From the moment I took office as President, the central challenge we have confronted as a nation has been the need to lift ourselves out of the worst recession since World War II. In recent months, we have taken a series of extraordinary steps, not just to repair the immediate damage to our economy, but to build a new foundation for lasting and sustained growth. We are creating new jobs. We are unfreezing our credit markets. And we are stemming the loss of homes and the decline of home values.
But even as we have made progress, we know that the road to prosperity remains long and difficult. We also know that one essential step on our journey is to control the spiraling cost of health care in America.
Today, we are spending over $2 trillion a year on health care - almost 50 percent more per person than the next most costly nation. And yet, for all this spending, more of our citizens are uninsured; the quality of our care is often lower; and we aren't any healthier. In fact, citizens in some countries that spend less than we do are actually living longer than we do.
Make no mistake: the cost of our health care is a threat to our economy. It is an escalating burden on our families and businesses. It is a ticking time-bomb for the federal budget. And it is unsustainable for the United States of America.
It is unsustainable for Americans like Laura Klitzka, a young mother I met in Wisconsin last week, who has learned that the breast cancer she thought she'd beaten had spread to her bones; who is now being forced to spend time worrying about how to cover the $50,000 in medical debts she has already accumulated, when all she wants to do is spend time with her two children and focus on getting well. These are not worries a woman like Laura should have to face in a nation as wealthy as ours.
Stories like Laura's are being told by women and men all across this country - by families who have seen out-of-pocket costs soar, and premiums double over the last decade at a rate three times faster than wages. This is forcing Americans of all ages to go without the checkups or prescriptions they need. It's creating a situation where a single illness can wipe out a lifetime of savings.
Our costly health care system is unsustainable for doctors like Michael Kahn in New Hampshire, who, as he puts it, spends 20 percent of each day supervising a staff explaining insurance problems to patients, completing authorization forms, and writing appeal letters; a routine that he calls disruptive and distracting, giving him less time to do what he became a doctor to do and actually care for his patients.
Small business owners like Chris and Becky Link in Nashville are also struggling. They've always wanted to do right by the workers at their family-run marketing firm, but have recently had to do the unthinkable and lay off a number of employees - layoffs that could have been deferred, they say, if health care costs weren't so high. Across the country, over one third of small businesses have reduced benefits in recent years and one third have dropped their workers' coverage altogether since the early 90's.
Our largest companies are suffering as well. A big part of what led General Motors and Chrysler into trouble in recent decades were the huge costs they racked up providing health care for their workers; costs that made them less profitable, and less competitive with automakers around the world. If we do not fix our health care system, America may go the way of GM; paying more, getting less, and going broke.
When it comes to the cost of our health care, then, the status quo is unsustainable. Reform is not a luxury, but a necessity. I know there has been much discussion about what reform would cost, and rightly so. This is a test of whether we - Democrats and Republicans alike - are serious about holding the line on new spending and restoring fiscal discipline.
But let there be no doubt - the cost of inaction is greater. If we fail to act, premiums will climb higher, benefits will erode further, and the rolls of uninsured will swell to include millions more Americans.
If we fail to act, one out of every five dollars we earn will be spent on health care within a decade. In thirty years, it will be about one out of every three - a trend that will mean lost jobs, lower take-home pay, shuttered businesses, and a lower standard of living for all Americans.
And if we fail to act, federal spending on Medicaid and Medicare will grow over the coming decades by an amount almost equal to the amount our government currently spends on our nation's defense. In fact, it will eventually grow larger than what our government spends on anything else today. It's a scenario that will swamp our federal and state budgets, and impose a vicious choice of either unprecedented tax hikes, overwhelming deficits, or drastic cuts in our federal and state budgets.
To say it as plainly as I can, health care reform is the single most important thing we can do for America's long-term fiscal health. That is a fact.
And yet, as clear as it is that our system badly needs reform, reform is not inevitable. There's a sense out there among some that, as bad as our current system may be, the devil we know is better than the devil we don't. There is a fear of change - a worry that we may lose what works about our health care system while trying to fix what doesn't.
I understand that fear. I understand that cynicism. They are scars left over from past efforts at reform. Presidents have called for health care reform for nearly a century. Teddy Roosevelt called for it. Harry Truman called for it. Richard Nixon called for it. Jimmy Carter called for it. Bill Clinton called for it. But while significant individual reforms have been made - such as Medicare, Medicaid, and the children's health insurance program - efforts at comprehensive reform that covers everyone and brings down costs have largely failed.
