tv Key Capitol Hill Hearings CSPAN October 7, 2016 2:00am-4:01am EDT
this week, the supreme court heard oral argument in the death sentence case of buck v. davis. in that case, the court is considering whether a lower court improperly denied an appeal for a convicted murderer. listen to the oral argument in its entirety friday night at 8:00 p.m. east owner c-span. and we have a new page on c-span.org to help you follow the supreme court. go to c-span.org. select supreme court near the right-hand top of the page. once there, you'll see the calendar for this term. a list of all current justices and with supreme court video on demand, watch oral arguments we've aired and recent c-span appearances by supreme court justices at c-span.org. donald trump to campaign with house speaker paul ryan this saturday in wisconsin. christina marcos is following
the story for "the hill" newspaper. she's joining us on the phone in washington. thanks for being with us. >> thanks for having me. >> how did this all come together? >> it's been quite a long road for paul ryan and donald trump. if you'll recall, even as recently as last december when it wasn't clear trump would get the republican nomination, and -- a lot of people thought he was still a long shot, paul ryan was denouncing his proposal to ban muslims from the country. since then he has criticized trump on a whole lot of fronts. and then for weeks, he declined to endorse donald trump after he effectively clinched the republican nomination. and as payback, as donald trump withheld endorsing ryan in his house primary over the summer. and now, here we are when they'll make their first campaign appearance together this weekend. >> it's called the wisconsin fall fest. it sounds like a typical republican event in the sense it's happening in a key swing
state. the republican governor, former presidential candidate scott walker in attendance. what is going to happen? how is this all going to unfold? do you have any idea? >> so event happens annually. and ryan and other wisconsin officials regularly go to this event. a source familiar with planning told me trump expressed an interest in doing an event with ryan. the speaker extended an invitation to come to the event that he goes to every year anyway. and so this will be interesting. as of right now, there isn't -- there aren't any photographs that you see that are out there of donald trump and paul ryan appearing together on the campaign trail. so for someone who distanced himself quite a lot, donald trump, even after he did officially endorse him, this could potentially be a little awkward for paul ryan. >> christina marcos, senator ron johnson in his battle for re-election being challenged by
russ feingold who defeated him six years ago. this is one of the states both parties say they need if they want to capture or maintain control of the u.s. senate next year. >> that's right. and ron johnson will be at this event, too, that paul ryan and donald trump are going to on saturday. and so it was an interesting strategy compared to some of the other vulnerable senate republican incumbents this cycle like kelly ayotte in new hampshire or toomey who very much distanced themselves from trump and are generally don't really like to say trump's name even. they prefer to say "the nominee." and ron johnson, meanwhile, he is going to appear in person at this same event with donald trump. >> let me go back to the relationship that you talked about a moment ago between house speaker paul ryan. he was mitt ryan's running mate four years ago. the former massachusetts governor in 2012.
republican nominee saying he's advising people to vote for gary johnson. he did so in a tweet. so this relationship between the house speaker and donald trump or lack thereof, how is this going to change or evolve or unfold with 30-plus days before the election, and will it have any impact? >> this event will come just one day before the second presidential debate between donald trump and hillary clinton. and the last ten days or so have been some of the worst ones of donald trump's whole campaign in the aftermath of his derogatory comments about a former miss universe winner. and so this could be a pivotal moment for donald trump if he wants to make a comeback in this weekend's debate. >> donald trump in wisconsin this weekend with house speaker paul ryan. the reporting of christina marcos of "the hill" newspaper. her work available at thehill.com. thank you for being with us. >> thanks for having me.
the second presidential debate is sunday night at washington university in st. louis, missouri. watch our live coverage at 7:30 p.m. eastern for a preview of the debate. at 8:30, the predebate briefering in audience. 9:00 a.m., live coverage of the debate followed by viewer reaction. your calls, tweets and comments. the second presidential debate. watch live to c-span. watch live or on demand using your defrktop, phone or tablet at c-span.org. listen to live coverage with the free c-span radio app available in the app store or google play. medicare recipients could see a 20% increase in their part b premiums next year. retirement industry experts talked about it in a panel in washington, d.c., today. this is about an hour.
>> looked like it was, but i guess it wasn't. sorry about that. as i said, i have the privilege of serving as the administrator of the public sector roundtable and on behalf of our members, i'm happy to be with you and to welcome you to this discussion this morning. i just want to take a couple of minutes before i turn this over to our friend and colleague john rother from nchc to share what the health care roundtable is. it's an organization that's a little over a dozen years old that represents the interests of in of the nation's largest public sector health care purchasers. which means from one end of the country to another, we represent the folks who provide health care benefits to the public employee community, the public
retiree community and their families and survivors. the issue of quality and cost are -- those issues are tremendously important to the public sector as we seek to maintain a high level of health care benefits for our workforce. obviously, the topic of today's session is very important to us, and we are grateful for you being here. i also wanted just to mention that although this issue is of tremendous importance to us, we are, because of the nature of the population that makes up our membership, we're interested in health care across the gamut. and you all have in your constituencies, public employees who participate in programs who are -- many of whom are likely members of our coalition. we just wanted to say, if there are other issues that other
times that we could be helpful to you, we would welcome the opportunity. in that regard, i just want to note that standing in the back of the room, our policy -- senior policy adviser for the health care roundtable is andrew mcpherson from healthspherion. i would just encourage you to reach out to us if we can be helpful in that regard. i want to say a special word of thanks to the folks at the national coalition on health care. john rother and larry mcneily who have been so involved in preparing today's session are real leaders and real assets. and we are proud to partner with them in this endeavor. and finally, i just want to thank all the panelists. john will introduce them all. but i want to say a particular thank you to jane gilbert and chris collins who are here representing two of the founding members of our health care
roundtable, the kentucky teachers association and ohio public employees retirement system. that as a brief introduction, i'd like to introduce our friend and colleague, mr. john rother. >> good morning, everyone. this, unfortunately, is turning into an annual exercise because the reason we're here is the costs in the medicare part b program which pays for physicians projected to go up 22%. when the social security cost of living is practically flat. and so we have a serious imbalance, and that's the focus of today. so nigh name is john rother. i'm the ceo of the national coalition on health care. we are a non-profit, nonpartisan organization that represents consumers, providers and payers,
purchasers in health care. and our mission is health care affordability. and today, i think we'll just reinforce the need for us to take more steps in medicare and in the system of health care more generally to keep health care affordable. so let me just introduce our excellent lineup of speakers. starting with longtime colleague and friend trisha neuman who at the kaiser family foundation will lay out the facts for us. there's no one who is better able to do that. tricia is the director of the program on health policy and the project on medicare's future at kaiser. then andrew scholnick from aarp is with us. and, obviously, an organization deeply concerned about anything that has to do with medicare. jane gilbert is the director of the kentucky teachers retirement
system. thank you, jane, for joining us. and chris collins is the assistant government relations officer for the ohio public employees retirement system. so we're going to hear from private sector and public sector. and finally, we have matt salo. matt is the executive director of the national association of medicaid directors. and medicaid is very much a part of this discussion. so with that, tricia? >> good morning. thank you, john, and thank you larry and the coalition. n it's good to be back again this year with several panelists to talk about this issue. i have three goals for myself this morning. you can see how well i do. i'm going to set the stage and talk about where we are in terms of medicare premiums and cost sharing. i'm then going to explain sort
of the nitty-gritty connection between premiums and social security colas and something called the hold harmless and how that all fits together and why. and then lastly, i'm going to talk about what we do know and what we don't know and when we will know the things that we need to know to understand what's really going to be happening in 2017 for beneficiaries. so with those three goals in mind, let's see how we do here. okay. where are we now? we are in a situation where there's a medicare part a where people do not normally pay premiums. there's part b which pays for physician and outpatient services. there's part c which is the hmo part of the program and part d. my point here is that for people who are in medicare part b, which is what we're going to be focussing on, there are premiums
which vary based on people's incomes. so here what you can see is typically people pay $121.80 per month. but that varies based on their income. they also pay deductibles by the way, which are affected by this issue we're talking about today. and another point to keep in mind is many people rely on social security for the bulk of their income which is about $1200 per month. so what's in store? the medicare actuaries, after getting information from social security and the bureau of labor statistics said they predict that medicare premiums will rise by 22% between this year and next year. as will the medicare part b deductible. so that's a big increase in historic terms. and that is -- that's actually why we're here today.
