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Remarks by AFL-CIO President Richard L. Trumka, National Business Coalition on Health, Washington, DC

Richard Trumka • November 16, 2010

Good morning.  I'm pleased to be with you today.            

I want to start by thanking you for all the work you do in providing health benefits to working families, and for your participation in the National Business Coalition on Health.            

Andy Webber is a forceful and effective advocate for safer, better and more efficient health care, and we value our relationship with him and NBCH.            

The relationships between unions and employers are complicated in many areas—and health care can be up there at the top of the list.              

But workers and employers have critical common interests in health care policy.            

These common interests begin with the efforts by both workers and employers going back to the beginning of the last century to see to it that working families could get the health care we all deserve.  Since that time, a key test of a responsible employer has been, "Does that employer provide affordable health coverage to its employees?"  And I am proud to be in this room with so many employers who have passed that test for decades.            

Over the decades, we have seen a variety of institutions extend health care benefits to more and more Americans—both union and company-sponsored health care plans, Medicare and Medicaid, state universal coverage plans and now comprehensive federal health insurance reform that promises to provide health insurance coverage to 94% of all non-elderly Americans.             

Yet in the end, together employers and employees pay for health care—through premiums, co-pays and through taxes.             

We may argue over the split, but because health care costs come out of wages and profits, we share an interest in reining in the high health care costs that are rapidly pricing health care out of everyone's reach.              

And yet as costs rise, we both mostly agree to eat those costs rather than cut back on health benefits.  Why is that?  It's because first, getting quality health care is the difference between life and death, between families sharing their lives together and families being devastated by tragedy, between full lives appreciating our world, and lives of pain and crippling limitations.            

And there is something more.  While most of us go for years with only occasional health care expenses, very few of us can afford to pay out of pocket for the health care we might need—if our baby is born premature, if cancer strikes, if we have a serious accident.  Health care provision is necessarily an act of solidarity—it binds us together.  Employer-provided health care binds the employees of a company together.  Medicare and Medicaid bind all Americans together in a web of mutual support.            

But for three decades now, health costs in America have been unsustainable, and yet our health outcomes are no better than other advanced countries, and in many ways they are worse.              

Starting in the late 1970s, many, if not most, of the policies that were supposed to rein in out-of-control costs only made things worse:  

  • Deregulation and competition among providers;
  • Risk segmentation that big, for-profit insurers used to get into the health
    business, and then forced out non-profit companies and ended the use
    of community rating; 
  • The American Hospital Association's "Voluntary Effort" that started in the late 70s
    to forestall federal cost control legislation; 
  • And, of course, managed care.              

We did get some public policy changes that moderated the growth of health costs—Medicare's switch from cost plus-reimbursement to prospective payments for treatment, for example.              

And more recently, we are beginning to build the foundation for a value-based rather than volume-driven system of paying for health care, by measuring and reporting quality performance data.              

Overall, though, employers and workers have had to fend for ourselves.              

In the absence of any real controls on health costs, we had to figure out ways to manage them.              

In the process, we learned a lot and built a pretty impressive toolkit – prevention and wellness programs, chronic disease management, drug purchasing arrangements, and, more recently, restrictions in our contracts that barred health plans from paying providers for the most egregious and avoidable medical errors.              

But, while a few cost management techniques—like health maintenance programs for diabetes and other high-cost chronic diseases—do get to the core drivers of health costs, most operate on the margins.              

The bottom line: Today all of us are fighting a losing battle against health costs that have become nothing short of cataclysmic.              

That is why we viewed the enactment of health care reform legislation in this Congress as a do-or-die issue.              

Some people thought that once we passed the Affordable Care Act, our work was over.            

But we quickly discovered that implementing this historic but complex law was going to take an enormous effort.            

Make no mistake: The Affordable Care Act is a great milestone toward ensuring adequate health benefits for everyone and changing the way we deliver and pay for care.            

We now have a law on the books that protects people against some of the worst abuses of the insurance industry that ensures that people with pre-existing conditions are not denied coverage, that protects our families from bankruptcy when a child is diagnosed with cancer and an insurance company limits what it will pay.            

We finally have a law on the books that helps all the employers and union funds that struggle to maintain health benefits for early retirees and laid-off workers.            

And we finally have a law that brings us close to universal coverage by providing coverage for 32 million people in this country who would not otherwise have it.            

This huge expansion of coverage is also the critical first step in bringing down health care costs across the system.             

Universal coverage is the foundation on which the Affordable Care Act builds a structure for delivering higher value health care, and creates a path toward slowing the growth in health spending significantly.           

But the Affordable Care Act's cost-cutting potential depends on how it is implemented.             

The new law does not use the spending caps or direct price regulation that other countries have used successfully. Instead, its design for cost containment works through a set of provisions designed to improve the quality of care while lowering costs. This is something manufacturing companies learned how to do two decades ago.            

The Affordable Care Act's cost containment program begins with Medicare.  The Congressional Budget Office estimates the reforms in the Act will reduce Medicare spending by $511 billion over 10 years.            

We have to make sure the payment and delivery reforms contained in the Affordable Care Act are driven through the entire health care system.               

The cost containment design in the Affordable Care Act has the potential to redraw the landscape of health costs. And the challenge for all of us is how to apply the law in the coverage we purchase to slow the growth in private-sector health spending.              

