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Value-Based Transformation of America’s Healthcare System

Alex M. Azar II
America’s Health Insurance Plans
March 8, 2018
Washington, D.C.

Putting the healthcare consumer in charge, letting them determine value, is a radical reorientation from the way that American healthcare has worked for the past century. …Simply put, our current system may be working for many. But it’s not working for patients, and it’s not working for the taxpayer.

As Prepared for Delivery

It’s a pleasure to be here with all of you today. I want to thank Marilyn [Tavenner] and all of AHIP’s members for inviting me here to share our vision for HHS and America’s healthcare system.

One of the key commitments President Trump has made across this administration has been to see the private sector as our partners, not just as entities to be regulated or overseen.

That charge has been taken seriously at HHS from Day One.

We at HHS see stakeholders, including America’s health insurers, as part of the solution to our country’s many healthcare challenges.

We recognize that it’s not just government that wants better, more affordable healthcare for all Americans — our partners in the private sector, all of you, want the same.

It’s an exciting time to take over as Secretary of HHS, full of both challenges and opportunities.

I want to focus today on something that represents both a challenge and an opportunity: the transformation of our healthcare system from paying for procedures and sickness to value and outcomes.

We know many of you in this room have taken the lead on shifting toward value-based payments. With costs outrunning quality improvement, you are increasingly working not just as payers, but also as innovators and care coordinators.

Unfortunately, our federal programs have not always kept up the same pace, or led as they could have. But on all fronts, this transition must accelerate dramatically.

This is no time to be timid. Today’s healthcare system is simply not delivering outcomes commensurate with its cost — President Trump knows it, and the American people know it, too.

But there is a better way. Imagine a day when healthcare delivery in the United States functions the way other parts of our economy do. We as patients would pick providers with the level of information we have when using Amazon or Yelp. Consumers would drive quality and cost-effectiveness with information, competition and genuine choice.

Some argue healthcare is simply different, that it is and should be immune from market forces. I simply disagree. Real competition — in the economic sense — has never really been fully tried in our system.

Upon taking office at HHS, I identified the value-based transformation of our entire healthcare system as one of the top four priorities for our department. The others are combating the opioid crisis; bringing down the high price of prescription drugs; and addressing the cost and availability of insurance, especially in the individual market.

Value-based transformation in particular is not a new passion for me. It became a top priority for Secretary Mike Leavitt when I was working for him as deputy secretary, and it was taken seriously by President Obama’s administration as well.

It has been, at times, a frustrating process. But there is no turning back to an unsustainable system that pays for procedures rather than value.

In fact, the only option is to charge forward — for HHS to take bolder action, and for payers and providers to join with us.

This administration and this President are not interested in incremental steps. We are unafraid of disrupting the system simply because it’s backed by powerful special interests.

So today, I want to lay out four particular areas of emphasis that will be vital to laying down new rules of the road, accelerating value-based transformation, and creating a true market for healthcare.

The four areas of emphasis are the following: giving consumers greater control over health information through interoperable and accessible health information technology; encouraging transparency from payers and providers; using experimental models in Medicare and Medicaid to drive value and quality throughout the entire system; and removing government burdens that impede this transformation.

The key theme uniting these four priorities is the recognition that value is not accurately determined by arbitrary authorities or central planners.

It is best determined by a market of many players — in the case of healthcare: patients, providers and third-party payers. Each piece of our plan for value-based transformation recognizes this, and it’s the main reason I am optimistic that we’ll be able to build on the work that’s already been done by the public and private sector and achieve real transformation.

But I want to emphasize that this change will not be easy or painless. Putting healthcare consumers in charge, letting them determine value, is a radical reorientation from the way that American healthcare has worked for the past century.

In fact, it will require some degree of federal intervention — perhaps even an uncomfortable degree. That may sound surprising coming from an administration that deeply believes in the power of markets and competition. But the status quo is far from a competitive free market in the economic sense of the term, and healthcare is such a complex system, that facilitating a competitive, value-based marketplace is going to be disruptive to existing actors.