and the reason why the premium is expected to go up has to do with the social security cola which has been projected to increase by a very modest amount. 0.2% on top of no c.o.l.a. last year. an underlying issue here is what's going on with social security and medicare is sort of the tail of the dog that's getting the impact of what's going on in social security. i'm going to come back to that in a minute. basically, i just want you to see the projected 20% -- 22% increase in premiums and deductibles. and this will also affect people at all income levels, if it takes effect. so right now what you can see is the income related premium rises from $170.50 to almost $400. something people don't normally remember when they think about what's going on with income related premiums. and for everybody at that level, which is above $85,000 per
person, their premiums would also go up by 22%. so if this takes effect, the 22% increase basically goes across the board for anybody who is not protected by the hold harm lifts. so why are the actuaries predicting another year of large increases in part b premiums and deductibles? how does this all happen? each year it's the secretary of health and human services who makes the determination of what the part b premium will be. this has not happened yet. and in general, the part b premium is based on -- it is an amount that would cover 25% of all part b spending. so everybody's contributions, all people on medicare who in part b pay a premium and if you put it all together, will pay 25% of part b spending costs.
and general revenues, the federal government pays the other 75%, or medicare. so that's the calculation the secretary has to make. and then there's a little bit of wiggle room in the language which says -- by the way, there need to be adequate reserves in the supplemental medical fund. based on this threshold, this concept of adequate reserves, the secretary has the authority to set premiums. and the secretary will set premiums probably within the next month once she knows what's going to happen with the social secured c.o.l.a. at this point, what we know is that the c.o.l.a. is projected to increase by 0.2%. if that happens, many people on medicare, most people on medicare, will be protected by something called the hold harmless which means your
premium cannot increase so much that it makes your social security check go down because most people have their premiums deducted from their social security checks. and that's a provision in law that's intended to protect people who rely on social security to get by. and the idea is part b premiums shouldn't diminish your social security income. that's the idea behind it. but what happens when a lot of people are protected by the hold harmless provision, because it would otherwise force their social security checks to go down, the people who are not protected, and i'll tell you who they are in a second, end up paying more because they are compensating for the people who aren't paying the full premium. have i lost you yet? excellent. all right. let's do an example here. so this is what you might call a typical year. in a typical year, let's say the
social security c.o.l.a. is 2%. the part b premium goes up 5%. i'm making up these numbers because i want to illustrate the point. and let's say the social security benefit in year one is $1,500. and the part b premium is $100. a typical person would have their premiums deducted from their social security check and they would get -- they would then take home $1,400. got it? so now let's go to year two. in year two, let's say there's a 2% c.o.l.a. the social security check increases by $30. that's all good. let's say there's a 5% increase in the part b premium. it goes to $105 when you take $105 out of the social security check, that person is going to see an increase in their social security payments. that's all good. there's no hold harmless issue here, right? that's a typical year. but this year, like last year, is not a typical year, or
doesn't look like it will be. last year, remember there was no c.o.l.a. this year there's a tiny c.o.l.a. 0.2% maybe. we'll know for sure in a few weeks. in this particular example, when -- if the social security check increases not by $30 but $3, and the part b premium still goes up by $105 -- to $105, when you take the part b premium out of the lower social security check, what you can see here is that the social security check would otherwise drop below $1,400 in the following year because of that increase in the premium. that can't happen with the hold harmless. that's what the hold harmless is designed to prevent. actually what happens is the person instead pays a smaller premium -- part b premium so that their social security check doesn't go down. i know it's a little
complicated, but i thought the example might help. okay. so the deal is, not -- most people are protected by the hold harmless. but not everybody is. and i think the folks at the table are going to talk about what that means for them. so anybody new to medicare, next year, wouldn't be protected by the hold harmless because they didn't have their part b premium deducted from their social security check this year because they didn't pay the part b premium. who else? people who don't receive social security. they're not protected. people who are billed directly for their part b premiums and don't have their premium deducted from their social security check because they write a check. people who are duely eligible for medicare and medicaid. that's a group for whom states pay their part b premiums. and matt salo will talk about what that means for states. and beneficiaries with higher incomes are not protected by the
hold harmless. when you say to the 70% of people, you're not going to pay the full amount of what would be your part b premium increase, that 30% of the people who are paying the part b premium pay more than they would have paid this provision if this provision in law was not in place. in this particular case, part b spending is riser faster than it has in recent years, but the big jump in part -- in the premium that could happen has more to do with the hold harmless than it has to do with what's going on inside part b and projected spending growth. so is this deja vu all over again for people at the panel, it is because we talked about this last year when premiums were expected to rise by 52%. and there was no c.o.l.a. last -- i think it was in november of 2015, congress stepped up with the bipartisan budget act of 2015 which prevented a 52% increase from
taking effect. it basically increased the premium by 16% which would be the amount it would have increased had the hold harmless not been in effect. will that happen again? it's not clear. one thing to know about that particular provision of law is that it had cost estimate to it of over $7 billion. and to make it budget neutral, what the law required a $3 rebate -- repayment over time, which increases the premium, both the standard amount and income related premium. so what's coming up next? this is important to keep in mind. this leads me to the what we know and what we don't know. the social security administration will make an announcement later this month. could be as early as october 18th, which will let us know what the c.o.l.a. is. if the c.o.l.a. is 0.2%, we have an idea of what the premium
could be, but remember the secretary has some authority to adjust the premium up or down depending on the reserves in the trust fund. if the c.o.l.a. is bigger than 0.2%, then the projected increase we've talked about will be lower. should be lower. so after we -- the announcement occurs, then the next stop is secretary -- the secretary will announce what the premium is. if this year is like last year, that should happen in early november. at that point, we will know what the deal is. we will know what the premium will be unless congress takes action. but this is where i get to the point where i say i'm telling you what we know and what we don't know and what we will know. and all will become pretty clear within a few weeks. so why is all of this important? this saul is all important beca many people on medicare have limited incomes.
