[Senate Hearing 111-347]
[From the U.S. Government Publishing Office]
S. Hrg. 111-347
ACHIEVING HEALTH REFORM'S ULTIMATE
GOAL: HOW SUCCESSFUL HEALTH SYSTEMS KEEP COSTS LOW AND QUALITY HIGH
=======================================================================
HEARING
before the
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
WASHINGTON, DC
__________
SEPTEMBER 30, 2009
__________
Serial No. 111-12
Printed for the use of the Special Committee on Aging
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
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SPECIAL COMMITTEE ON AGING
HERB KOHL, Wisconsin, Chairman
RON WYDEN, Oregon BOB CORKER, Tennessee
BLANCHE L. LINCOLN, Arkansas RICHARD SHELBY, Alabama
EVAN BAYH, Indiana SUSAN COLLINS, Maine
BILL NELSON, Florida GEORGE LeMIEUX, Florida
ROBERT P. CASEY ORRIN HATCH, Utah
CLAIRE McCASKILL, Missouri SAM BROWNBACK, Kansas
SHELDON WHITEHOUSE, Rhode Island LINDSEY GRAHAM, South Carolina
MARK UDALL, Colorado SAXBY CHAMBLISS, Georgia
KIRSTEN GILLIBRAND, New York
MICHAEL BENNET, Colorado
ARLEN SPECTER, Pennsylvania
AL FRANKEN, Minnesota
Debra Whitman, Majority Staff Director
Michael Bassett, Ranking Member Staff Director
(ii)
C O N T E N T S
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Page
Opening Statement of Senator Herb Kohl........................... 1
Statement of Senator Bob Corker.................................. 1
Statement of Senator Al Franken.................................. 3
Statement of Senator George LeMieux.............................. 5
Panel of Witnesses
Statement of Mark Pearson, Head of Health Division, Organisation
for Economic Co-Operation and Development, Paris, France....... 7
Statement of Honorable Carolyn Bennett, Official Liberal
Opposition Critic for Health and Former Canadian Minister of
State (public health), Ottawa, Canada.......................... 9
Statement of Cathy Schoen, Senior Vice President for Research and
Evaluation, the Commonwealth Fund, New York, NY................ 30
Statement of Arnold Epstein, Chair, Department of Health Policy
and Management, Harvard School of Public Health, Boston, MA.... 69
Statement of Michael Tanner, Senior Fellow, Cato Institute,
Washington, DC................................................. 84
APPENDIX
Prepared Statement of Senator Robert P. Casey, Jr................ 113
Statement submitted by Premier Healthcare Alliance............... 114
(iii)
ACHIEVING HEALTH REFORM'S ULTIMATE GOAL: HOW SUCCESSFUL HEALTH SYSTEMS
KEEP COSTS LOW AND QUALITY HIGH
---------- --
WEDNESDAY, SEPTEMBER 30, 2009
U.S. Senate,
Special Committee on Aging,
Washington, DC.
The Committee met, pursuant to notice, at 11 a.m. in Room
SD-106, Dirksen Senate Office Building, Hon. Herb Kohl,
Chairman of the Committee, presiding.
Present: Senators Kohl [presiding], Franken, Corker, and
LeMieux.
OPENING STATEMENT OF SENATOR HERB KOHL, RANKING MEMBER
The Chairman. At this time, we'd would like to call this
hearing to order and commence.
We thank you all for being here today. Obviously, as we all
know, there's a lot happening on health reform. The debate is
shifting and progressing every day, and we've been at this for
a long time, as you know.
Today, our committee will discuss one of health reform's
most important goals, which is to get healthcare costs under
control. The United States spends $7300 per person per year on
healthcare, while the other 29 most developed countries in the
world spend an average of just $2900. That's $7300 here in the
United States versus $2900 per year elsewhere in the world.
That means that we're spending nearly two and a half times what
these other countries spend. It's not acceptable that we have
so much more of our money tied up in healthcare, when we are
not delivering demonstrably better healthcare than many of
these countries.
Studies show that the United States ranks below average on
major health indicators, including infant mortality and life
expectancy, when compared to the rest of the world, and we'll
be hearing more about that today.
