Speeches & Floor Statements

Floor Speech: Health Care Cost

Posted on December 11, 2018

Mr. President, today, I am asking experts at the American Enterprise Institute and the Brookings Institution as well as other leading health careexperts, for specific ideas about how Congress and the president can work together to reduce the cost of health care in the United States.

Here is why:

Last July, at the Senate health committee’s second in a series of five hearings on reducing health care costs, Dr. Brent James, a member of the National Academy of Medicine, testified that 30 percent, and probably as much as 50 percent, of all the money spent on health care is unnecessary.

That startled me, as I hope it startles you.

So I asked another witness, Dr. David Lanksy, from the Pacific Business Group on Health, if he agreed with Dr. James’ estimate, and he said yes.

And then at our next hearing not one witness on our distinguished panel disagreed with Dr. James.

That means we are spending as much as half of all that we spend on health care on unnecessary treatment, tests, and administrative costs. 

As a country, we spend a huge amount on health care—$3.5 trillion in 2017 according to the Centers for Medicare and Medicaid Services.

When we use Dr. James’ estimates, that means we spent between roughly $1-$1.8 trillion on unnecessary health care in 2017.

That is more money than the Gross Domestic Product of every country in the world except for the top nine.

That is three times as much as we spend on all of our national defense, 60 times as much as we spend on Pell grants for college students, and about 550 times as much as we spend on national parks. 

For the last eight years, most of the debate about health care has not been about this extraordinary fact that we may be spending up to half of what we spend on health care unnecessarily but instead on health insurance, and in fact on six percent of the health insurance market.

The truth is we will never have lower cost health insurance until we have lower cost health care.

Instead of continuing to argue over a small part of the insurance market, what we should be discussing is the high cost of health care that affects every American.

Here is something that we ought to be able to agree on: that we are spending too much on health care and that too much of what we spend is on unnecessary care

And the five hearings we held reminded us of something else we should agree on: one major reason for the unnecessarily high cost of health care is that the health care system does not operate with the discipline and cost saving benefits of a real market.

Too many barriers to innovation drive up costs.

And most Americans have no idea of the true cost of the health care services they buy —which also drives up costs.

As a country – American families, federal and state governments, private companies – we spent $3.5 trillion on health care in 2017 according to the Centers for Medicare and Medicaid Services – almost as much as the $3.98 trillion the entire federal government spent in 2017, according to the Congressional Budget Office. 

High health care costs impact everyone:

First, the taxpayer, because the federal government spends about one-third of all federal dollars on health care. According to the Congressional Budget Office, of the $3.98 trillion the federal government spent in 2017, $1.1 trillion of that was mandatory spending for Medicare, Medicaid, and other health care programs. 

This federal government runaway spending is the principal cause of the national debt. It squeezes the budget for national parks, national defense, and basic research.

Health care costs also impact states, all of which have to balance their budget.

When I was governor of Tennessee, Medicaid was 8 percent of the state budget; today is it 30 percent of the budget. That means states have less to spend on fixing roads and on higher education.

Second, health care spending adds to the cost of doing business.

And Warren Buffett has called the ballooning costs of health care “a hungry tapeworm on the American economy.”

Third, and most important, the rising cost of health care is squeezing the budgets of American families.

According to a Gallup poll released days before the midterms, 80 percent of registered voters rated health care as “extremely” or “very important” to their vote – a higher percentage than every other issue polled, including the economy, immigration, and taxes.

I would imagine that every senator has heard stories from their constituents about struggling to stretch their paychecks to afford a prescription or cover a surprise bill in the mail.

Any one of us who has received a medical bill in the mail has wondered what you’re actually paying for.

Here is a story that I heard recently: Todd is a Knoxville father who recently took his son to an emergency room after a bicycle accident. His son was treated, Todd paid a $150 copay because the emergency room was “in-network” for his health insurance, and they headed home.

So Todd was surprised when he received a bill for $1800 – because even though the emergency room was “in-network,” the doctor who treated his son was not.

Todd wrote me, trying to figure out why it is so hard to understand what health care really costs and said, “If I’m expected to be a conscientious consumer of my own health care needs, I need a little more help.”