Simply put, our current system may be working for many. But it’s not working for patients, and it’s not working for the taxpayer.

I’ll start with the information and technology piece, because we’ve taken some real steps forward on it just this week.

In the years since we were talking about this topic around Secretary Leavitt’s conference room table, technology has advanced by leaps and bounds. The ubiquity of smartphones, cloud-based storage and computing power, and near-universal access to broadband internet has changed the way we keep and consume information.

When this journey began, Secretary Leavitt warned us of electrifying a system without standards to ensure interoperability, lest we simply entrench a balkanized system.

In recent years, we’ve seen substantial advances in adoption of electronic health records by providers, but all too often, this simply meant putting in electronic form what had been on paper, at great expense and burden to the provider. Useful, but hardly realizing the promise of health IT.

Most important, this shift almost entirely left the patient out of the picture.

It’s not just that the benefits of health IT aren’t always apparent to patients — it’s that unless we put this information and technology in the hands of patients themselves, the real benefits will never arrive.

Empowering consumers and individuals has been key to the advances of the information age. Think about how we now often make restaurant reservations through apps like Open Table. From the restaurant’s perspective, there was nothing wrong with a ledger of reservations or, maybe, a business-focused program for tracking tables. But until the advent of reservation apps, there was no way for consumers to have that information at our fingertips.

When I’m making a reservation on an app today, I’m the one in control of the whole process: I see the available choices, I can make an informed decision, and I’ve got the record in my hands.

We already have the technological means to offer this power to patients — but it hasn’t yet happened.

We’re not interested in micromanaging how this process happens. We are much more interested in setting out simple goals: Patients ought to have control of their records in a useful format, period. When they arrive at a new provider, they should have a way of bringing their records, period. That’s interoperability—the what, not the how.

Let me give you a sense of what we’re doing to help make this happen. On Tuesday at the HIMSS conference in Las Vegas, CMS Administrator Seema Verma and Jared Kushner of the White House Office of American Innovation announced two major initiatives to get this process started.

One piece is revamping Medicare’s system of providing claims data, called Blue Button, into what we’re calling Blue Button 2.0.

Branding, apparently, is the one place we’re going to tolerate incrementalism.

But seriously, the current Blue Button system is of quite limited use for patients: They can print out a PDF of all of their Medicare claims, and that’s about it.

Blue Button 2.0 will use open APIs to give private tech developers access to data in a form they can incorporate into their apps—in other words, leveraging the private sector to let the patient own, use and understand their data.

More than 100 companies, including real leaders in the tech world, are already signed up.

Blue Button 2.0 is part of a larger government-wide initiative that Jared Kushner announced on Tuesday, called MyHealthEData.

MyHealthEData will take a broader view of the goal we’re working toward within the Medicare program by Blue Button 2.0: How can we help private payers and providers put patients in charge of their data?

For one, you all can do your part: Follow Medicare’s lead by making your patients’ claims data available in formats that are not just usable to the patient, but also to app developers. Not only will this rapidly expand the number of patients in charge of their data, I bet you all can also come up with better names for it than “Blue Button 2.0.”

Through CMS and the Office of the National Coordinator, HHS already has a number of initiatives in the works to expand interoperability and usability.

We’re developing measures to prevent information blocking, as well as ways to encourage patient ownership of data in Medicare Advantage and Affordable Care Act plans. We are also going to overhaul Meaningful Use so that the program’s incentives are focused on encouraging interoperability.

We truly believe these measures can improve quality and drive value. Data sharing encouraged by CMS, for instance, could enable providers to avoid duplicative testing, saving money and sparing the patient unnecessary inconvenience.

Putting patients in charge of this information is a key priority.

But if we’re talking about trying to drive better value overall, we also have to do a better job of informing patients about the quality and cost of the services they’re receiving.

That is where our emphasis on transparency comes in — transparency about both costs and quality.

I want to share a personal story about this, because I think it speaks to the powerlessness consumers can often feel in our health system at a time when, through high-deductible plans, we’re asking them to take charge of their own care and decisions.

