Transforming American Healthcare National Symposium - Remarks by Thomas J. Donohue

Phoenix, AZ
March 23, 2006

** As Prepared for Delivery**

Thank you, Michael. It's refreshing to see a diverse audience of healthcare providers, insurers, employers, government folks, academics, and others dedicated to improving our healthcare system.

Improvement of our system cannot be realized unless all of the stakeholders work together, and this symposium is a good example of that kind of collaboration.

I'd like to take this opportunity to present the employer perspective on our nation's health care crisis—and yes, a crisis is an accurate description of what we're encountering.

Most American companies provide their employees— voluntarily, I might add—with health care coverage. In fact, 136 million Americans receive health care through private sector employers.

Employers remain committed to providing health care to their workers, but current cost trends make that an increasingly difficult proposition.

Businesses cannot continue to absorb double-digit percentage increases in health care costs year after year and be expected to compete in a highly competitive global economy.

Let me give you an example of the competitive threat I'm talking about. In 2004, General Motors spent more than $1,500 on employee health care for every vehicle it produced. By comparison, Toyota, which has very low retiree costs for its U.S. operations, is estimated to have spent about $200 on employee health care per vehicle.

The rise in health care costs has forced many U.S. employers into some very hard decisions. Do you shift more health care costs onto your employees? Do you reduce benefit levels? Or do you drop coverage altogether?

Small businesses with limited purchasing power are particularly hard hit. It is estimated that about 60% of the 45 million Americans without health insurance either work for small businesses or are dependent on someone who does.

There is no silver bullet for fixing the health care cost crisis. There is not a single piece of legislation that can fix everything in one fell swoop. But there are several legislative and non-legislative ways to restrain costs and extend coverage to those without it.

First, we need greater transparency in cost and quality of health care, and we're slowly moving in that direction as the market begins to embrace consumer-driven health care products.

Consumers with traditional types of employer-sponsored coverage have little appreciation or understanding of the cost of health care.

They visit their doctor or fill a prescription and make a $15 co-payment, with little to any knowledge of the actual cost of the treatment or medication they just received because a third party – the insurer or employer – pays the bill.

As more consumer-driven health care products are purchased and adopted, consumers will demand information on cost and quality, the market will respond to those demands, and transparency will improve.

The shift to a more consumer-driven system is well underway in the employer market. The evidence is the growing popularity of Health Savings Accounts, or HSAs, among employers and their workers.

These accounts—when paired with a high-deductible health insurance plan—allow employees to save tax-free dollars to be used for eligible health care expenses.

Funds in an HSA belong to the employee or individual, regardless of who contributes the money. That makes the employee more likely to shop around for health care services—carefully weighing both price and quality—and use health care services only when necessary.

More than 3 million Americans have signed up for HSA-compatible health plans, and the Chamber wants to see that number grow.

We are lobbying Congress to pass legislation that would:

Raise the limit on tax-free contributions to an HSA;

Allow individuals to deduct the cost of their premiums for their high-deductible health plans;

Provide a tax rebate for small business owners who contribute to their employees' HSAs; and

Provide a refundable tax credit for low-income individuals.

Of course, consumers in charge of their own health care dollars cannot make wise, informed decisions without good information.

We must develop a common, uniform, and accepted method for assessing and evaluating quality and align incentives to reward it.

Medicare has already introduced "pay for performance" reimbursement on a limited scale, and it may not be too long before private employers move toward that system as well.

Of course, for that to happen, there needs to be more reliable data on quality. That brings me to my second point – dramatically expanding the use of information technology to track and store medical information.

U.S. industries such as retail, shipping, and banking have successfully made the transition to the electronic age, yet the health care industry's use of information technology lags far behind.

Walk into just about any physician's office and what do you see behind the desk—rows and rows of filing cabinets containing thousands of paper medical records.

Health care is stuck in a paper-based system, and that creates unnecessary costs and threats to health.

Many injuries, illnesses, and even deaths may have been avoided after Hurricanes Katrina and Rita had medical records been stored electronically rather than on paper.

Hundreds of thousands of paper records were destroyed in the storms, leaving physicians and rescue workers without knowledge of the medical histories of the people they were treating.

The widespread adoption of health IT would help lower costs, prevent medical errors, guide medical decision making, and allow providers to better track health outcomes and coordinate public health activities.

One of the Chamber's priorities this year is passage of a health information technology bill that would develop a nationwide interoperable health IT infrastructure.

We support the work of the American Health Information Community to provide input and recommendations to the government on how to make health records digital and interoperable, and assure that the privacy and security of those records are protected, in a smooth, market-led way.

A third important ingredient for controlling costs and achieving greater access to health care is to reform Medicare and Medicaid reimbursement rates. On its face, that statement sounds contradictory.

How can more government spending on health care control costs and improve access?

The fact is, Medicare and Medicare reimbursement rates don't cover the cost of services delivered. In 2002, Medicare paid 95 cents for each dollar of services received, while Medicaid paid about 85 cents for each dollar of services.