Several of our witnesses will shed light on the ways in
which other nations deliver high quality care at a cost much
lower than we do here in the United States. We must be willing
to learn from the many examples of successful healthcare
systems around the world that are doing it as well or better
than we are. But, it's also vital that we understand why our
healthcare costs are higher. Our panel of witnesses will
outline some of the reasons we pay more for physician services,
prescription drugs, medical equipment, and hospital services.
We also expect to learn about why our administrative costs
are so much higher across the board. In 2004, the United States
paid more than seven times the average of other developed
countries on administrative costs. Very importantly, we'll also
hear today about the need to reconfigure our healthcare system
in a way so that it prioritizes the quality of care provided
instead of the amount of care provided; in other words, value
of care over volume of care. I support the provisions included
in the Senate Finance Committee health reform bill that would
transform the Medicare system to pay for value over volume, and
I am hopeful that they will remain in the final health reform
bill.
But, more must be done in order to get healthcare costs
under control. With so many industries and special interests
tied up in our healthcare system, reining in healthcare costs
is not an easy task.
I urge my colleagues to be open, and to stay open, to the
lessons that we hope to learn today, and take them into account
as we make tough decisions and carry healthcare reform through
to the finish line. If we pass a piece of healthcare reform
legislation without sufficiently addressing the issue of
healthcare spending, then we will have failed.
So, we thank you all, our witnesses particularly, for being
here today.
At this time, it's an honor and a pleasure to turn to my
new partner on this committee, our ranking member, Senator Bob
Corker.
Senator Corker.
STATEMENT OF SENATOR BOB CORKER
Senator Corker. Mr. Chairman, first of all I want to thank
you for the kindness you've extended through your staff to us
as we've come on board. I certainly look forward to working
with you and other committee members.
I think this hearing, by the way, is most appropriate. I
think the timing of it is excellent and I certainly appreciate
the testimony that each of the witnesses have put forth.
I, you know, constantly was throughout our State in
townhall meetings during August, and the whole issue of the us
being ranked the 37th in the world, as it relates to health,
continued to come up. I brought it up, myself, of course. But,
I think, also, when you look at the comparisons, there are a
lot of things that just aren't apples to apples. I'm sure that
this testimony will certainly lead to that conclusion.
The fact is that if you happen to have a cancer episode,
you want to be here in the United States of America. You have a
heart issue, you want to be in the United States of America. If
you want something electively done quickly, you want to be in
the United States of America.
So, much of the comparison obviously is not accurate; on
the other hand, I think much of your testimony has--will point
out that there certainly are huge areas of improvement that
need to occur in this country. I thank you each for those
contributions.
The whole issue of our country being the third largest in
the world, and having the most diverse population compared to
other countries that we are compared to, certainly creates much
of the distortion, if you will, as it relates to our health.
But, again, I think much of what you have brought forth in your
testimony, and will again orally today, will be helpful to us.
I think it's appropriate that, when we hear numbers like 37th
in the world as it relates to health, as we hear things as it
relates to how much we pay, which is exorbitant--and I think
all of us want to focus on that--that we deal with facts, and
not myths. That's why I look forward so much to your testimony
today.
So, Mr. Chairman, thank you for calling this hearing, and I
look forward to hearing from the witnesses.
The Chairman. Thank you very much, Senator Corker.
Senator Franken.
STATEMENT OF SENATOR AL FRANKEN
Senator Franken. Thank you, Mr. Chairman and Senator
Corker, welcome----
Senator Corker. Thank you.
Senator Franken [continuing]. In your new role as ranking
member.
Senator LeMieux, this is, I think, the first hearing I've
been in when I've had someone junior to me-- [Laughter.]
Senator Franken [continuing]. So, I'd like to point that
out, if you don't mind. But, welcome to the committee.
It's an honor to be here today, and I'm glad you're holding
this hearing, Mr. Chairman, on such a critical and timely
topic.
Since I've been in Washington, I've been disheartened about
how little discussion there's been about containing healthcare
costs. When I travel around Minnesota, people ask me over and
over again, ``What is Congress doing to make healthcare more
affordable?'' They know that, unless we get to the source of
what's driving up healthcare costs, health reform will be
incomplete.
I look forward to hearing, today, about models from other
countries, and from within our own country, that can show us
the way to bring down healthcare costs for everyone.