i always like to circle back to that because what you see here is that half of all people on medicare live on an income of about $24,000 or less per person. so it's important to think about the connection between health expenses like premiums and income like social security. because putting the two together are critical when we think about retirement security for an older and disabled population. we already know from the actuaries that medicare premiums and cost sharing take a bigger and bigger bite out of social security payments. this shows you the percent of social security payments that go for part b and d premiums and cost sharing. so we're building on a base of health care costs growing far more rapidly than income. and finally, that just looked at premiums and cost sharing for parts b and d. remember that people on medicare have so many other health care expenses. they are paying premiums for
private insurance. they are paying for dental care, eye glasses, hearing aids and long-term services and support. so all of this particular issue that we're here to talk about today builds on a broader set of questions about the affordability of health care for an older population with many of whom live on limited incomes. >> thank you very much for including me. unfortunately, we have to do this again this year. but i think we're all adept at handling it knowing what's around the pike. again, thank you, john, for inviting me to participate in this. tricia provided great background and lay of the land and letting us know what's out there and what we're facing. i'll try to start zeroing in on
some of the population affected and the beneficiaries this is happening to. first, it bears repeating that medicare is not free. there is considerable cost sharing with premiums korks-pays, deductibles, just like private payer plans. and supplemental medigap coverage and part d prescription drug coverage is additional. there's no coverage for dental, hearing or vision. so most people are paying out of pocket. it's not just, you have medicare, you're done. you're set. there's still additional costs besides the premiums. additionally, there's no out-of-pocket cap in medicare so these costs can add up quickly, especially for someone that is older, a little sick or unhealthy and accesses the health care system on a fairly regular basis. also, as tricia said, not everyone is held harmless. she broke down the groups, but there's some numbers associated
with them to give you a perspective. about 3% of medicare beneficiaries, that's about 16 million people, give or take, about 2.6 million of those are new to medicare part b in 2017. another 3.2 million are higher income individuals whose premiums are income related and are not held harmless. and there's a fair number who are not collecting social security checks for a variety of reasons, as well as people who are dually eligible and are on medicaid. that's the largest group but i'll allow other panelists to talk about how the medicare premiums affect their populations. i just want to spend a moment kind of focussing on the new beneficiaries and those with income-related premiums because they're often overlooked in all of this. to start with, among those not held harmless, being those who do not receive social security. this group includes those who have yet to sign up for social
security for various reasons. maybe it's because they have not reached full retirement age and are still working. medicare begins or medicare eligibility is at age 65. however, social security begins at full retirement age at 66. if you want to claim full benefits and everything you're entitled to from paying in over your entire working life, you have to wait until 66. that's going to go up to 67 the next couple of years. there is the opportunity to buy in at 62 and start receiving benefits earlier than your full retirement age but that's a diminished benefit. you receive less than you otherwise would by waiting longer. so people are put in a situation where they are turning 65, they enroll in ed care -- medicare but are not receiving social security benefits. we happen to get questions from our members asking for advice about -- saying i'm going to be enrolling in medicare. i know there's this premium
spike happening. should i enroll early in social security and claim benefits early in order to avoid the premium increase. even though we don't give personal financial advice because every case is different, in general, it's probably a bad idea to enroll early and forgo higher social security benefits over the course of your life for one or two years of higher medicare premiums. the fact this question is on our members' minds means they are worried about medicare premiums and what a temporary spike could do to their pocketbooks and household budgets. another component of those not held harmless are those who do not have medicare premiums deducted from social security checks at the end of one year and the beginning of the next. this is people that may have enrolled in medicare during 2017. they're not included but also includes people that might be enrolling right now. in fact, now october could be
too late. by the time social security gets up to speed with your enrollment and starts deducting your medicare premium, you have to have november and december accounted for in order to avoid the hold harmless limbo, so to speak. nrd to be held harmless, you have to have the end of the previous year in addition to the year affected, which would mean currently november and december of 2016 in order to avoid 2017. i threw this slide up here. it's hard to read a little bit. just to provide some numbers and context for new enrollees. even though younger beneficiaries, those 65 to 69 pay or have fewer health care costs than older tend to be sicker medicare beneficiaries, they're still spending -- 50% of them are still spending over $3,000 a year out of pocket in health care expenses, which is a
sizable chunk of change when you're retired and living on fixed income. so even though they might be younger and healthier and new to medicare, they are still paying out-of-pocket expenses over $3,000 in many cases. and that's the median. half are paying more than that. so it could go up quite a bit. the average is a little higher. the 90 percentile spending is significantly higher for this demographic, and all demographics in general. lastly, i'd like to talk about a quirk in the income related -- a lot of people assume they are higher income beneficiaries and can afford higher premiums. unfortunately to determine those subject to high-income premiums, the social security administration use the most recent federal tax return provided by the internal revenue service. it's the year prior to the year filed. that means for example the 2016
tax return we all presumably did this past spring contains your 2015 income and that's what's used to determine 2017 premiums. as an example, let's say janet has been working at her salary or she's earned about $86,000 in 2015. that's a fairly comfortable, upper middle class lifestyle, depending where you are in this country. she is retiring in 2016 and enrolls in medicare now that she's 65. she now lives off of about $50,000 in savings and retirement income, which is reasonable and fairly substantial for someone. but she still has to pay the higher income related premiums in 2017 because her previous working income is what's counted for the medicare calculation. even though she's living on considerably less than what she was earning during her working life, she's still considered high income and has to pay higher premiums. so just urge everybody to remember that.
high income in medicare is not the same thing as wealthy and that often gets overlooked. that's kind of just a little background and nuance to some of the population affected. i'd like to turn it over to jane or john. >> good morning. i'm glad to be back again this year on this topic, but i'm not glad to be back again this year on this topic. i'm jane gilbert with the teachers' retirement system of the state of kentucky. i represent a population that's as large as 146,000 folks. however, my main role is responsibility for the 46,000 retired teachers that participate in two health plans
offered by the teachers retirement system of kentucky. i'm very thankful to have the opportunity and the pleasure to be here to represent those 46,000. also want to thank a few of the kentucky congressional delegates that i see in the audience, especially zach marshall, with congressman john yarmuth's office. thank you for coming. as has already been mentioned this morning, kentucky falls into one of those buckets. we're into the, we don't pay into the social security bucket, along with 15 other states that don't pay into social security. ten of those, including kentucky, happen to be members of the public sector health care roundtable. you heard a little introduction from tom this morning in regards to the public sector health care roundtanl. very interesting we have 10 of the 15 as members of that roundtable. i'm glad to be part of that
roundtable as well. in terms of demographics, i mentioned i represent 46,000 retired teachers. 15,000 of those are on an under 65 health plan that's through the kentucky employees health plan. and 31,000 of those are on a medicare eligible health plan through a medicare vantage plan and a medicare part d drug plan. our average age is 74 on the medicare plan. give a shoutout here along with my friend willard scott. we have about 42 retired teachers over the age of 100. we have 208 teachers between 95 and 99. we have 750 retired teachers between the ages of 90 and 94. and we have over 5,800 that are greater than the age of 80 years
old. so a 22% increase, a $27 increase to the medicare part b premium has a huge impact in terms of my population. i want to mention that teachers' retirement system, along with other states involved with the public sector health care roundtable are doing their best to retain costs and work with federal solutions. we also -- condition ken pakent piece of legislation, house bill 540, shared responsibility. so between that piece of legislation that brought in four new revenue streams into our medical insurance trust fund as well as reverse the pattern of borrowing from our pension plan to pay for health insurance, in addition to medicare advantage, medicare part d, all of those solutions. we've been able to reduce our 30-year overpay of actuary by
over $5 billion. in terms of busting the trend a little bit with our medicare eligible trend. we're bending the trend. in 2006, our medicare premium, in addition to the part b paid drctly to social security, our medicare premium was in the $315 a month range. 11 years later, it is $260 a month. again, that's through some of the industry best practices, federal solutions such as medicare vantage and medicare part d. one of the things we did as well in kind of this constant look at how can we contain cost, we did move the necessary years of service for retired teacher. in 2002 was moved from 20 years of service to 27 years of service. as i mentioned before, we jumped on the medicare advantage
bandwagon in january of 2007, and nine years later, we still have a medicare advantage plan. we also jumpod the medicare d, the retiree drug subsidy in 2006, and then later moved on to what's known as the employer group waiver plan in 2010. just continued to seek deeper subsidies. another stipulation was for those that retired, new members to the teachers retirement system beginning on or after july 2002. they must have 15 years of service to be eligible at all for health insurance as a retired teacher. i mentioned shared responsibility. that piece of legislation, as well as some other federal solutions we were able to trim $5 billion off our 30-year
actuarial liability. some of the rest of those are just industry best practices that the state of kentucky and many other states have taken on as part of their fiduciary responsibility. how have we communicated this to the retired teachers of kentucky? we have given them the worst case scenario. last year this time, the worst case scenario was $105 a month. rose to $159 a month. we're very appreciative for the solution in the 2015 balanced budget act because that may go from 105 to 122 instead of 159. so this year we've communicated the full possible worst case scenario of $149 a month. so again, we're looking at a $22 increase -- a $27 increase,