The law uses a five-part strategy for reforming the way we provide and pay for care:                  

  • First, it improves administrative efficiency by modernizing data processing and by standardizing and simplifying the procedures for plan selection and administration.
  • Second, it aims to stop paying for unsafe or poor quality care, such as hospital acquired infections and unnecessary readmissions to hospitals.
  • Third, it reforms the way we approach care in a number of ways. For example, it places more emphasis on prevention and wellness. It provides new models of care, like advanced primary care. It creates a new institute that will allow us—on a large scale for the first time—to compare the effectiveness of each new drug or treatment against existing ones for the same condition. And it makes possible, also for the first time, the combining of quality data from Medicare and from private plans to get a complete picture of who is delivering quality care.
  • Fourth, it reforms the way we pay for care by linking what providers get paid to the quality instead of the amount of care they provide.
  • And last, it sets targets for overall Medicare spending and creates an independent board that will direct more reforms if those targets are not met. This will serve as a failsafe savings mechanism if the other savings mechanisms—such as reduced payments to hospitals and other providers—are not enough to meet the targets.            

Two familiar examples of poor care with very high costs show how much we stand to gain:
(1)   Hospital-acquired infections kill 90,000 patients a year and conservatively cost us 
        $20 billion a year in unnecessary expense, according to HHS.
It used to be assumed that a significant number of patients would get these infections and almost half would die, despite very costly efforts to save them. But some hospitals have made relatively simple changes that have resulted in zero infections for months and even years.            

Only one-fifth of U.S. hospitals, though, have adopted these improvements.  
(2)   Or take preventable re-admissions to hospitals—a $50 billion a year problem.            
These readmissions happen because patients get inadequate follow-up care and help after they are discharged.            
But recent studies have shown that readmission rates can be reduced dramatically—HHS puts a conservative estimate of attainable savings at $12 billion a year—and again, it's not rocket science.                    

This is a very different approach to containing costs than shifting more and more costs onto consumers in the hopes that they will use less health care, which is the thinking behind the excise tax on high-cost plans, or efforts designed to disaggregate risk and force each of us to bear health care risks alone.            

Last week the chairs of the President's deficit commission proposed increasing cost-sharing in Medicare.  That is not courage or a starting point or anything of the sort.  It is an attack on seniors' access to health care by people who do not have the courage to address real solutions to our health care cost crisis by holding either health care providers or insurance companies accountable.            

We have too much cost-shifting already.  Many companies are already asking workers to foot more and more of the bill, if they provide health insurance to their employees at all.             

Health insurance premiums have risen 27 percent since 2005, yet worker contributions rose an average of 47 percent.  This is the problem that needs to be solved, not the solution.            

Unless we change our current course, the situation is likely to worsen very quickly: Working families will see their coverage moving farther and farther out of reach, companies large and small will find health benefits less and less affordable and labor relations will become more and more contentious.            

The Affordable Care Act's innovations present a great opportunity to get at the basic cost drivers in health care—using Medicare to model best practices and channel its immense purchasing power to drive reform throughout the health care system.             

But it is a work in progress – and now we have to implement it right. Now we have to fight the short-sighted, ideological efforts to give up and repeal it. Now we have to ask all businesses not to doom it by walking away from providing coverage – and I hope you will join me in that effort.  Now we have to get ready to take maximum advantage of this opportunity.            

To do this, I hope together we can do three things:

  • First, as private purchasers, we need to partner with Medicare and get to work immediately on implementing the system reforms and payment reforms in the Affordable Care Act. In fact, implementation should move faster than what's scheduled in the law. And we should follow Medicare's lead and put the reforms into our contracts with health plans and providers. If it's good enough for Medicare, it ought to be good enough for employment-based coverage, as well.
  • Second, we should continue to use the cost management tools we've already developed and refined: workplace prevention and health maintenance programs, screenings for early detection of chronic diseases and management of those diseases.
  • Third we need to work NOW to structure the new state health insurance exchanges so they become models for more efficient and higher quality health care.              

At the same time, we must press for enactment of a public health insurance option that would partner with Medicare to promote payment and delivery reforms and—through competitive pressure—make those innovations the standard throughout private coverage.  A public option is in all of our interest as the people who are paying for health care, and I am convinced it is the unavoidable next step in getting health care costs under control.            

On January 1, the Center for Medicare and Medicaid Innovation will be up and running. Today, CMS is announcing the launch of the Center and a set of important new pilot models of care.            

I am heartened by the fact that unions and employers are being involved from Day One in the Center's work and, even more importantly, that the biggest of the pilot programs being announced today includes private payers as well as Medicare and Medicaid in eight states.            

So, starting today we will have the chance to partner with Medicare in delivery system reforms that save money while improving the quality of care.            

Based on recent comments by HHS officials, those early reforms are likely to include tests of the advanced primary care practice model, or "medical homes," as they are sometimes called. They're likely to include efforts around patient safety issues such as hospital acquired infections and basic process problems in care transitions, such as hospital discharges.            

The AFL-CIO and our unions want to work with employers and with Medicare to achieve the full cost-saving potential of the new law in private coverage. It will only happen if we work together in a national effort to tackle health costs.            

This means we need to take "working together" to a whole new level.            

One of the groups I looked forward to working with on this is the NBCH, since you have consistently been a leader in reforming employment-based health care.            

I'm ready to work together. Our unions are ready. I believe you're ready, too.            

Thank you for this opportunity to join in one of the most important discussions of our time.            

I would be happy to take your questions.

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