Part of the reason is because the different groups involved - physicians, insurance companies, businesses, workers, and others - simply couldn't agree on the need for reform or what shape it would take. And another part of the reason has been the fierce opposition fueled by some interest groups and lobbyists - opposition that has used fear tactics to paint any effort to achieve reform as an attempt to socialize medicine.
Despite this long history of failure, I am standing here today because I think we are in a different time. One sign that things are different is that just this past week, the Senate passed a bill that will protect children from the dangers of smoking - a reform the AMA has long championed - and one that went nowhere when it was proposed a decade ago. What makes this moment different is that this time - for the first time - key stakeholders are aligning not against, but in favor of reform. They are coming together out of a recognition that while reform will take everyone in our health care community doing their part, ultimately, everyone will benefit.
And I want to commend the AMA, in particular, for offering to do your part to curb costs and achieve reform. A few weeks ago, you joined together with hospitals, labor unions, insurers, medical device manufacturers and drug companies to do something that would've been unthinkable just a few years ago - you promised to work together to cut national health care spending by two trillion dollars over the next decade, relative to what it would otherwise have been. That will bring down costs, that will bring down premiums, and that's exactly the kind of cooperation we need.
The question now is, how do we finish the job? How do we permanently bring down costs and make quality, affordable health care available to every American?
That's what I've come to talk about today. We know the moment is right for health care reform. We know this is an historic opportunity we've never seen before and may not see again. But we also know that there are those who will try and scuttle this opportunity no matter what - who will use the same scare tactics and fear-mongering that's worked in the past. They'll give dire warnings about socialized medicine and government takeovers; long lines and rationed care; decisions made by bureaucrats and not doctors. We've heard it all before - and because these fear tactics have worked, things have kept getting worse.
So let me begin by saying this: I know that there are millions of Americans who are content with their health care coverage - they like their plan and they value their relationship with their doctor. And that means that no matter how we reform health care, we will keep this promise: If you like your doctor, you will be able to keep your doctor. Period. If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what. My view is that health care reform should be guided by a simple principle: fix what's broken and build on what works.
If we do that, we can build a health care system that allows you to be physicians instead of administrators and accountants; a system that gives Americans the best care at the lowest cost; a system that eases up the pressure on businesses and unleashes the promise of our economy, creating hundreds of thousands of jobs, making take-home wages thousands of dollars higher, and growing our economy by tens of billions more every year. That's how we will stop spending tax dollars to prop up an unsustainable system, and start investing those dollars in innovations and advances that will make our health care system and our economy stronger.
That's what we can do with this opportunity. That's what we must do with this moment.
Now, the good news is that in some instances, there is already widespread agreement on the steps necessary to make our health care system work better.
First, we need to upgrade our medical records by switching from a paper to an electronic system of record keeping. And we have already begun to do this with an investment we made as part of our Recovery Act.
It simply doesn't make sense that patients in the 21st century are still filling out forms with pens on papers that have to be stored away somewhere. As Newt Gingrich has rightly pointed out, we do a better job tracking a FedEx package in this country than we do tracking a patient's health records. You shouldn't have to tell every new doctor you see about your medical history, or what prescriptions you're taking. You should not have to repeat costly tests. All of that information should be stored securely in a private medical record so that your information can be tracked from one doctor to another - even if you change jobs, even if you move, and even if you have to see a number of different specialists.
That will not only mean less paper pushing and lower administrative costs, saving taxpayers billions of dollars. It will also make it easier for physicians to do their jobs. It will tell you, the doctors, what drugs a patient is taking so you can avoid prescribing a medication that could cause a harmful interaction. It will help prevent the wrong dosages from going to a patient. And it will reduce medical errors that lead to 100,000 lives lost unnecessarily in our hospitals every year.
The second step that we can all agree on is to invest more in preventive care so that we can avoid illness and disease in the first place. That starts with each of us taking more responsibility for our health and the health of our children. It means quitting smoking, going in for that mammogram or colon cancer screening. It means going for a run or hitting the gym, and raising our children to step away from the video games and spend more time playing outside.