which is a 22% increase, in addition to the 16% increase last year. and so these increases, as mentioned earlier, don't make a lot of sense when we're trending downwards in kentucky in terms of our medicare premiums. so our medicare vantage plan and medicare part d drug plan is trending downward, yet our members are being charged some pretty large increases in medicare part b. in addition to the ten states that don't pay into social security and are part of the public sector health care roundtable, i'd like to mention that in all 50 states for those on original medicare, they, too, are being asked to pay some pretty stiff increases in regards to the medicare part b deductible. that annual deductible that applies to those with original medicare. so that is looking at an
increase from $166 a month all the way up to $204 a month. so we're all kind of in this increase together. again, as i was here last year and again here this year, teachers retirement system of kentucky and on behalf of our 46,000 retired teachers, we would love to see this not be an annual issue. and we would love to see a solution in terms of the 30%, the states, the non-social security states, the 30% doesn't pay the increase for the medicare beneficiaries for the 100% of the beneficiaries. so looking for help to make sure this is the last time i'm here in this regard. i'm going to let chris collins, with the state of ohio speak as well. he's next after me. and i'm sure we'll be available
for questions after everyone speaks. >> thank you, everyone. my name is chris collins. i'm assistant government relations officer for the ohio public employee retirement system. and i do definitely appreciate the invitation to be here today and tell you a little bit about ohio's experience with this issue. just as a little background, opers represent those who work for state and local government townships. public libraries, basically public employees generally in the state of ohio. we have a million members all together when you add up the number of active public employees, folks who have some time in the service, are currently working for a public employer and also retirees. it's -- social security, opers is just slightly old are than social
security. the potential impact of the med b increase is significant. we have approximately 140,000-plus medicare eligible retirees in our system. almost all of those folks would not be receiving a social security benefit. we are their pension. so those are the types of individuals that's would be impacted if, you know, this increase went into effect. when you look at all the five statewide systems in ohio, not only opers but we have a state teachers system, system covering school employees like bus drivers, police and fire, pension fund and highway patrol, you're talking about 260,000-plus medicare eligible retirees in the state of ohio that would be impacted by this fact. and, you know, that's a large number, but i always try to take into mind that each one of those 260,000-plus, there's individual stories behind that. it's personal for me because my father is one of our
140,000-plus medicare eligible retirees. and, you know, i know certainly last year when we went through this, we were very thankful that congress was able to reach a compromised solution but they did see an increase both for him and for my mom in their monthly medicare part b premiums. they had to figure that into their budget. he's had a kidney removed in the last year. he's going to dialysis three times a week. he is seeing his physician more regularly. my mom, you know, in her upper 70s is having additional problems and going to the doctor regularly. these benefits very important to each of these individual retirees. it's important to remember for each one of those numbers we talk about, there's a story behind that. these are individuals who basically committed their lives to public service in the state of ohio. so if you're talking about the increase from what was -- currently 121.80, $149, for a couple like my parents, that's
an additional $54 a month. $600 plus a year, that they're having to fit into their budget. and that's very challenging. and, you know, they are certainly not the only population in ohio that would be impacted. we've had some reference to folks newly eligible for med case, aging in. i can just speak to opers. at the rate that folks are turning 65. as we look back over the past calendar year, just amongst opers members, about 8,700 who have turned 65 in the last year. so as you imagine going forward that there are people aging into this program that will be not subject to the hold harmless under the social security act. and then the other category as we work collaboratively with the partners in ohio is that dual eligible population. the medicaid/medicare population. and just speaking to our ohio medicaid department, we know the impact of this increase could be $31 million for them as a state
share. so i just want to leave you with a little bit of that information. a little insight in terms of how it's affecting us in ohio. and certainly hope that, like last year, we can come together here in congress and find a solution to help avoid the full impact of this change. matt is going to speak more into that medicaid issue. thank you. >> great. thanks a lot. appreciate being here and appreciate all of you attending and watching on c-span. i'm matt salo. i represent the national association of medicaid directors. those are the individuals in each of the 56 states and u.s. territories who run the medicaid program. now you may well be asking, what exactly is medicaid, and why is that relevant for a question on medicare solvency? it's a very good question. so medicaid is actually the
largest health insurance program in this country. we serve 72 million americans. and we spent combined state and federal dollars last year, half a trillion dollars. it's a big, it's an important program. why is it relevant here? isn't medicaid the program for the poor? isn't medicaid for pregnant women and kids and low-income and working families? in some levels, that is right. medicare does cover almost half the births in this country. cover about one-third of all kids. we cover a lot of things. what's perhaps the best-kept secret in health care in this country is medicaid's role in supporting, subsidizing and keeping solvent the medicare program. this is not well known, but it's incredibly important. if you think about the diagrams
of the medicare population and medicaid population, the overlap has been referred to a couple of times as the dual eligible population. low-income, frail seniors, low-income individuals with physical and other disabilities. it's a relatively small number of people. it's about 9 million. again, compared to the 72 million that medicaid covers. but when you think about it from a very blunt budgetary perspective, despite the fact that medicare is primary and medicaid is just kind of stepping in to fill in the gaps. the gaps happen to be very, very big. medicare doesn't really do any long-term care. medicare has serious limitations on things like dental and mental health services, and medicare has a lot of cost-sharing diameters. premiums, co-pays, deductibles. medicaid, the state medicaid programs step in and cover
those. so when you look at that diagram, that small group of people who are already getting everything that the medicare program has to offer, we spend 42% of the medicaid budget on that population. that's staggering. that's not very well known. and it's critically important because a huge component of that is around the cost sharing. premiums, co-pays and deductibles. and that's what -- that's what makes this relevant here today. tricia talked about, you know, when you exempt a large portion, 70% of medicare beneficiaries, that hit gets -- that hit lands disproportionately on the remaining 30%.
now, some of that 30% are the higher income medicare beneficiaries. andrew sort of talked about some of their issues, and it's going to hit retired people, and it's going to hit a lot of folks, but it's really going to hit state medicaid programs. the irony is on some level it's not going to directly hit the nine million lowest income frailest medicare beneficiaries because medicaid is going to take the entirety of that hit. , but i would caution you not to think that that makes it free because any time medicaid takes a big hit like that, there are going to be repercussions, there are going to be trade-offs, there are going to be sacrifices that have to get made either elts where with this population or elsewhere in other vulnerable populations, and that's something that i think is really important that we need to pay attention to. i think, you know, one of the themes that you've heard and
that you will continue to hear is that, you know, a lot of things here just don't make sense, and i would continue to hammer home the fact that the reason we're here at all doesn't make sense. you know? medicare solvency is important. i get that. we all get that. it needs to be solvent, but it just doesn't make any sense that, a, you know, we as a nation -- we as a society have acknowledged that there's a large portion of the most vulnerable and frail and poorest individuals who can't afford to pay a part b premium, the deductibles, the co-pays, et cetera, but rather than saying we're going to waive those responsibilities or exempt them, what we do is we shift the tax burden of doing that on to state
governments. state governments that are also trying to provide, again, long-term care services, and really trying to fix the health care system, the most fragile and vulnerable in society. these things don't make sense. having this spike doesn't make sense, and having this spike in medicare part b premiums dis disproportionately impact states doesn't make sense. chris talked about the impact in ohio. you're seeing that in every state. in fact, we've got a hand-out in the packets. we have 50 state impact projections over what this will mean. the short version of that is this simple change, this simple increase in the part b premium is going to increase medicaid spending by $2.5 billion.
that's obviously state and federal spending. the state share of that is about $1.1 billion. again, how does that make sense? any time that state medicaid programs see a spike in costs like that -- again, we saw this last year where the po material hit was going to be much, much higher. now, thankfully congress stepped in and did something about it, but there was still a hit. any time there's this kind of spike in the best case scenario, what it's going to mean for states is they'll probably have to slow down some of the investments they're making in real health care transformation and delivery system reform and improvement. quite frankly, the worst case for the real world scenario is states are going to have to make trade-offs, and they're going to
have to look at what are we doing in terms of eligibility? what are we doing in terms of benefits for other populations? what are we doing for reimbursement rates for providers across the system? this is a closed system. we don't get to print money at the state level, and it is -- it makes no sense, again, for the medicare program, for policymakers to be shifting the tax burden of medicare solvency on to the state medicaid programs. if you want to shift it around within federal pocket books, that's fine. don't shift it back on to the states where we actually have to balance budgets and where we can't print money. so i think i would -- what i would just say in closing here is that it's -- it's a real frustrating thing to be up here,
again, the deja vu all over again. you know, we don't need this to be another medicare dock fix or sustainable growth rate where clearly nonsensical policy just keeps revisiting itself year after year after year, skps we go through this panic, and we go through the worry, and we have to go to congress to say can you fix it for us this year? maybe they will. maybe they won't. they addressed it last year. they fixed some of it. not all of it. every time we do that, have to come up with offsets, and those are going to be meaningful as well. this doesn't make sense, says and i would just leave you with a broad thought, which is medicare solvency, medicaid pays for it. medi can't do this anymore. we need to fix this big-time, big picture, be and permanently.