A few years ago, my doctor back in Indiana wanted me to do a routine echocardio stress test. I figured this could occur within the scope of his practice, which was connected to a major medical center.

Instead, I was sent a few floors down, where I was told to start handing over all sorts of information to a receptionist. Soon enough, I had a plastic wristband slapped on me, and, to my surprise, what I thought would be a simple test in the room next door had resulted in my being admitted to the hospital.

Now, I had a high-deductible plan, so I would be paying for this test out of pocket.

As someone who works in healthcare, I knew that the sticker price on the test had just jumped dramatically by my receiving it within a hospital — something that might never occur to most healthcare consumers.

So I asked how much the test was going to cost, and was told that information wasn’t available. Fortunately, I didn’t just fall off the turnip truck, so I persisted, and eventually, the manager of the clinic appeared and gave me the answer. The list price was $5,500.

I knew that wasn’t the right answer either. The key piece of information was what my insurer would pay as a negotiated rate, or what I’d pay with cash.

That information didn’t come easily either, but eventually, I was told it would be $3,500.

I happened to know of a website where you could search typical prices for such procedures, so I looked up what it would have been if I’d received it outside of the hospital, in a doctor’s office. The answer was $550.

Now, there I was, the former deputy secretary of Health and Human Services, and that is the kind of effort it took to find out how much I would owe for a procedure. What if I had been a grandmother? Or a 20-something with a high-deductible plan?

This is simply wrong. It cannot continue if, as most people in America agree, we want some degree of a consumer market when it comes to healthcare.

I believe you ought to have the right to know what a healthcare service will cost — and what it will really cost — before you get that service.

This is a pretty simple principle. We’ll work with you to make it happen — and lay out more powerful incentives if it doesn’t.

To go back to my restaurant analogy, imagine if you have to order before knowing what anything costs — indeed, before ever seeing the menu. And once your bill finally does arrive, not only are you paying for your appetizer, entrée and dessert, you get a surprise bill from the pastry chef, too — who turns out to be out of network.

No one would ever put up with such a system. Especially if we want to put patients more in charge of their own healthcare dollars, payers and providers have to become more transparent about their pricing. There is no more powerful force than an informed consumer.

The good news is that some of you have taken steps in this direction already, and we applaud you for it. Some insurers and employers have created tools that show people what different local providers charge for a procedure. The information is correctly “grouped” together so you don’t have to add together the doctor’s charge, the hospital’s charge, and the cost of other services.

And if you log in with your insurance information, it shows you how much you will pay out of pocket.

The price-transparency problem is not limited to payers or providers. The same applies for prescription drugs: Your pharmacist typically cannot tell you the real price you’re going to pay for a drug, and therefore your out-of-pocket cost, until they actually create a claim. So transparency is a crucial piece of our efforts to bring down prescription drug prices, too.

In both healthcare services and pharmaceuticals, the huge gaps between the list price and the actual price are notorious. It’s like the gap between the $500 rack rate on the back of the door in your Hampton Inn room and the $100 you actually pay.

This thicket of negotiated discounts makes it impossible to recognize and reward value, and too often generates profits for middlemen rather than savings for patients.

That’s why we were so pleased to see UnitedHealthcare take the step it did earlier this week, announcing that it would be passing on drug manufacturer rebates to consumers. This will bring down costs for millions of patients, and it aligns perfectly with our efforts to bring transparency to these transactions and ensure that discounts are passed on to consumers.

So this administration is calling on not just doctors and hospitals, but also drug companies and pharmacies to become more transparent about pricing and outcomes of their services and products. And if that doesn’t happen, we have plenty of levers to pull to push it along.

The third piece we’re looking at is using Medicare and Medicaid to drive the value-based transformation of our entire health system.

Federal spending on Medicare and Medicaid amounted to just over $1 trillion in 2016 — one-third of America’s total health spending. If we’re serious about transforming our health system toward paying for value, Medicare and Medicaid will play a key role.