It also means cutting down on all the junk food that is fueling an epidemic of obesity, putting far too many Americans, young and old, at greater risk of costly, chronic conditions. That's a lesson Michelle and I have tried to instill in our daughters with the White House vegetable garden that Michelle planted. And that's a lesson that we should work with local school districts to incorporate into their school lunch programs.
Building a health care system that promotes prevention rather than just managing diseases will require all of us to do our part. It will take doctors telling us what risk factors we should avoid and what preventive measures we should pursue. And it will take employers following the example of places like Safeway that is rewarding workers for taking better care of their health while reducing health care costs in the process. If you're one of the three quarters of Safeway workers enrolled in their "Healthy Measures" program, you can get screened for problems like high cholesterol or high blood pressure. And if you score well, you can pay lower premiums. It's a program that has helped Safeway cut health care spending by 13 percent and workers save over 20 percent on their premiums. And we are open to doing more to help employers adopt and expand programs like this one.
Our federal government also has to step up its efforts to advance the cause of healthy living. Five of the costliest illnesses and conditions - cancer, cardiovascular disease, diabetes, lung disease, and strokes - can be prevented. And yet only a fraction of every health care dollar goes to prevention or public health. That is starting to change with an investment we are making in prevention and wellness programs that can help us avoid diseases that harm our health and the health of our economy.
But as important as they are, investments in electronic records and preventive care are just preliminary steps. They will only make a dent in the epidemic of rising costs in this country.
Despite what some have suggested, the reason we have these costs is not simply because we have an aging population. Demographics do account for part of rising costs because older, sicker societies pay more on health care than younger, healthier ones. But what accounts for the bulk of our costs is the nature of our health care system itself - a system where we spend vast amounts of money on things that aren't making our people any healthier; a system that automatically equates more expensive care with better care.
A recent article in the New Yorker, for example, showed how McAllen, Texas is spending twice as much as El Paso County - not because people in McAllen are sicker and not because they are getting better care. They are simply using more treatments - treatments they don't really need; treatments that, in some cases, can actually do people harm by raising the risk of infection or medical error. And the problem is, this pattern is repeating itself across America. One Dartmouth study showed that you're no less likely to die from a heart attack and other ailments in a higher spending area than in a lower spending one.
There are two main reasons for this. The first is a system of incentives where the more tests and services are provided, the more money we pay. And a lot of people in this room know what I'm talking about. It is a model that rewards the quantity of care rather than the quality of care; that pushes you, the doctor, to see more and more patients even if you can't spend much time with each; and gives you every incentive to order that extra MRI or EKG, even if it's not truly necessary. It is a model that has taken the pursuit of medicine from a profession - a calling - to a business.
That is not why you became doctors. That is not why you put in all those hours in the Anatomy Suite or the O.R. That is not what brings you back to a patient's bedside to check in or makes you call a loved one to say it'll be fine. You did not enter this profession to be bean-counters and paper-pushers. You entered this profession to be healers - and that's what our health care system should let you be.
That starts with reforming the way we compensate our doctors and hospitals. We need to bundle payments so you aren't paid for every single treatment you offer a patient with a chronic condition like diabetes, but instead are paid for how you treat the overall disease. We need to create incentives for physicians to team up - because we know that when that happens, it results in a healthier patient. We need to give doctors bonuses for good health outcomes - so that we are not promoting just more treatment, but better care.
And we need to rethink the cost of a medical education, and do more to reward medical students who choose a career as a primary care physicians and who choose to work in underserved areas instead of a more lucrative path. That's why we are making a substantial investment in the National Health Service Corps that will make medical training more affordable for primary care doctors and nurse practitioners so they aren't drowning in debt when they enter the workforce.
The second structural reform we need to make is to improve the quality of medical information making its way to doctors and patients. We have the best medical schools, the most sophisticated labs, and the most advanced training of any nation on the globe. Yet we are not doing a very good job harnessing our collective knowledge and experience on behalf of better medicine. Less than one percent of our health care spending goes to examining what treatments are most effective. And even when that information finds its way into journals, it can take up to 17 years to find its way to an exam room or operating table.
As a result, too many doctors and patients are making decisions without the benefit of the latest research. A recent study, for example, found that only half of all cardiac guidelines are based on scientific evidence. Half. That means doctors may be doing a bypass operation when placing a stent is equally effective, or placing a stent when adjusting a patient's drugs and medical management is equally effective - driving up costs without improving a patient's health.