One of the most logical ways to get costs under control is
to transform how we pay for and incentivize healthcare. Right
now we have perverse incentives in Medicare, which actually pay
doctors more if they just provide more procedures. There's no
accountability for the quality of services or for getting and
keeping patients healthy. In fact, there's incentive, in some
ways, to not keep them healthy. But, the Finance Committee is
making progress, and I commend Chairman Baucus for including an
amendment to incentivize value in Medicare. The provision is
called the ``Value Index,'' and it's designed to move Medicare
toward rewarding providers who provide high quality care at
lower costs. I believe this is the only way to make the rest of
the country more like the Mayo Clinic, in my State, improving
healthcare delivery and bending the cost curve.
Even though I'm a proud Senator from Minnesota, I know that
no other system is identical to Mayo, but Mayo is not alone in
Minnesota. We have other great examples of high quality
integrated systems in our State, like HealthPartners, Allina,
and Fairview. We know, from systems like Geisinger and
Cleveland Clinic, and Kaiser, that this high-value healthcare
is possible in other parts of the country.
These coordinated health systems distinguish themselves by
focusing on patients, and not profits. They have physicians
engaged in leadership, high levels of teamwork and
collaboration, and more sharing of electronic medical records
and information.
Perhaps more importantly, systems like Mayo have much
greater use of what's called the ``science of healthcare
delivery.'' This means that their leaders are systematically
looking at how patients flow through the organization in order
to reduce waste and reduce errors. I look forward to hearing
from the witnesses about policies that will foster this type of
patient-centered care.
Administrative simplification is another area for cost
savings that seem like just a no-brainer to me. In 2004, the
U.S. paid an average of $465 per person for these expenses,
seven times more than other developed nations, as the Chairman
noted. It's unbelievable to me that every insurance company has
different forms and processes that providers have to navigate
in order to get paid. If you or your doctor, or your doctor's
administrative assistant, fills out something wrong, the
insurance companies simply, sometimes, deny payment. Maybe
that's why they do it.
In Minnesota, the providers and nonprofit insurance
companies have gotten together and decided that this madness
has got to end. They developed a common payment and billing
procedure that everyone is now starting to use. This will save
millions of dollars in Minnesota. If we require all insurance
companies to use a common payment system, we will save billions
of dollars in administrative costs and prevent lots of
headaches for doctors, other providers, and for patients.
Since we're here in the Aging Committee, I also want to
mention that AARP in Minnesota has been holding regular tele-
townhalls to get accurate--accurate--information out about
health reform. During these discussions, there is unanimous
agreement that our health system needs to be reformed. But,
there's also some confusion about how we save money in Medicare
Advantage without cutting benefits.
I want to be very clear that the discussion we're having
today is about increasing efficiency in Medicare, and
healthcare overall, not about cutting benefits. The more we can
clarify this for folks, I think, the better off we'll all be.
Another topic I hope that will be discussed today is the
importance of prevention in lowering healthcare costs. The cost
of obesity in this country is a $147 billion dollars per year,
half of which is direct cost to the Federal Government. This is
a public health issue, and one that the prevention is really
part of a medical system in a country, and should be considered
part of healthcare, and not just be considered part of the
culture. Obesity can lead to diabetes, heart disease, and even
cancer. There's no other country that is facing the chronic
disease epidemic that we're facing as a result of obesity.
Again, this is something that can be targeted through public
health measures, and should be considered as part of our
healthcare system, and not divorced from it.
The current proposals to eliminate copays for preventive
services like mammograms and colonoscopies are crucial. But,
healthcare reform must also support community health, like the
Senator--Senator Harkin's Prevention and Public Health
Investment Fund. I look forward to hearing from witnesses about
how prevention fits into this discussion on cost containment.
In closing, I'd like to share the words of a young woman I
met when I was back in Minnesota in August. She's a cancer
survivor, worried that she won't be able to pay for the care
that she needs. When I go back to Minnesota, I want to be able
to look her in the eye and say, ``We've done everything we can
in Washington to make health reform work for you, from ending
preexisting-condition exclusions to bring down the cost of
healthcare for everyone.'' Her words explains--explain far more
eloquently than I can why we have to pass health reform this
year. She says, ``Healthcare reform means people not having to
choose between their life and their life savings. Healthcare
reform means that no American loses their life because they
can't afford screenings or treatment. Healthcare reform means
cancer patients receiving care that is available, adequate, and
affordable, and it means getting rid of the fears that we are
faced with every day.''
Thank you, Mr. Chairman.
The Chairman. Thank you very much, Senator Franken.