We know that payers have taken many strides in this direction, but in many cases, only Medicare and Medicaid have the heft, the market concentration, to drive this kind of change, to be a first mover.

We already have a range of tools for using these programs to pay for value, many created by 2015’s MACRA legislation. The Center for Medicare and Medicaid Innovation, alongside these tools, vests HHS with tremendous power to experiment with new payment models.

Of course, we will be transparent and collaborative as we experiment here. We are mindful that aggressive models have not always worked out, so appropriate guardrails will always be essential.

But make no mistake: We will use these tools to drive real change in our system.

Simply put, I don’t intend to spend the next several years tinkering with how to build the very best joint-replacement bundle — we want to look at bold measures that will fundamentally reorient how Medicare and Medicaid pay for care and create a true competitive playing field where value is rewarded handsomely.

As just one example, we are looking at our efforts regarding Accountable Care Organizations. The program was intended to give providers three years to learn how to accept risk and share savings, but the results have been lackluster.

In retrospect, this isn’t such a surprise: Providers were not given new meaningful space to experiment — such as the arrangements they needed to truly take on the risk of a patient’s outcomes. Meanwhile, they were allowed to share in modest cost savings, but not asked to accept responsibility for cost overruns.

Now, we recognize that many of you have taken a leading role in models where providers can take on real risk, through your work in Medicare Advantage and elsewhere. We look forward to those innovations continuing — you all have the opportunity to pave the way.

In all of this work, we’ve been informed by your responses to CMS’s requests for information — they have been immensely valuable, and we will act on them.

We will also bear in mind whether new burdens created by models or the scale they require for viability may be driving consolidation in the healthcare market. As a matter of principle, we want to move to a system where we can be agnostic about ownership structures, a system that will allow independent providers to group together to drive innovation, quality and competition.

This brings me to our fourth key engine for transformation: addressing any government burdens that may be getting in the way of integrated, collaborative and holistic care for the patient, and of structures that may create new value more generally.

There are a number of regulations that may be getting in the way of value-based transformation, including certain Medicare and Medicaid price reporting rules, restrictions in some FDA communication policies, and current interpretations of various anti-fraud protections.

These may be impeding coordination and integration of services, which is crucial to building system that works for the patient and provides quality care at a lower cost.

We also want to look at burdens we’re placing on insurers specifically. We know the amount of time and money that goes into complying with well-meaning but often byzantine rules and regulations regarding consumer communications.

More broadly, we are committed to using the flexibilities we have within the law to allow insurers to offer competitive products that work for consumers. We know the layers of regulation imposed by the Affordable Care Act have made this almost impossible. Consistent with the law, we want to work with you to open up new affordable and flexible options.

I want to end by laying out why I’m so optimistic that we can tackle these longstanding priorities under this administration.

First, the time has simply come: As costs continue to skyrocket, the current system simply cannot last.

But it is also because this administration is not afraid of disruption in the way many political actors are. President Trump is a man of courage and vision. He has seen and heard how the high cost of healthcare is burdening working-class Americans and he has given us a mandate to do something about it.

The measures I outlined today will get us part of the way. In order to bring down costs and increase quality, we have to put patients in charge of their own data; provide them with useful, transparent price and quality information; use Medicare and Medicaid to shift toward a value-based system; and get government out of the way of such a system.

This won’t be the most comfortable process for many entrenched players. But those who are interested in working with us to build a value-based system will have the chance to take advantage of a market where consumers and patients will be in charge of healthcare.

That’s the kind of system that will put patients first, but also represent a chance for competitive payers and providers to succeed in new ways.

I am determined that we will look back at the years of this administration as an inflection point in the journey toward a system that rewards value and puts patients at the center. We want you to join us on this journey.

So thank you all for listening today, and for your ongoing engagement with our administration.

Change represents opportunity, and I exhort all of you to take advantage of the opportunities represented by what I’ve discussed today. Because I assure you: Change is possible, change is necessary, and change is coming.

Content created by Speechwriting and Editorial Division 
Content last reviewed on March 8, 2018