So, one thing we need to do is figure out what works, and encourage rapid implementation of what works into your practices. That's why we are making a major investment in research to identify the best treatments for a variety of ailments and conditions.
Let me be clear: identifying what works is not about dictating what kind of care should be provided. It's about providing patients and doctors with the information they need to make the best medical decisions.
Still, even when we do know what works, we are often not making the most of it. That's why we need to build on the examples of outstanding medicine at places like the Cincinnati Children's Hospital, where the quality of care for cystic fibrosis patients shot up after the hospital began incorporating suggestions from parents. And places like Tallahassee Memorial Health Care, where deaths were dramatically reduced with rapid response teams that monitored patients' conditions and "multidisciplinary rounds" with everyone from physicians to pharmacists. And places like the Geisinger Health system in rural Pennsylvania and the Intermountain Health in Salt Lake City, where high-quality care is being provided at a cost well below average. These are islands of excellence that we need to make the standard in our health care system.
Replicating best practices. Incentivizing excellence. Closing cost disparities. Any legislation sent to my desk that does not achieve these goals does not earn the title of reform. But my signature on a bill is not enough. I need your help, doctors. To most Americans, you are the health care system. Americans - me included - just do what you recommend. That is why I will listen to you and work with you to pursue reform that works for you. And together, if we take all these steps, we can bring spending down, bring quality up, and save hundreds of billions of dollars on health care costs while making our health care system work better for patients and doctors alike.
Now, I recognize that it will be hard to make some of these changes if doctors feel like they are constantly looking over their shoulder for fear of lawsuits. Some doctors may feel the need to order more tests and treatments to avoid being legally vulnerable. That's a real issue. And while I'm not advocating caps on malpractice awards which I believe can be unfair to people who've been wrongfully harmed, I do think we need to explore a range of ideas about how to put patient safety first, let doctors focus on practicing medicine, and encourage broader use of evidence-based guidelines. That's how we can scale back the excessive defensive medicine reinforcing our current system of more treatment rather than better care.
These changes need to go hand-in-hand with other reforms. Because our health care system is so complex and medicine is always evolving, we need a way to continually evaluate how we can eliminate waste, reduce costs, and improve quality. That is why I am open to expanding the role of a commission created by a Republican Congress called the Medicare Payment Advisory Commission - which happens to include a number of physicians. In recent years, this commission proposed roughly $200 billion in savings that never made it into law. These recommendations have now been incorporated into our broader reform agenda, but we need to fast-track their proposals in the future so that we don't miss another opportunity to save billions of dollars, as we gain more information about what works and what doesn't in our health care system.
As we seek to contain the cost of health care, we must also ensure that every American can get coverage they can afford. We must do so in part because it is in all of our economic interests. Each time an uninsured American steps foot into an emergency room with no way to reimburse the hospital for care, the cost is handed over to every American family as a bill of about $1,000 that is reflected in higher taxes, higher premiums, and higher health care costs; a hidden tax that will be cut as we insure all Americans. And as we insure every young and healthy American, it will spread out risk for insurance companies, further reducing costs for everyone.
But alongside these economic arguments, there is another, more powerful one. It is simply this: We are not a nation that accepts nearly 46 million uninsured men, women, and children. We are not a nation that lets hardworking families go without the coverage they deserve; or turns its back on those in need. We are a nation that cares for its citizens. We are a people who look out for one another. That is what makes this the United States of America.
So, we need to do a few things to provide affordable health insurance to every single American. The first thing we need to do is protect what's working in our health care system. Let me repeat - if you like your health care, the only thing reform will mean is your health care will cost less. If anyone says otherwise, they are either trying to mislead you or don't have their facts straight.
If you don't like your health coverage or don't have any insurance, you will have a chance to take part in what we're calling a Health Insurance Exchange. This Exchange will allow you to one-stop shop for a health care plan, compare benefits and prices, and choose a plan that's best for you and your family - just as federal employees can do, from a postal worker to a Member of Congress. You will have your choice of a number of plans that offer a few different packages, but every plan would offer an affordable, basic package. And one of these options needs to be a public option that will give people a broader range of choices and inject competition into the health care market so that force waste out of the system and keep the insurance companies honest.