thank you. >> just i would like to offer three observations as a result of this discussion. first, medicare is a complicated program. it's not easy for people to understand all the interactions, all the choices that people face, and it's interaction with social security is complex, so this is difficult as an issue, and it's something i think particularly those of you in the congress need to get your heads around because as matt says this doesn't make sense. >> number two point. we have to acknowledge the fact
that the things we're talking about today are not understood by most medicare beneficiaries. i bet those of you in the congress have not received much mail yet or anything. believe me, when this hits, you will receive outrage cries. this is an issue that we see coming. it's going to be very painful, but, yet, i thank you for, c-span, being here. we have a lot of work to do to help people prepare and anticipate what could be a very difficult set of increase costs. the third observation is i want to go back to something that trisha pointed out, which this is about the interaction between social security and its cost of living and medicare and the way
premiums are set, and you might say why are they so out of sync? because shouldn't this social security cost of living incorporate and reflect the higher costs that medicare beneficiaries face? well, guess what, it does not. social security costs of living is based on the experience of those under 65. not the experience of those who are eligible and receiving medicare benefits. built in to the way that we measure this is a disconnect, and that's playing out now in very painful consequences because social security is practically without a cost of living as a practical matter and health costs continue to go up. even fairly modestly, but it's a disconnect that's creating this
issue, and so my pitch coming back to the mission of the national coalition. we have our work to do around keeping medicare costs reasonable, keeping health care system costs reasonable so that people can actually enjoy the pension benefits or the wages that they have because right now they're taking away whether you are working or whether you are retired, we're taking away some of those benefits through higher and higher health care costs. now i think it's time for those of you who have questions or commen comments. yes, sorry. here you go. and i'm opening the floor. if you would stand and identify yourself because c-span would
like to make sure that we hear you. >> they did the same formula this year? does that make sense? >> does anyone know the answer to that? >> at the moment we don't exactly know because the official numbers aren't available for a couple of weeks, so it really depends on where it ends up being. the estimates still probably another $10 to $15 on top of what they are already paying, so i don't know what percentage that is, but it's not small. >> yes, right here. >> just a second. let the mike catch up to you.
thanks. >> thank you for your presentation today, guys. great job of outlying potential problems for medicaid agencies and for beneficiaries. i wonder do we have an idea of the administrative burden related to social security? if there is no fix with different premium amounts. has this happened before? is that a potential concern? >> yes, it is, and, trisha, do you want to take it? >> it's not a new concern, but it is a concern. as john said earlier, medicaid has gotten more complicated, and medicare has gotten disconnected more from social security with the age of retirement changing. there is a greater -- there are questions that people have when they come in and deal with differential payments in social
security checks. >> if i could actually just add it's probably more complicated at this point to not let it happen because congress hasn't done anything yet, so they only have about two months, if that much, to implement the reverse changes if congress were to intervene and wherever the new premiums come out could change the calculation again. social security administration has been proceeding as much as they can under current law with the assumption that the changes will occur. if we have to wait for congress to come back with a lame-duck do anything that leads very little time for them to implement the new update. the longer they wait, the increasingly complicated it becomes for them. >> i think your question is really quite important because as a practical matter, congress is not likely to act until well into late november, early december, and that does not give
social security very much time at all to adjust, and so we are also having to deal with the fact of staff cutbacks and shortages in social security administration. the combined effect is this is a crisis for the program to deal with all this complexity, with all the differences,ing and still get people their checks on time in the krekd amount. yes. in the back. >> hi. i'm autumn campbell with the national association of air agencies on aging, and i have a comment and certainly welcome any response from the panel as well. at the same time that this issue is happening, the senate labor age appropriations committee and now the full senate appropriations committee has approved a measure for fy 17 spending that would eliminate the state insurance assistance program or ship program, which is a nationwide program that
provides free counselling services to medicare beneficiaries in terms of helping them choose the medicare options that are best for them and for their pocket books. i want to say that with this complicated issue happening, with more beneficiaries likely seeking counselling services, can you comment on, you know, if that makes sense or your thoughts on that move by the senate to eliminate that counselling program at the exact time that something like this is happening? >> i can say that we are concerned about it. we value the ship programs and we're hoping we're working towards it doesn't get enacted when it goes through the process. >> i hope that a fuller understanding of the complexities that people now are facing reinforces the need to have an adequate ship program to help people understand their choices, and this is really an essential service. this is not an optional.
trisha. >> if i could just add on to that, in thinking about what medicare beneficiaries are being asked to do, we're also about to launch intoed medicare open enrollment period, and there hasn't been much press attention or other attention focus on the decisions that people should be making between october 15th and december 7th. that's something that the ships have provided, an enormous source of support for people. social security can do some, but really can't do that much in this area. ships are really needed, as is more public education to drive people to compare their options and make changes, and they'll be needing this information, including what it means for their underlying premiums and including part d and just on the part d point because i'm not sure this point was made. the hold harmless does not take into account the part d premium,
so for people who see an increase in their part d premium and have it deducted from their social security check, they could well see a reduction in their monthly payments from social security so in that sense it's important to bear in mind two things. one is the hold harmless is focused on part b, not part d, and, two, it pays to shop and people may want to look at their part d options before the end of the open enrollment period. >> thank you, trisha. the whole point here was to try to protect people from an actual cut in their social security benef benefit. worry now going to see that. those benefits cut for millions of seniors, because of the increases in drug costs and increases in part b as well. this is going to be, again, a very, very difficult issue for many, many people. other comments or questions?
yes. right here. >> charity usa. as i'm listening to you discuss increases in midcare premiums, i'm wondering if that's going to directly impact medicaid enrollment possibly. if there's any correlation. >> i think you could definitely see if you have a portion of the population who is not held harmless and does pay a big chunk of this, they could spend down faster into medicaid. thereby, growing the roles. again, the largest chst challen would be as medicaid would take the $2.5 billion hit for paying this, what has to give? i think the challenge is that
when you step back and learn on a macro level, you know, what is medicaid do that is optional? it's things like long-term care, prescription drugs. those things are technically optional in the medicaid program. those things are on the table if the state finds itself in a bind to try to figure out where am i going to come up with this new bill for $2.5 billion. that would to me be the biggest concern. >> i could envision how people might look for more information about where they can get help when their premiums start to go up. there are many people with low incomes who are eligible. as premiums go up, it would be easy to see how somebody would say how do i get help with this,
and that might leave them to apply for these programs that they would not otherwise have gotten. >> it would also lead them to call their member of congress and to call service providers andle aging network. anywhere that people have contact for people that might have information. this is, i think, going to be big as soon as people understand what the implications are personally. any other comments or questions? yes. right here. >> i'm nathan hogan from congresswoman web's office, and i was just wondering when you think there's some proposed solutions that congress could pursue in order to protect that 30% who are covered by the hold harmless principle. >> andrew. >> well, unfortunately, because of the time constraints running to the end of the year, we're really looking at what's the most feasible in the short-term and on a bipartisan basis and can get done so the most realistic solution is a
continuation of what they did last year where they allow a slight increase to where the actuaraial value would be for everybody, and not allow these roll-over from the 70% on to the 30% as an offset entirely. it's not ideal. it's probably not the best solution, but right now it's one of the more feasible ones. >> i would characterize what we're talking about now as not solutions, but, rather, band-aids. we're trying to prevent injury to moulgz illions of medicare beneficiaries. this is a regrettable situation. we were here last year with the same kind of message. i certainly hope we're not here again next year. band-aids are only good to kind
of postpone the need for more fundamental action and so i would echo matt's characterization this is not where we want to be. this is does not make sense for the long-term. given the time constraints, given the realities that we face, it maybe the best we can hope for as another band-aid. >> it was not meant to be a one-year solution, so i think in what was written, there is part of the 2015 balanced budget act, it's the use of a zero cola, and the problem this year is we have a near zero cola that's triggered some hold harmless issues. >> that's certainly corrupt. thank you. >> i just reinforce all of that to say let's not let the perfect be the enemy of the good. we do need a band-aid now.
this really does call for a broader more thoughtful look -- it's the constant reliance of keeping medicare solvent by shifting the tax burden to states in if little ways, in it large ways. just doesn't make sense. that's a big policy change, and that's going to take time to really, you know, wrap our arms around it. but it needs to be done. >> so i want to thank everyone for coming. i want to thank our audience on c-span. i hope this has been helpful. it's quite a complicated problem. but a timely one. i hope that we can arrive at whether it's a band-aid or whether it's more fundamental solutions, i hope we avoid having to have the same discussion next year. thank you all for coming.
a are. >> as the nation elects a new president in november, will america have its first for the reason-born first lady since louisa adams, or will we have a former president as first gentleman? learn more about the influence of america's presidential spouses from c-span's first ladies. now available in paperback. first ladies gives readers a look into the personal lives and
impact of every first lady in american history. first ladies is a companion to c-span's well regarded biography series, skps features interviews with the nation's leading first ladies historians. each chapter also offers brief biographies of 45 presidential spouses and archival photos from their lives. first ladies, in published by public affairs is now available at your favorite book seller and also as an e-book. we'll take you there live at 8:00 a.m. eastern on c-span 2. international trade will be the focus of the speech by world trade organization, director general roberto.
