs are the reason for skyrocketing premiums, the answer is not to put everyone on a government plan.

If government-run care eliminates choices and narrows provider networks, the answer is not a single-payer system where essentially everyone has the same plan and it takes Congress to deliver new benefits.

History shows us that the way forward is to go a completely different direction…to put patients, not government, at the center of reform…to promote competition and choice and value.

Our health care system is the best in the world, but it simply costs too much and is not sustainable.  We all know that.  But, more government is not the answer: We need to start talking about the underlying issues that are driving up costs. 

And we need to start talking about how to move to a value-based care healthcare system, one in which we pay for the value of a service rather than the mere volume of services.

Value based health care isn’t new, you’ve probably heard this before, but unfortunately calls for value-based care by past administrations haven’t led to the value they promised. Their failures weren’t ones of intent, but of perspective, because they initiated their move towards value through government-mandated programs, models, and regulations that moved more power to Washington. They failed to tap the largest force for change in our healthcare system: patients.

After generations of government policy-makers failing to produce the results our system not only requires, but also demands, this Administration is taking a new approach: putting patients at the center of our healthcare system, equipped with the information and freedom to determine value for themselves.

This concept of consumerism certainly isn’t revolutionary. Empowering Americans to make choices for themselves about what they purchase and how much they’re willing to pay for it, will lead to the market responding, and will force providers to increase the quality and coordination of their care at increasingly lower costs.

Pricing is complicated, but rather than waving the white flag and surrendering to a system that is riddled with convoluted payment calculations, often caused by overly-burdensome regulations, let’s all work together to simplify our system and be transparent with patients so that they will be empowered with the information they need to determine which options deliver the highest quality for them and their families.

As I said earlier, we just proposed a rule to make drug manufacturer list prices more transparent.  Earlier this year, we increased price transparency by requiring hospitals to post their prices online, making it easier for patients to know the cost of services before they commit to them, and allowing them to shop for the best value. We know this is just a first step, and we have actively sought input on even more significant requirements.

By the end of this year, we will be launching new consumer tools through our website that will compare Medicare payments and beneficiary copayments for services between Outpatient hospital care and Ambulatory Surgery Centers, empowering patients to be the driver of cost and quality by giving them the information they need to make the best decisions for their care. 

But cost and quality transparency are not the only things that patients need.  They must have access to their health care record.  Increasing interoperability of electronic health care records is also critical to patient empowerment and to driving towards a value based health care system.  To this end, CMS is part of the White House Office of Innovation’s MyHealthEData initiative led by Jared Kushner and Chris Liddell. This initiative is based on the premise that patients should be in control of their health information and have access to their medical records.

Health records belong to the patients, and patients should control them and be able to share them with providers, caregivers, researchers, or whomever they want.

But, MyHealthEData, is more than just patients and doctors getting health care data to better coordinate care and avoid unnecessary treatment.  It’s about driving a new era of digital health, one that will aggregate health data to trigger innovation, and advance research to cure diseases and generate more evidence-based treatment guidelines that will drive down costs and improve health outcomes, leading us to more value-based care.

When we announced MyHealthEData, we also unveiled Medicare Blue Button 2.0, a new initiative that will allow a majority of Medicare beneficiaries to connect their claims data to third party apps, and research programs.  Today, we have over 1200 developers working on new apps for our Medicare beneficiaries.  And while, we have provided claims data to Medicare beneficiaries in the fee for service program, we have called upon all insurers to do the same and you will be hearing more from us on this very soon.

In our drive towards value, and lowering health care costs, we are also working to remove barriers to innovation and value.  To this end, as a part of the President’s Cut the Red Tape Initiative, CMS launched our Patients Over Paperwork Initiative to reduce unnecessary and redundant regulations that impact the entire health care delivery system by reducing efficiency and increasing costs.   

Every hour saved from reducing needless administrative burden is an hour more that our healthcare system can spend improving Americans’ health outcomes and reducing costs.

CMS projects that our final rules and current proposals will eliminate more than 53 million hours of burden for providers and save our healthcare system close to $5.2 billion in the next four years.

As part of this effort, we have streamlined provider quality reporting requirements in Medicare through the Meaningful Measures initiative.  Meaningful Measures is about continuing to focus on evaluating quality, safety, and program integrity, but recognizing, that in our drive to value and innovation, we can’t weigh providers down with reporting that doesn’t improve patient outcomes.   

This year we have overhauled our measures, getting rid of the ones that were duplicative, topped out, process oriented or just not meaningful to patient care. I am supportive of quality measures that mean something to providers and patients. But we also have to make sure that we have the back-end processes in place to evaluate quality without the provider having to spend hours on reporting.  This year we combed through more than 500 quality measures and proposed to eliminate more than 100 of them while increasing program integrity and patient safety.

In as much as Medicare can do, we won’t meaningfully reduce provider burden unless all payers work together to make measures easier for providers to report and much more outcomes-driven.  We hope plans will join us in this effort and we look forward to working with you on this important initiative. 

As we drive towards value, we must rethink about how we align financial incentives to drive quality and lower cost. At CMS, we are using use the tools available to us in the Center for Medicare and Medicaid Innovation – or CMMI – to introduce new flexibilities and strengthen our programs.

We have seen the potential for Medicare Advantage plans to innovate in response to consumers' needs.  The Value-Based Insurance Design or VBID model tests particular flexibilities for Medicare Advantage plans.  We are taking a closer look at VBID to see how we could lift additional barriers so that plans can better meet patient needs, to lower drug costs for patients and so that plan incentives are aligned with beneficiary incentives. 

We are also looking at models that will focus on areas in the health care system that drive costs. This includes focusing on individuals who are seriously ill. We know we have to figure out a better way to provide care for our beneficiaries with chronic and advanced disease.  We want to think about innovative ways to treat these individuals that realign incentives for providers to focus first on improving quality of life, quality of care, while also lowering costs. 

In addition, we will be developing models that identify high-value providers – ones that deliver high-quality care at lower costs – and create new financial incentives for our beneficiaries to seek out these high-value providers. 

We aim to provide a range of alternative payment models, creating a variety of options and choices that create incentives for clinicians to provide better value to their patients.

Well I could go on, but I see sleepy faces and bowed heads praying to the cell phone gods. 

We’ve made tremendous strides in Medicare this year. Medicare Advantage plans this year will offer seniors more benefits, at lower costs. We have empowered seniors with more choices, increased transparency and introduced a better customer service experience, but problems in Medicare still persist. We need to make Medicare sustainable so that it can continue to deliver on its promise to future generations. 

Changing the program to make it an open-ended, government-run entitlement program for all Americans is not the answer. Instead, we need to come together as a healthcare community and focus on the drivers of our skyrocketing healthcare costs:  Drug pricing, lack of interoperability, overly-burdensome regulations, and inefficiencies that are jeopardizing our status as the premier healthcare system in the world.

The solution to our problems is right in front of us, and it’s all of us coming together, not relying on the government, to transform our health care system to make it more sustainable for today and for future generations.

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