Now, I know there's some concern about a public option. In particular, I understand that you are concerned that today's Medicare rates will be applied broadly in a way that means our cost savings are coming off your backs. These are legitimate concerns, but ones, I believe, that can be overcome. As I stated earlier, the reforms we propose are to reward best practices, focus on patient care, not the current piece-work reimbursement. What we seek is more stability and a health care system on a sound financial footing. And these reforms need to take place regardless of what happens with a public option. With reform, we will ensure that you are being reimbursed in a thoughtful way tied to patient outcomes instead of relying on yearly negotiations about the Sustainable Growth Rate formula that's based on politics and the state of the federal budget in any given year. The alternative is a world where health care costs grow at an unsustainable rate, threatening your reimbursements and the stability of our health care system.
What are not legitimate concerns are those being put forward claiming a public option is somehow a Trojan horse for a single-payer system. I'll be honest. There are countries where a single-payer system may be working. But I believe - and I've even taken some flak from members of my own party for this belief - that it is important for us to build on our traditions here in the United States. So, when you hear the naysayers claim that I'm trying to bring about government-run health care, know this - they are not telling the truth.
What I am trying to do - and what a public option will help do - is put affordable health care within reach for millions of Americans. And to help ensure that everyone can afford the cost of a health care option in our Exchange, we need to provide assistance to families who need it. That way, there will be no reason at all for anyone to remain uninsured.
Indeed, it is because I am confident in our ability to give people the ability to get insurance that I am open to a system where every American bears responsibility for owning health insurance, so long as we provide a hardship waiver for those who still can't afford it. The same is true for employers. While I believe every business has a responsibility to provide health insurance for its workers, small businesses that cannot afford it should receive an exemption. And small business workers and their families will be able to seek coverage in the Exchange if their employer is not able to provide it.
Insurance companies have expressed support for the idea of covering the uninsured - and I welcome their willingness to engage constructively in the reform debate. But what I refuse to do is simply create a system where insurance companies have more customers on Uncle Sam's dime, but still fail to meet their responsibilities. That is why we need to end the practice of denying coverage on the basis of preexisting conditions. The days of cherry-picking who to cover and who to deny - those days are over.
This is personal for me. I will never forget watching my own mother, as she fought cancer in her final days, worrying about whether her insurer would claim her illness was a preexisting condition so it could get out of providing coverage. Changing the current approach to preexisting conditions is the least we can do - for my mother and every other mother, father, son, and daughter, who has suffered under this practice. And it will put health care within reach for millions of Americans.
Now, even if we accept all of the economic and moral reasons for providing affordable coverage to all Americans, there is no denying that it will come at a cost - at least in the short run. But it is a cost that will not - I repeat, not - add to our deficits. Health care reform must be and will be deficit neutral in the next decade.
There are already voices saying the numbers don't add up. They are wrong. Here's why. Making health care affordable for all Americans will cost somewhere on the order of one trillion dollars over the next ten years. That sounds like a lot of money - and it is. But remember: it is less than we are projected to spend on the war in Iraq. And also remember: failing to reform our health care system in a way that genuinely reduces cost growth will cost us trillions of dollars more in lost economic growth and lower wages.
That said, let me explain how we will cover the price tag. First, as part of the budget that was passed a few months ago, we've put aside $635 billion over ten years in what we are calling a Health Reserve Fund. Over half of that amount - more than $300 billion - will come from raising revenue by doing things like modestly limiting the tax deductions the wealthiest Americans can take to the same level it was at the end of the Reagan years. Some are concerned this will dramatically reduce charitable giving, but statistics show that's not true, and the best thing for our charities is the stronger economy that we will build with health care reform.
But we cannot just raise revenues. We also have to make spending cuts in part by examining inefficiencies in the Medicare program. There will be a robust debate about where these cuts should be made, and I welcome that debate. But here's where I think these cuts should be made. First, we should end overpayments to Medicare Advantage. Today, we are paying Medicare Advantage plans much more than we pay for traditional Medicare services. That's a good deal for insurance companies, but not the American people. That's why we need to introduce competitive bidding into the Medicare Advantage program, a program under which private insurance companies offer Medicare coverage. That will save $177 billion over the next decade.