Now we would like to hear from the newest member of this
committee, and our newest United States Senator from Florida,
Mr. George LeMieux.
STATEMENT OF SENATOR GEORGE LeMIEUX
Senator LeMieux. Thank you, Mr. Chairman. Thank you.
It's great to be here this morning, and I look forward to
working with you and the other colleagues here on this
committee.
With more than 3 million seniors living in Florida, the
issue of healthcare reform is tremendously important to our
State. We like to think that all seniors will eventually live
in Florida. So, it will be a more---- [Laughter.]
Senator LeMieux [continuing]. Important issue as time goes
on.
This issue of addressing healthcare cost is crucial to a
successful reform effort. If we do not address rising costs, we
won't get at the core of the healthcare crisis. As my colleague
just said, ``No American should be turned away from treatment
because they can't afford a procedure.''
These hearings come, as you know, at a pivotal time, as we
are currently debating healthcare reform legislation. I support
affordability and access to quality healthcare. Right now the
costs are too high, and too many people do not have health
insurance.
I've heard from, and my office has heard from, a number of
Floridians who are dealing with skyrocketing healthcare costs.
Last week, I met with some cancer survivors from Florida, one
of whom is--has a husband who's employed, so she still has
insurance, but is scared, if he were to lose his job, what it
would mean for her; the other, who has lost her job and now is
on COBRA and struggling to be able to provide for the
healthcare, and they are making life decisions about not having
healthcare procedures done in order to be able to keep some
life savings for their family if they are not able to win the
fight against cancer. Those are decisions that no Floridian, no
American, should have to make.
But, I believe there are a number of measures that we can
look at to control costs. I hope that the panelists will talk
about them today. One of them is, every patient has the right
to know what a procedure costs. Requiring transparency would
allow families to make better decisions about which doctor they
see, which healthcare provider they go to. We must ensure
families can obtain information about price and quality of
healthcare services. Informed decisions are better decisions.
No one knows what these procedures cost right now. We have
divided the patient from the process. We need a consumer-driven
healthcare system to increase quality and to drive down costs.
We also need to address fraud, waste, and abuse. We have a
Medicare system, where escalating costs are driven, in part, to
out-of-control waste, fraud, and abuse. Florida, really, is
ground zero for these problems, especially southeast Florida.
There are as much, it's estimated, as $60 billion wasted every
year in the Medicare program because we don't have
transparency, and we don't know what's going on with this
money.
When I was the deputy attorney general in Florida, we were
responsible for the Medicaid Fraud Control Unit. We were able
to recover $100 million in one year in Medicaid fraud just in
Florida alone, and Medicaid is not near the program that
Medicare is.
So, we need to learn from the private sector and other
industries, industries like the credit card industry. The
credit card industry handles as much money as the healthcare
industry does in this State--in this country, and yet, they
have a 0.01-percent fraud rate, when it's estimated that in
healthcare it might be 10, 20, or even 30 percent of all the
dollars that we spend. Everyone, Democrat and Republican alike,
can agree that we should not be wasting these dollars on fraud,
waste, or abuse.
I look forward to hearing from the panelists on this
comparison between our health system and those of other
countries. I, too, saw this ranking of 37th. I look forward to
that discussion today. I don't buy it. I know that we train the
world's doctors. I know that we create the drugs that help save
the lives of people around the world. I know that people who
have means from around the world choose to come to our country
to have healthcare.
So, don't get me wrong, I know we can do better, I know
that we can learn, I know that there are other models, and we
always should have an open mind about it.
So, I welcome the panelists here today. I'm the new kid on
the block. I've got the temporary sign, here. But, I look
forward to being---- [Laughter.]
Senator LeMieux [continuing]. Part of this committee. As I
said, it's such an important issue for Florida.
So, thank you very much, Mr. Chairman.
The Chairman. Thank you very much, Senator LeMieux.
Now we turn to our panel. Our first witness today will be
Mark Pearson, who heads the Health Division at the Organisation
for Economic Co-operation and Development, or OECD. In this
role, he helps countries improve their health systems by
providing internationally comparable data, state-of-the-art
analysis, and policy recommendations on a wide range of health
issues. He is the leading healthcare expert at the OECD.