The issue of surprise billing is a widely recognized problem – it was highlighted in a report from the White House on health care costs released last Monday.

We want Americans like Todd and his son to be able to access quality care they can afford, so earlier this year, the Senate health committee set out to explore what could be done to lower costs.

We have held five hearings over the last six months to examine why health care costs so much:

In June, at our first hearing, we set out to better understand how much health care actually costs in America.

In July, at our second hearing, we heard from Dr. James that up to half of what we spend on health care is unnecessary.

At our third hearing later in July, we looked at administrative tasks imposed by the federal government – and how those burdens lead to doctors spending more time on paperwork, less time treating patients, and an increase to the cost of care.

In September, we looked at why, when you can check reviews and prices before buying everything from a coffee maker to a car, the cost of health care has remained hidden in a black box.

This is something even the federal government’s top health care official knows personally.

Health and Human Services Secretary Alex Azar recently told the story of his doctor ordering a routine echo cardio stress test. He was sent down the street and admitted to the hospital, where, after considerable effort on his part, he learned the test would cost him $3,500. After using a website that compiled typical prices for medical care, he learned the same test would have cost just $550 in a doctor’s office. Secretary Azar said that consumers are so in the dark they often feel ‘powerless.’

In an age when you can compare different prices and check a dozen reviews when shopping for a new BBQ grill, Americans should be able to more easily understand the cost of their health care.

And last month, at our fifth hearing, we heard about steps the private sector is taking to disrupt the health care system and what kinds of federal barriers are preventing private companies from lowering costs.

As we held these five hearings, two conclusions became clear.

First, as a country, we spend more on health care, but we don’t spend it well.

Again, Dr. James told us that 30 percent, and probably over 50 percent, of all the money spent on health care is unnecessary.

That really is astonishing.

It echoes what Dr. Ashisha Jha [AH-SHEESH] [JAH], a witness from our first hearing and Director of the Harvard Global Health Institute, who said, “The popular belief has been that the reason we spend so much more on health care than other countries is that we just use too much health care. Well, it turns out when you look at the data… we are not using more health care. Why is it we are spending twice as much? There are two reasons.  One, is administrative complexity.  [And second] Every time we use health care in America, we pay a lot more than any other country in the world.”

Second, while it would be convenient to have a moonshot to reduce health care costs, this will require people other than the federal government.

First, as the largest purchasers of health insurance, employers are really leading the way in the effort to lower health care costs.

For example, Memphis-based International Paper, uses a service called Best Doctors, that employees can use for a second opinion on health care.

Best Doctors review an employee’s records, and then either reaffirm the treatment recommended by a doctor, or recommend a different course of treatment, such as physical therapy.

The use of this voluntary program saved International Paper over half a million dollars in 2017 by preventing unnecessary treatment.

Another way employers reduce health care costs is through wellness programs – which encourage employees to lead healthier lives.

There is a consensus that wellness – lifestyle changes like eating healthier and quitting smoking – can prevent serious illness and reduce health care costs. 

And it is hard to think of a better way to make a bigger impact on the health of millions of Americans than to connect the consensus about wellness reducing health costs to the health insurance that 181 million people get on the job.

Second, states are taking an active role in the cost of health care.

In 2017, the state of Maine required health insurers to split the savings with a patient if the patient shops around and chooses a doctor that is less than the average price the insurer pays.   

And in Oregon, the state compiles data on insured residents and uses this information to run a tool that allows patients to compare the costs of procedures at different hospitals.

Third, private companies are creating innovative tools to reduce health care costs. 

For example, Healthcare Bluebook, a Nashville company and a witness at one of our hearings, is a tool that helps patients find the best price for the highest quality care in their area, using their employer sponsored insurance.

This is useful to lower costs because, for example, the amount a patient pays for cataract surgery in Memphis can range from as little as $2000 to more than $8000.

Fourth, hospitals, doctors, and other health providers have the potential to make a large impact on the cost of health care.

On a smaller scale, one of our witnesses, Dr. Gross, runs a practice under what is called the direct primary care model.