>> they laid out goals. this is just over two hours. >> good afternoon. good afternoon. >> we have a panel of business and policy experts for shaping the future of health care, but doing it in different roles and with different perspectives. at nickham we believe that's really how you can transform health care in america. we believe in bringing the evidence together and leaders together with different
perspectives. part of the perspective is what is happening with all of you. we're inviting questions at the end of the presentations. you all have a question card in your folder. if you'll fill it out and hold it up and somebody from nickham will pick it up and bring it up to the front. with that, let's get started. it's really my great pleasure to introduce governor mike levitt. founder and chairman of levitt partners. he has served as a three-term governor of utah and as secretary of health and human services with george w. bush's administration. as hhs secretary, he led the implementation of the medicare part d prescription drug program, and ten years later you all may know that 70% of medicare enrolles are part d. governor levitt also has a downevening perspective for helping presidential candidates.
he led the transition team with romney-ryan, referred to as the gold standard by both democrats and republicans, and he continues to be a sought after advisor. i know speaker paul ryan mentioned him as someone he consults with regularly. currently he is a volunteer with the center for presidential transition, housed in the partnership for public service, and is available to both parties for questions about how to run the transition teams. please join me in welcoming governor levitt to the podium. [ applause ] >> am i the own tom clancy novel fan here? any of you read a tom clancy novel? >> one of my favorites is a novel referred to as "executive order." it is a thriller that actually
took place on capitol hill where the nation really gathered for the purpose of being able to celebrate the inauguration of a new president. regrettably, there was a terrorist event, and bad things happened. a lot of people died, including the president and the president-elect and vice president-elect and what unfolded in this novel was a question of who actually would be in charge in such a situation. i won't spoil the plot for you. you can read it, and you would enjoy it. i will say i suspect having read that book it was of particular interest to me when i was sworn in as a member of the president's cabinet that i was taken by people very serious people who drive black cars to
an undisclosed location where it was explained to me that i would be as a member of the cabinet in the line of succession and that i would have certain obligations under that task. i want to -- you were never in any danger. i was a long ways down. it was a serious task, and it should be. i should always care what you see in this picture in my wallet. it was a card presented to me that was a plastic card, and i was told that if there was any moment where the wrong things happened and there was a liablehood that something could occur, i should find a telephone, i should break that card open, and inside i would find a telephone number and some numbers that i could authenticate in the right way, and if, in fact, it occurred, that would be the way in which i would demonstrate that i was the
person to next be chosen as the president. as i said, you are not in any danger. the second thing is because if i was in that line, i would receive on a regular basis what all of you would know to be the president's morning briefing. now, this is a process where a member of the intelligence community would come to my office. we would go to a specially prepared place where they would begin to describe for me what was happening in the world, and they would pull out a document stamped top secret. the process that was used very simple basically, they come up with a series of uncertainties, and then they collect information from around the world, and they are then able to put it in front of a bunch of smart people, and they're able to say when you look at the dots on this page of information, what picture do you see? we can begin to tease out things that will help us understand what could or happen in the
future, and if those are bad, how we could avoid them, and if they're good, how we could take them as an opportunity? it's not just used in government. it's used in any -- it's obviously a very important process. as a man who was a veteran -- what we're looking for is trying to make sense of weak signals. if we're able to make sense of the weak signals, then we have the opportunity to take advantage of opportunity or to avoid disaster. this is a picture you all will remember. having seen before december 7th, 1941, pearl harbor. it's i day that the entire pacific fleet of the united states was lost. after that occurred, there were a lot of people wondered how could that have happened? how could we have lost such an
asset at one moment and have been so unprepared? well, there were hearings that were held in places like this room where testimony was taken and studies were done, and there were pages of weak signals that were determined to have been missed. for example, it was determined that we knew that the japanese were not allowing access to any of their naval facilities. we knew that they were gathering targets of british and dutch and american sites. we knew that, in fact, it was a report from the secretary of navy and war saying very easily they could attack pearl harbor. the day before this attack occurred, a ship was seen in hawaiian waters. maybe one of my favorites was
december 6th -- or 7th, rather, the day of the attack at 6:40 a.m. there was actually a submarine that was sunk by the u.s.s. ward, and as they were coming back, they could hear explosions on the other side of the island, and the commander said to the first officer, oh, it sounds as though they are working on the road between honolulu and pearl harbor. i think that is significant in the context of knowing the future because we often look at the future and try to put unusual ooeftds in the context of what we know and understand. so my purpose today is i hope that you would think about what we're doing as really a kind of intelligence briefing, if you will, on the future of health care and where this is going and the weak signals and what they're saying. i would like to talk about two things. long-term.
will, in fact, fee for service payment be replaced by value payment. my judgment, one of the most significant changes that's happened in it health care since the widespread adoption of health insurance -- secondly, i would like to talk short-term. what are the issues that will confront a new straiks in the congress in 2017 despite the outcome of the election? >> what you'll sear here is the dif use of innovation curve, and this is a curve that is used whenever there is an innovation, whether it's the iphone or whether it's a big change in the payment structures we're going through today. i would like to highlight this quote of bill gates. we always overestimate the change that will occur in the next two years, and we'll underestimate what will occur in the next ten. his advice is don't be lulled into inaction. i would like to talk a bit about
what we all know today as aco's, or accountable care organizations. a lot has been said about that, but the question is what's actually occurring? is this this is a map in 2010. the splochs, the darker they are, the more there are. i'm just going to run through quickly. 2011, 2012, 2013, 2014, 2015. it's very clear that this method of payment is becoming more prevalent. this is the number of hospitals in 2010 that were actually involved. 2011, 2012, 2013, 2014, it 2015. you can see there's a lot of activity. the smaller open dots are those that haven't. there's still a lot to do. this demonstrates the number of
contracts and the growth that's occurring. what you can't see in the back, but you can see the convergence of the lines. basically what it says is the weak signals are saying there's still a lot of new contracts being led to do this between payers and providers. however, there are fewer new aco's being formed, but more contracts as we move forward. currently we believe and the research we've done is there are roughly 28 million lives that are currently on some kind of payment structure other than just fee for service. you put this, and you will see we're right at the beginning of this process. that's a very important point.
it's clearly moving towards adoption. it's going to be hard to see in this big room, but could i just point out that we've broken this into four cases as to how quickly it would occur and how complete it would be. the first one on the upper left is basically the base case, and if you can see a blue line and a red line, the red line is what we believe will occur and the blue one is what's happened thus far. you can see if things operate just as they were, we'll get to roughly 105 million lives by 2020 that will be part of this. to the upper right this is a base line without macro. i want to pause there and say quickly macrowas a very important piece of legislation not just because of what it implemented, but because it demonstrated that there is bipartisan support for a change
for this structure. what happens if no one makes any money at this? obviously that means people aren't going to adopt it. what happens if they're wildly successful? as you can see, there is progress being made. it will be somewhere between 40 and 100 and 77 million lives. it needs to be tracked, but it's clearly demonstrating that the change in payment is beginning to happen. now we'll say we're not very good at this yet. there are a lot of people who are not ready for it. the time sg a critical issue. from an understanding where the future is going, this in my mind is a very significant development historically. now i would like to talk about what the weak signals are saying with respect to the new administration and congress. obviously we have a campaign going, and we don't know who will control congress, and either chamber, and we're not certain who will be the president. i would like to suggest that
there are at least three topics that i believe the new administration and the new congress will be dealing with early in 2017 without respect to the outcome of the election. the first is the fragile informational market. ten million people are now in the individual market as a result of actions that's been taken in the past. it is demonstrating currently to be fragile. i have -- there are lots of reasons for that. i think it's predictable that at the end of this election one party will say, see, we told you that would not work without a public option. we need to have a public option. the other party will say we told you if you didn't organize this market correctly, it would not function, and, therefore, we need to go back and either change the system or we need to fix that problem. in the balance are ten million people who have health insurance, and it's my belief
that, first of all, it needs to be responded to, and second of all, those of you involved in health care will be involved in this debate in early 2017. obviously not every state now has adopted medicaid expansion. moving into a new administration. a knew administration, whoer it is, will not be led to that of the past. if we have a president-elect clinton, it seems likely to me that we will, in fact, begin to see a push for more medicaid expansion. i think we'll begin to see more flexibility offered by the new administration as an incentive to do that, and, frankly, i think we'll see state legislatures and governors who are willing to have that conversation.