Providers are making up the difference by charging private payers more. In fact, in 2002, private payers paid $1.22 for a $1 of services received. We can't continue to expect the private sector to keep paying more than its fair share of the nation's health care bill, and so we need a fair government payment formula.

Fourth, the Chamber strongly supports the creation of new health care purchasing vehicles such as Small Business Health Plans, which would allow small and mid-size businesses to band together across state lines to purchase health insurance.

Under this arrangement, businesses could achieve the same bargaining power that large companies and labor union plans have, resulting in more affordable rates and better service.

Small Business Health Plans would also allow small and mid-size businesses to offer plans without being subject to state mandates, just as larger businesses and union plans currently do.

Speaking of health care mandates, we're seeing an effort in many states to impose them on large employers.

Mandates can result in significant job losses and are not effective in controlling costs or improving the quality of care.

In January, the Maryland state legislature overrode the Governor's veto of a bill that requires employers with 10,000 or more employees to earmark 8% of payroll spending for health care costs or divert an equal amount of money into the state's fund for low-income individuals.

The Chamber is supporting the Retail Industry Leaders Association's legal challenge to Maryland's new law, and we're being very vocal in our opposition to similar legislation in many other states – with great success, I might add.

No other legislative body in the country has acted on employer mandate proposals since the Maryland veto override.

Bills have stalled, been derailed, or voted down in more than half a dozen states. But many proposals are still on the table, and we remain vigilant in our efforts to stop them.

Fifth, the growth of frivolous lawsuits stemming from a severely flawed medical liability system has direct consequences for health care costs, quality, and access. We must reform the system.

On any given day, there are more than 125,000 medical liability lawsuits in progress against America's 700,000 doctors.

The median award in medical liability cases jumped 140% from 1997 to 2003, topping $1.2 million.

To protect themselves against claims, doctors are increasingly practicing "defensive medicine" – ordering unnecessary tests and providing redundant treatment.

The costs of defensive medicine are estimated to be between $70 billion and $126 billion per year.

Worse than that, some doctors are getting out of the profession or moving somewhere with a more favorable legal climate.

The American Medical Association says 20 states have a health care liability crisis that is causing doctors to flee those states, leaving working families without access to affordable health care.

One of the worst states is Illinois. While an OB-GYN in California, which has had medical liability reforms since the 1970s, can expect to pay around $60,000 per year for liability insurance – that same doctor in Chicago will pay upwards of $200,000 or more because of the liability crisis.

These costs forced Southern Illinois' only neurosurgeon out of the state a few years ago, and large swaths of northern Illinois have had to make do without a Level 1 Trauma Center for much of the past few years.

Women living in the city of Carbondale, Illinois, have had to drive more than 20 miles to have their babies delivered.

We hope that the recent medical liability reforms passed in Illinois will help reverse some of the "brain drain" in that state's health care sector.

The trial bar also has set its sights on America's pharmaceutical industry. By last fall, Merck was facing almost 5,000 federal and state lawsuits stemming from the use of Vioxx – even though the company voluntarily pulled the drug from the market.

Some analysts are now projecting that Merck could take a hit of up to $50 billion by the time this litigation is said and done.

Drug lawsuits are changing physician and patient behavior – for the worse. In a recent survey conducted for the Chamber, 38% of doctors and 44% of pharmacists said that their own patients had stopped taking prescribed medicine because the patients found out their medication might be the subject of a lawsuit. That was without consulting with their doctor first.

More alarming than that—43% of doctors said they had not prescribed a medication for a patient because of fear of lawsuits.

What's equally, if not more, disturbing is that breakthrough or life-enhancing pharmaceuticals or vaccines for diseases ranging from the flu to smallpox may never make it to market out of fear of litigation.

Breakthrough drugs are critical for early, preventative treatment of chronic diseases and can prevent those diseases from reaching the acute stage.

Health care liability is only partly about costs. It's about jobs…peoples' lives…their health and well-being …being able to afford to take their kids to the doctor when they're sick, or even being able to find a doctor who can deliver their babies.

And so the Chamber is aggressively pushing medical liability reform that would cap noneconomic damages at $250,000 and restrict the ability to bring a lawsuit to within three years of the date that the injury occurred.

Finally, as we work to make health care more accessible, we must resist the temptation to hand over more control of our system to the government.

Government-run health systems, like what Canada and much of Europe has, dictate what care consumers get and when they get it – and that goes against the fundamental nature of our free-market society.

Universal health care can have major consequences on the delivery of services. For example, MRI wait times in Minnesota are measured in hours; wait times in Canada are measured in months, and those wait times are getting longer. There are more MRIs performed just in Minnesota than in all of Canada.

Cancer survival rates are much higher here than in Europe or anywhere else in the world – and that's because our patients generally receive best-in-the-world care when it's needed.

Conclusion

Ladies and gentlemen, the American health care system, though far from perfect, is superior to any other system in the world.

We must protect it, strengthen it, and ensure that all of our citizens have access to it.

The Chamber of Commerce and our 3 million business members are 100% committed to this – and we look forward to working with all of you to create the best possible health care system accessible to the greatest number of people possible.

Thank you.