Second, we need to use Medicare reimbursements to reduce preventable hospital readmissions. Right now, almost 20 percent of Medicare patients discharged from hospitals are readmitted within a month, often because they are not getting the comprehensive care they need. This puts people at risk and drives up costs. By changing how Medicare reimburses hospitals, we can discourage them from acting in a way that boosts profits, but drives up costs for everyone else. That will save us $25 billion over the next decade.
Third, we need to introduce generic biologic drugs into the marketplace. These are drugs used to treat illnesses like anemia. But right now, there is no pathway at the FDA for approving generic versions of these drugs. Creating such a pathway will save us billions of dollars. And we can save another roughly $30 billion by getting a better deal for our poorer seniors while asking our well-off seniors to pay a little more for their drugs.
So, that's the bulk of what's in the Health Reserve Fund. I have also proposed saving another $313 billion in Medicare and Medicaid spending in several other ways. One way is by adjusting Medicare payments to reflect new advances and productivity gains in our economy. Right now, Medicare payments are rising each year by more than they should. These adjustments will create incentives for providers to deliver care more effectively, and save us roughly $109 billion in the process.
Another way we can achieve savings is by reducing payments to hospitals for treating uninsured people. I know hospitals rely on these payments now because of the large number of uninsured patients they treat. But as the number of uninsured people goes down with our reforms, the amount we pay hospitals to treat uninsured people should go down, as well. Reducing these payments gradually as more and more people have coverage will save us over $106 billion, and we'll make sure the difference goes to the hospitals that most need it.
We can also save about $75 billion through more efficient purchasing of prescription drugs. And we can save about one billion more by rooting out waste, abuse, and fraud throughout our health care system so that no one is charging more for a service than it's worth or charging a dime for a service they did not provide.
But let me be clear: I am committed to making these cuts in a way that protects our senior citizens. In fact, these proposals will actually extend the life of the Medicare Trust Fund by 7 years and reduce premiums for Medicare beneficiaries by roughly $43 billion over 10 years. And I'm working with AARP to uphold that commitment.
Altogether, these savings mean that we have put about $950 billion on the table - not counting some of the longer-term savings that will come about from reform - taking us almost all the way to covering the full cost of health care reform. In the weeks and months ahead, I look forward to working with Congress to make up the difference so that health care reform is fully paid for - in a real, accountable way. And let me add that this does not count some of the longer-term savings that will come about from health care reform. By insisting that reform be deficit neutral over the next decade and by making the reforms that will help slow the growth rate of health care costs over coming decades, we can look forward to faster economic growth, higher living standards, and falling, not rising, budget deficits.
I know people are cynical we can do this. I know there will be disagreements about how to proceed in the days ahead. But I also know that we cannot let this moment pass us by.
The other day, my friend, Congressman Earl Blumenauer, handed me a magazine with a special issue titled, "The Crisis in American Medicine." One article notes "soaring charges." Another warns about the "volume of utilization of services." And another asks if we can find a "better way [than fee-for-service] for paying for medical care." It speaks to many of the challenges we face today. The thing is, this special issue was published by Harper's Magazine in October of 1960.
Members of the American Medical Association - my fellow Americans - I am here today because I do not want our children and their children to still be speaking of a crisis in American medicine fifty years from now. I do not want them to still be suffering from spiraling costs we did not stem, or sicknesses we did not cure. I do not want them to be burdened with massive deficits we did not curb or a worsening economy we did not rebuild.
I want them to benefit from a health care system that works for all of us; where families can open a doctor's bill without dreading what's inside; where parents are taking their kids to get regular checkups and testing themselves for preventable ailments; where parents are feeding their kids healthier food and kids are exercising more; where patients are spending more time with doctors and doctors can pull up on a computer all the medical information and latest research they'd ever want to meet that patient's needs; where orthopedists and nephrologists and oncologists are all working together to treat a single human being; where what's best about America's health care system has become the hallmark of America's health care system.
That is the health care system we can build. That is the future within our reach. And if we are willing to come together and bring about that future, then we will not only make Americans healthier and not only unleash America's economic potential, but we will reaffirm the ideals that led you into this noble profession, and build a health care system that lets all Americans heal. Thank you.
President Obama is addressing the American Medical Association. Watch his speech live below. The full text, as prepared for delivery, is below the video player.