Next, we'll be hearing from Dr. Carolyn Bennett, who's
served as the Canadian Minister of State for Public Health and
is now a sitting member of the Canadian Parliament. Prior to
her becoming involved in politics in 1997, Dr. Bennett was a
Family Physician. She is currently the leading spokesperson for
her party on healthcare.
Next, we'll be hearing from Dr. Cathy Schoen, Senior Vice
President at the Commonwealth Fund for Research and Evaluation.
She has authored numerous publications on health policy issues,
national and international health system performance.
Next, we'll be hearing from Dr. Arnold Epstein, Chairman of
the Department of Health Policy and Management at the Harvard
University School of Public Health. Dr. Epstein's research
focuses on quality of care and access to care. He recently
chaired the OECD's International Working group on Quality
Indicators.
Then we'll be hearing from Michael Tanner. Mr. Tanner is a
Senior Fellow at the Cato Institute, where he has led the
health division for 16 years. Mr. Tanner conducts research on a
variety of domestic policies, including healthcare reform,
social welfare policy, and social security.
We welcome you all here today. We'll start out, Mr.
Pearson, with your testimony.
STATEMENT OF MARK PEARSON, HEAD OF HEALTH DIVISION,
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT, PARIS,
FRANCE
Mr. Pearson. Thank you very much. Honorable Senators,
ladies and gentlemen, it's a great honor for me to be allowed
to talk with you today.
As you've heard, I head up the work on health at the
Organisation for Economic Co-operation and Development. The
OECD grew out of the Marshall Plan. Secretary of State
Marshall's vision was about a flow of money to war-torn Europe
to help us recover. The OECD today doesn't do that, of course.
We're about the flow of information and of ideas. We don't
presume to tell countries what to do; instead, we help our 30
member countries, the world's economically developed
democracies, to learn from one another. This is as true in
health, as it is in other areas of policy.
We've worked hard over the years to collect comparable
information on healthcare policies and outcomes, and our work
shows, as you all well know, that the United States spends more
on healthcare, relative to national income, than any other
country--about 1 dollar in every 6. France and Germany, for
example, spend just under 1 euro in every 9 of their national
income on health. Japan, just 1 yen in every 12. These
countries, of course, have full insurance coverage for their
citizens.
America's a rich country, and rich people are willing to
spend a lot more on healthcare than poor people. Even after
allowing for this, America still spends up to $750 billion more
than we would expect.
There's no reason to think that America's sicker than other
countries, and--other OECD countries have to cope with an older
population.
So, where does all the money go? We know some things.
America spends more on inpatient care than any other country,
more on pharmaceuticals, and more on administration. But, the
biggest difference relative to other countries is spending on
outpatient care, particularly day surgery, where America's
spending here is about two and a half times as much as
Canada's, and over three times as much as that in France.
So, the key question then is, Why does America spend so
much more than other countries? Of course, there's no simple
answer, but there are many clues in the OECD's databases. The
total amount spent on health depends, of course, obviously, on
the price that you have to pay for those services and the
amount that you buy. Starting with prices, our most
comprehensive data show American prices for healthcare about 25
percent higher than other OECD countries, well over 50 percent
higher than in Japan. These data, I have to admit, are not as
reliable as we would like them to be. As we dig deeper, we
find, for example, that pharmaceuticals here cost maybe 40 to
50 percent higher than elsewhere, despite generic drugs being
cheaper.
Preliminary results of our latest work show that a range of
hospital procedures cost nearly twice as much here than in 12
other countries. Of course, doctors in the United States are
paid $25- to $40,000 more per year than in Canada, Germany, and
the United Kingdom; about $60,000 per year more than in France.
Moving on to the quantity of healthcare services provided,
the picture's mixed. There are not that many doctors in the
United States. America's see their doctors less than in most
OECD's countries. Acute hospital-care beds are few. Stays in
hospital are short. However, once people are in the medical
system, they receive far more diagnostic tests, that cost a lot
of money, such as MRI and CT scans, than in any other country.
There are many more caesareans, knee replacements, and
tonsillectomies--there are four times as many, of these than
the average--procedures that are driven by doctors' judgments.
The balance of evidence is that high American spending on
health is mainly the result of high prices, with a greater
number of procedures and interventions playing an important,
but lesser, role. Other OECD countries are striving to bend the
cost curve, to slow the seemingly inexorable growth in health
spending. They regulate various healthcare prices,
pharmaceuticals, doctors' fees, payments for hospital services,
or sometimes they regulate the kind and quantity of healthcare
services available. These policies have kept healthcare costs
well below the level in the United States without compromising
health outcomes.