He charges a flat membership rate of $60 per patient in cash for adults under age 65, $25 for one child, and $10 for each additional child.

His practice does not bill anything to an insurance company for direct primary care members– not to Obamacare plans, Medicaid, or Medicare.

In return for this membership fee, members can receive an annual wellness exam, 25 office visits per year including same-day appointments, and some in office testing and chronic disease management without paying anything additional out of pocket.

This gives patients access to a defined level of health care at a predictable price.

On a larger scale, HCA Healthcare, who also testified and has 178 hospitals and 119 freestanding surgery centers located in the U.S. and the United Kingdom, is implementing new techniques to reduce the spread of MRSA [MER-sa], a drug-resistant bacterial infection, in Intensive Care Units (ICUs).

These new techniques have reduced cases of MRSA by 37 percent in HCA hospitals, and have been so effective that the World Health Organization and the Centers for Disease Control and Prevention have added them to their best practices.

According to HCA, this reduction in MRSA infections saves $170,000 for every 1,000 patients. Those savings are shared among the hospital, insurers, and patients.

And finally, information needs to be easily available so patients can find out the cost of their care and take an active role in choosing health care and planning for medical expenses when they can.,.

The federal government spent $1.1 trillion on Medicare, Medicaid, and other health care programs in 2017 – about one third of all health care spending in America – so how we spend federal dollars will obviously make a big difference to the health care system.

There may also be things Washington is doing that are increasing health care costs, or preventing private companies from taking steps to lower those costs.

I want to find what concrete, specific steps the federal government can take to reduce unnecessary health care spending, or at least stop making the problem worse.

For example, after we heard a concern about “gag clauses” that prohibit a pharmacist from telling a patient their prescription would be cheaper if they paid with cash instead of their insurance, Congress was able to act and ban those “gag clauses” earlier this year.

In August, CMS is beginning to require hospitals to post the amount they charge for services online and to keep that information up to date.

These are the types of specific recommendations I’m looking for.

I’ve had success working with experts to get recommendations and then turning those recommendations into legislation.

In 2005, I stopped by a National Academies of Sciences meeting on American competitiveness, and I said to them, “most ideas fail for the lack of an idea. I believe if you will give Congress ten specific ideas in priority order to improve our competitiveness, I believe Congress will enact them.”

The Academies got busy immediately, recruited Norm Augustine, and put together a task force – called the Committee on Prospering in the Global Economy of the 21st Century – of American leaders. 

Under Norm’s leadership they produced a National Academies report, ‘‘Rising Above the Gathering Storm.”

The committee came up with 20 new, specific ideas such as:

Doubling funding for basic science research; and

Creating an energy agency modelled after the Department of Defense’s highly successful DARPA that would invest in high-potential, high-impact energy technologies – what we now call ARPA-E.

And Congress used most of those ideas and put together a bill called America COMPETES, which we passed in 2007 and reauthorized it in 2010.

So that’s an example of how a report, that has specific and precise policy recommendations, can help produce a legislative product.

That is what I am looking for with the letter I am sending today to experts at the American Enterprise Institute and the Brookings Institution.

I also want input from other leading policy experts, including economists, doctors, nurses, patients, hospital administrators, state regulators and legislators, governors, employers, insurers, and health care innovators.

I am asking for as many specific legislative, regulatory, or sub-regulatory solutions as possible, in writing, by March 1, 2019.

I am especially interested in policies that bring to the health care system the discipline and lower-cost benefits of a real functioning market.

One way to do that is to remove the barriers that discourage innovators from coming up with new ways to reduce health care costs. 

A second way is to make it easier for consumers of health care to know the cost of what they are buying.

And I would welcome suggestions of how those policy ideas could be implemented – what law to amend, what regulation to change – and any potential downsides to the policy recommendations.

I will be sharing these recommendations with Ranking Member Murray, and other members of our health committee, as well as Senator Grassley and Senator Wyden.

The federal government is not going to lower the cost of health care overnight, but I believe there are steps we can take that would make a real difference to American families.

 That might be two or three big steps, or a dozen smaller ones, but we shouldn’t let this opportunity to make progress pass us by.