there's a tremendous amount of new flexibility built into the law. that could be interpreted in ways that could make it a boon to medicaid innovation or used in a way to say we're not changing at all. time will tell. lastly, pharmaceutical pricing. it's very rare i have an opportunity to speak to a group of people like you who are engaged in public service. i would like to take advantage of this moment to give you a piece of advice. this is a picture that i took in
20 2002. in 2002 the state i was governor of hosted the olympics. the utah olympic winter games. one of the great privileges of that is that i had a chance to go to olympia, greece, and see the olympic flame lighted. this is the scene. these olympic goddesses that you can see walked out of the woods, and one of them -- one kneeling in the ground, held a torch. she held it in an olympic salute. then she put some flammable material of some sort into that bowl that you see. it's concave, and suddenly the sun began to beat down on that bowl, and i could begin to see some smoke, and then that sound as the flame burst into being. it was the first time in many
years of preparation i realized the olympic flame is actually the sun, but she lighted the torch, and she held it high, and then from the side came another runner. this one wearing a uniform of the utah winter games. chills went up and down my spine, as you might expect, and that runner also held a torch. they held them up together. it took place almost 12,000 times, and the run travelled over 13,000 miles. everywhere the torch went, people came by the thousands to see essentially fire on a stick. one day i'm with the woman who is organizing it. i said to her, i don't get this. why do people come to see fire on a stick?
she said, you're right. you don't get this. let me sflan it to you. two weeks ago she said i won't to an area where we had a gap in the runners, and i sent my assistant ahead in order to get a runner, and she went into an elementary school, and she said to the school's secretary, quick, i need a runner, but don't give me the student body president. give me somebody that will get a bit of a lift out of this. the school secretary said i know exactly who you are talking about. within about five minutes they were dressing an undersized fifth grader in the olympic unifo uniform. they went to the street. the runner began. came closer. as they approached, there was a
meeting of those two flames. they lighted. he took it with both hands and began to run down the street with tones every tens of thousands of people on the sidelines, including his classmates. >> the woman said to me what a great experience it was for their school, and then she said of the undersized fifth grader, he doesn't sit alone anymore. that she said is what the fire on the stick is about. it's about what it can do to the human condition. it's about what sport can do to bring us together as a people around the world.
i say that for the service opportunity you have. as we talk about the week e weak signals, we're not talking about business models. we're talking about lives, and we're talking about the opportunity that you have to be in a unique position to positively affect the lives of other people. my challenge to you is that we keep the fire on the stick in our mind as we begin to think about the opportunity that lies ahead in the new congress and in the new administration and that we begin to look for solutions, and if we do, says our country will stay prosperous and good place. thank you. >> governor, i wasn't sure where you were going with your beginning with the tom clancy
references, but certainly everyone in this room is trying to figure out those weak signals and what an inspirational way to end it. thank you. now it's my great pleasure to introduce bob coacher, a partner at venrock, a venture capital firm where he focuses on health care and i.t. investments where, in speaking with him, you'll know immediately that he is truly on the pulse of the future of health care advising and co-funding innovative care, delivery, and digital health companies. he served as a special assistant for health and economic policy where he helped to shape the aca. it was e he was the only physician on the national economic council. prior to working in the white house, he was a partner at mckenzie and company where he analyzed health care delivery systems around the world. he is truly passionate, and i
have to say also optimistic about improving health care in america. please welcome bob coacher. >> good afternoon. thank you for sharing your lunchtime with us. i think we have strong signals that health care is getting better faster today than it ever has in america, and i am excited about both the care that we can all receive today and how much better it will get for more people over time. i is a i that for a couple of reasons. i now live in california where i spend my days working with entrepreneurs who want to data, technology, new ideas to health care to make health care better, and i live in a place where we're seeing the hospitals, insurance companies, employers, and patients actually want to make health care better faster. i come to you with joy that we're seeing this happen.
there's bun 1,000 new start-ups created, and there's ben-veniste tour capital put into the health care economy. we've seen widespread technology and with technology comes all that data. one of the neat things that's occurred is the health data initiative, which has liberated more data in the last year from hhs to the entire history of hhs prior to last year. for the first time we can know prices, quality, patterns, which medications work with each patients, and find people for preventive care. there are amazing things happening with deck nolg and data. two other things that give me great optimism are an influx of proven technology entrepreneurs who have said i figured out how to track us, i figured out how to sell you an ad and engage you in a game. i want to work on something important like health care. just in the last few years we've seen exactecutives from faceboo apple, trulia, linkedn, and with them come engineers and product people who know how to make
really great technology to make health care better. the last thing is we're on the cusp of a host of really interesting technologies that have many applications for health care. whether we're learning to look for irregularities or make sure you're on the right clinical treatment path or things like virtual reality to help train doctors in how to be better, we have many things that are just coming to the market that i think undoubtedly will change the way we experience health care in five years. let me look back a little bit to give you a since of why i feel this way. we've covered 20 million more americans, and those americans for the first time can go to a doctor and be able to get access to care. protected from catastrophic economic disaster should they get sick. this is a good thing. many people have medicaid. many have commercial insurance. there's been net gain and employer responses. some more people have health
care and take advantage of the tax deduction and gaining access to health care as well. on the cost side, despite lots of worries that we would have great inflation, we've had the slowest five years of cost in really distant memory. we actually have premiums today despite what you may have re read -- on quality, today when you leave a hospital with certainty, you will have a discharge plan and an appointment and your medications, and that's led to thousands of americans who haven't been riyadh mitd for preventible things to hospitals in great attention and coordination of care. a lot more patients are on higher quality health insurance plans, and there's a lot more attention to data and medicine and treatment guidelines than we've had before, which is making us have a move to make us not repeat mistakes we've made in the past. there are a bunch of things we can do to make the system work better. i'm going to talk to a few of those now. the important policy priorities
that we will all face for our first generation in the next congress will also face immediately is how to make exchanges work better and how to make the market look better, and how to deal with the marketplace or the hospital market pricing power in particular that leads towards upward price pressure without a demand side that can necessarily push them back down. secretary or governor levitt talked about the new payment models, and one of the central important parts of the aca is the movement over the next decade from fifer service payment models where doctors and hospitals are paid for each things they do where instead they're paid a lump sum or bundle or some form of value-based payment where they're rewarded for good outcomes. how can we bring people in and not create unexpected consequences? the last thing is what do we do to save more money faster? health care in america is crazy expensive. $15,000 -- or actually more than that for a family of four. that's nearly half of the median american wage. it's growing at 5% a year, which is a slower growth rate.