If the United States were to take additional steps to
control health spending, there is indeed much to be learned
from international experience.
I look forward to questions from the honorable members.
Thank you.
[The prepared statement of Mr. Pearson follows:]
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The Chairman. Thank you very much, Mr. Pearson.
Doctor Bennett.
STATEMENT OF HON. CAROLYN BENNETT, OFFICIAL LIBERAL OPPOSITION
CRITIC FOR HEALTH AND FORMER CANADIAN MINISTER OF STATE (PUBLIC
HEALTH), OTTAWA, ONTARIO, CANADA
Dr. Bennett. I speak to you this morning from the
perspective of a mother, a daughter, a doctor, the former
Minister of Public Health, and an author of--about primary care
in Canada.
Like other observers in our country, I believe the debate
here in the United States has become less about debate about
healthcare than about the role of government in your lives.
But, for American families, the real question is a simple one,
Should a man go bankrupt because his child gets leukemia?
Should a woman hit by a drunk driver have to pay more for
healthcare than those lucky enough to escape such an injury? Is
it fair to make family genetically predisposed to cancer pay
greater share of their health costs, to deny treatment to
children with asthma or diabetes because their parents are
poor?
As a family doctor in Canada, I almost never had to worry
about what patients could or couldn't afford, or what level of
insurance they had. You have asked me to focus today on the
issue of costs and quality in comparing our systems. As
Chairman Kohl has said, in 2007 the United States spent 16.2
percent of its GDP on healthcare; Canada spent 10.6 percent.
That works out to $7,421 per American and $5,170 per Canadian.
For that extra $2,200 per person per year, your health outcome
should beat ours every time. But, they don't. Your infant
mortality rate is 6.9 per 1,000 births, compared to 5.4 in
Canada. Male life expectancy is 75.2 years here, compared to 78
years in Canada.
Please don't misunderstand me, our system is far from
perfect. It still needs constant tinkering, and we're still
struggling to realize the original goal of Canadian Medicare,
which is to keep people well, not just patch them up once they
get sick. As Senator Franken has said, we also are struggling
to take the perverse incentives out of our system that reward
quantity instead of quality.
In a survey of the ten OECD countries, your citizens are
the least satisfied with the care they receive. Canadians,
despite their criticisms we have of our own system, are
apparently five times as likely to be satisfied with the care
we receive than you are. Costs, as you've pointed out, are an
integral part of the differences between the U.S. system and
ours.
So, I have seven clear reasons why I think we pay less and
feel better:
Insurance companies. As Congressman Weiner has said, 30
percent of your cost, almost a third, go to insurance
companies. Your patients and taxpayers have to support massive
organizations, the insurers, that set the premiums, design
packages, asses risk, review claims, decide who to reimburse
and for how much. But, they don't deliver healthcare. The
administration, as Mr. Pearson has said, is much simpler in our
country. Our single-payer system allows us to run the
administration in our offices and our hospitals with much fewer
staff. We don't have to deal with multiple payers or chase bad
debts. We don't have to charge higher fees to compensate for
the unpaid-for procedures.
As was said, the pharmaceutical prices are very different
in our country. Although drug costs are rising in Canada, as
here, we're able to exercise much more control over the cost of
brand-name drugs, as a result of our Patented Medicine Prices
Review Board, and we also have a process for establishing the
cost--its cost effectiveness of all new technologies.
In our country, almost all physicians receive medical
liability protection from the not-for-profit Canadian Medical
Protective Association. Its not-for-profit status, combined
with its educational efforts to reduce the risk profile of its
members, contributes to relatively low medical malpractice
costs. This both reduces overall system costs and encourages
physicians to provide the full spectrum of medical care.
Evidenced-based care is, again, what we are hoping to
reward. But, from vaginal births after caesarean sections, to
lumpectomy, to X-rays for sprained ankles, applying evidence to
determine the appropriateness of tests and procedures
translates into fewer unnecessary tests and procedures and less
defensive medicine. We are committed to moving from the era of
pure cost-containment approach of the early 1990's into a true
evidenced-based cost-effective care in the future.
As was said before, prevention is extremely important, as
are the social determinants of health. Diseases are cheaper to
treat if they're caught early. Since all Canadians are insured,
they're more likely to have pap smears, mammograms, and other
early detection visits and tests than the U.S. patients who are
not covered.