we have to make health care more afofrdable. there are lots of other important things in our economy that we don't want to crowd out. we have to make the system work. we talked a bit about each of those for what you might do to make these work. on exchanges that you first remember, if anybody has bought individual insurance before 2014, it was a terrible experience. you sent in forms. you might have had to have a medical exam. you waited several weeks. then you got a mysterious price, and you couldn't really ask questions. the policy might have a name, but it meant nothing to you. all of the details were in 75 pages of 10-point font that you couldn't understand. today when you buy insurance, you can go to a website, which now works. you can select bronze, silver, gold. it says what the price is immediately, and you know what you are going to get. it's a massively better experience than the old paper-based system we've had before. that said, the market is not as dynamic as one would have thought. we haven't built an ecosystem like amazon or ebay where
there's lots of -- there are things to make that better. we passed the aca, and we knew it would take a few years to have stability in the risk pools, get enough people in. we had some policies to design to stabilize the markets. those were risk adjustment reinsurance and risk coords. there's been lots of contention over risk corridors, but my argument is that we should extend these three policies for a few more years to encourage stability in the marketplaces. we had great debate, and i think a tweet could help. something called -- today when a young person buys insurance versus an old person, there's a 3-1 ratio, which means if you are older, you get a really good deal on your health insurance, and that's good. older people have more health care costs. they're sicker. they need more. you like to have affordable coverage for older people. the challenge is if you are young, like most of this room, you are paying more to perform, and if you created a broader spread, you would have lower prices for younger people, and that brings more younger people
in, and it's good for america, i think. the down side is we have to do something i think to make policies assurably affordable for older people and it's more subsidy on the back end. the third thing -- this is economics 1 01. professor rhinehart teaches this on the first day of class. we set up in the aca 50 state exchanges. that's great because each state has idiocicratic differences. some of them are very small. larger exchanges are more attractive for people to sell policies and have more competition. you'll also have more stability because in a small pool if a few people are sick, you can get volatility in premiums where, that could be multi-state exchanges. it could be just changing the bidding areas. in california we have several large regions to bid on, and that is good competition in choice, and in a system where the plans make money and premiums are not grown as quickly. the final thing that i put
without a line, because i doubt that we're going to want to talk about this politically, is it wouldn't hurt to think about the mandate and subsidies because part of the challenges today is that the penalties are not anywhere close to as great as the cost to buy for many, many people. next topic, i want to take a moment to talk about is hospital market power. if you think about health care, most of you will think about hospitals, and the big things they have and the a345izing things that happen. one day in a hospital costs more than $5,000 on average in america. $5,000. that's more than any hotel you're going to stay at, and, in fact, for are that much money, you could have me come to your house to take care of you for the day, and we would all be happy. hospital prices are growing between 5% and 10% every single year. there's no other price in the u.s. economy that's growing as fast as a hospital price.
the other problem is unlike drug prices which were easy to talk about, hospitals are a lot bigger part of the health economy. $1.9 trillion of the $3 trillion we spend, give or take, and that slice of the pie is growing faster. you have one. you go to it. very few patients will drive far or fly to some other place to go. with that consolidation that we've had of hospitals often buying doctors and hospitals building bigger buildings in it different markets, would he have seen prices go up faster than any other. this is an example of data from professor jamie robinson who shows you the effect, but in markets where there's not much hospital competition, prices are 30% higher for everything. that's problematic because you as a patient have a hard time shopping. the things that you could do to mitigate that market power and make the demands that have a bit more say here is the first one
is there's been lots and lots of mergers since the affordable care act of hospitals and doctors and systems becoming bigger systems, and these are all promulgated on the promise that this is all being done for you to make your quality better as a patient and your experience better as a patient. >> some places -- we often talk about the magic of geisinger health systems in pennsylvania or the amazing things happening up at the billings clinic in montana or keiser in the west, and you can get some great outcomes when you have specialists and hospitals of primary care and computers of share data. a lot of times what happens when you merge these systems is you raise prices first well before you coordinate care and create better quality. one thing that would certainly help mitigate the pricing tendency to do these mergers would be to stay above a certain threshold. hospitals could set medicare prices for all payers so they can't jack up the prices and wait a long time to make quality
better. another important policy is today if you go get an mri or x-ray or colonoscopy screening, you'll get two bills, and one will surprise you. you'll get a bill from the doctor that does the procedure, and you'll expect that, though. you get a second bill called a facility fee, which could be thousands of extra dollars. if you did that at an outpatient center, you might get a second bill, but it would be -- today in medicare and in most other health insurance, there are two payments. site payments and then the doctor payments. if you made the sites neutral, you would create a different market. the hospital would make a ton of money in the outpatient services. the third thing is there's a bunch of patients that the shop for health care.
much power of hrr which is like the entire when you were in the california and bay area. we need zip codes to figure out the mergers. and the last thing is, we have made front of character nonfor profit hospitals. and they were ready to report and read them and should. you'll -- by the subtlety of the quality and public health benefits being created by many hospitals. we need to have a way to hold them accountable for what they said they do. price quality and and put pressures on the hospital like every other product company has to make the product better every year. next i want to talk about models. this is data from most recent data release on the savings
generator. we look by the best far. i agree with governor for any first knee of the curve of adoption here and we'll clearly have a lot more adoption of models. if you look at where moneys have been saved about half of the money has been generated by physician or independent of the hospital. that's not too surprising. running a hospital, your job is to fill it up. you're running acl, your job is not to use a hospital. this is a zero sum payment system. there's a benchmark, if we can take care of that patient for less than the benchmark, you've got half or more than half, that savings comes from hospitals, specialists, facilities, and most come from hospitals. when a hospital aco, they have aced, they're not sure what they want to do. they lose revenue today to get it back later. share it with a payer. we have to think about that to
design them in ways we don't misalign the incentives at the front. the issue will be misaligned incentives for patients for those who pay because the current system pays for more stuff. alternative payment model will have to make sure we're aligning up status, they'll be better off if they perform better from cost quality perspective. thoughts on how you design these or the following. the first is aco program is a don put it as escalator you can get on and move them up. one people today are one sided risk, which is very good bonus payment program. if you don't save money, you get paid whatever you get paid. if you do, then you'll split some of the difference with medicare and you'll get a bonus payment at the end. that's a good way to learn. you don't redesign your kpleemt of care completely and think about point of view from patient and how you would engage them in the fullness that you need to without moving to it.
i believe there should be a duration and graduation to more risk as we think about this policy. the next issue particularly for independent groups is that you can lose much more than you were paid by medicare today. if you're in a risk model today, there might be getting 5 or 10% but they're on the hook for 100% of the loss and makes it -- and think about the caps -- two sided models. and previous had a lot of discussion about him is that the way it's currently designed is that you have a three-year benchmark and then you do your three years, the next you reset to how you did before. if you did a great job in saving money, your new benchmark will be reset at your new lower price
care and you have to beat it again. maybe you can, because there's a lot of improvement opportunity. over time you're racing against yourself and that doesn't make a lot of sense keep saying get better. we should think about readjusting to the market averages or some other benchmark after the first go around. the last thing that's amazing the rate of which up coding occurs. every talk, all policy talks we have alliance, let's rude out fraud and we all say, of course, we should. but the most -- the most e gr egregious area is in the coding system it can be better sure that the patient is coding accurately. it's more codes that's how you get paid more. it is breathtaking how quickly you can take emissions out of hospitals and see the patients that are left over appear sicker in codes than they appear in reality. use to be treated in hospitals for urinary track infection,
that's a $40,000 difference, it's the same treatment for three days. so this subtlety and how you code has maximum effects of how much you save, you don't have a good system to hold anybody accountable for this and the medicare one off one at a time and systemic enough to protect against this. in the med code unit every year you might see those that really patient rule a line called coding intensity. what that means is adjusting for coding, up coding which flex patient aiding within one year, within a year by virtue of the codes they get we need to think about how to get it. the last thing i add and there's been a lot of discussion about this, having some system patient for engaging in their care, one of the most important is actually called patient activation, which talks about how active is a patient knowing what their options are and knowing why they're taking their
meds and wanting to get follow up to get it done and sleeping and walking and all of that stuff they tell you to do before you leave my office. the more i can get it up in care, the better they do. and not enough time spent in enough making sure the patient knows what they're doing and why. but when that happens, better out comes occur. have some mechanism to award between other things that would be important to making these look better. they require cooperation. the last thing i want to touch on for a moment, what should you do to bend that cost current down, what are the next set of things to do. the first thing productivity. this is a tough one. america loves middle class jobs, jobs with benefits and jobs that pay well, health care jobs have been good jobs. we're hiring at a rate that's faster than the demand is growing. the most expensive thing is labor of people. friendly document is ftes
running around, nine of them are administrative. the number of nonclinical labor jobs has doubled. that's the opposite of what you would expect in a system that's getting more productive. the ratio of productive labor gets smaller every year as we get more efficient. we're not seeing that in hillary clinton. think about how to signify the process sees how to redesign them to have frankly fewer people in them so you don't have to check and fact so many things back and forth. we haven't tackled it yet. whenever i talk to doctors, why did we fix medical malpractices, defense medicine by doctors. i think there's lots of things that make it better, for following evidenced based pathways there are lots of ways you can do it. the last thing we have to think about of stuff, they're super expensive. we think about how to do how to reward doctor fees for things they