My last point is about the longstanding specialty in Canada
family medicine. Family doctors in Canada are trained to help
outpatients navigate their care. We interpret the difference
between what patients think they want and what they actually
need. It's a point of first contact, a trusted coach to explain
the evidence and the choices. As Dr. Barbara Starfield has
shown with her research here in the United States, the stronger
the family medicine base in any healthcare system, the better
the system is.
But, don't take my word for it. Harvard Dr. David
Himmelstein wrote, recently in the New England Journal of
Medicine, that, ``A Canadian single-payer system would save
your country $400 billion a year.''
In conclusion, I want to leave you with the story of Barry
Lamar Head, a Vietnam-decorated vet who married a Canadian, got
sick, and had to remain in Canada because he could not get
health insurance in the--in your country, at any price. Before
he died, he made his Toronto friends promise that they would
find a way to tell his story, the story of a hero who had
served his country honorably, but could not afford to die
there, and the excellent care that he received in the Canadian
system. I am proud to leave you with a copy of his full story
this morning, and also a document on myths versus reality on
the Canadian healthcare system, that I hope you will read.
Thanks very, very much. I look forward to your questions.
[The prepared statement of Dr. Bennett follows:]
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The Chairman. Thank you very much, Dr. Bennett.
Dr. Schoen.
STATEMENT OF CATHY SCHOEN, SENIOR VICE PRESIDENT FOR RESEARCH
AND EVALUATION, THE COMMONWEALTH FUND, NEW YORK, NY
Ms. Schoen. Thank you, Mr. Chairman and members of the
committee, for the invitation to testify.
As the United States confronts the urgent need for Federal
action to expand access and slow the increase in costs, we
might well ask, How is it that other countries insure everyone,
get outcomes that often rival or even exceed the United States,
yet spend far less than we do?
We stand out, when we look at other countries, for our
failure to cover everyone, our complex, inefficient insurance
system, our fragmented healthcare system, with very weak
primary care, lack of information that's an essential for
markets to work, and incentives to increase volume,
irrespective of quality.
I want to focus right in on the strategies we see other
countries using. They all do it differently. They've adopted it
to their own institutions and policies. But, there're some core
themes and strategies where we stand out in comparison to them.
First, when we look at the payment systems in these other
countries, it's clear, as we just heard from the OECD
testimony, that the U.S. spends more. We're notable for paying
higher prices, including very high prices for more specialized
care and for incentives to do more, irrespective of value.
Unlike other countries with multiple payers--and there are
several: Switzerland, Germany and the Netherlands--we lack a
mechanism to coordinate those payers so they have a consistent
set of price signals and they all move in the same direction.
We lack a mechanism for group purchasing power, particularly in
monopolized markets. Instead, U.S. private insurers often act
as pricetakers to maintain networks, and they simply pass
through higher prices, with a markup for marketing
administrative costs and margins.
As a result, the U.S. tends to pay much higher prices for
devices and specialized services, such as prescription drugs. A
McKinsey study estimates that we pay, on average, about 50
percent more for brand-name drugs, and buy more expensive mix,
which results in $90 billion in excess cost, compared to what
other countries do.
Second, we have a very weak primary care system. Overall,
we stand out for having an insurance system that does not
promote continuity, and does not promote choice of primary care
providers. Many countries encourage all their patients to
identify a medical home, which is their main source of care,
helps coordinate, stays with the patient for a lifetime, unless
they move away. They've set up after-hour cooperatives; you
don't have to go to the emergency room. You can talk to a
doctor. Doctors are rewarded for talking to patients, including
on the phone. Fundamentally, their insurance systems have a
value-based benefit design which rewards effective, efficient
care. They lower cost-sharing if they know a drug works very
well, even if it's a high-priced drug. They want people to
enforce chronic-care management.
Recent--other countries recently have adopted incentives
particularly targeted at primary care, to strengthen it as all
face rising rates of chronic disease. I've provided a range of
examples in my testimony. These include direct payments for
nonvisits, for talking to patients, for team-based care, for
putting patients in a team with nurses.
Third, we have an information deficit. We lack an HIT
system that cuts across and binds everyone together. Many other
countries have even smaller practices than the United States--
onsies and twosies--but they've said, ``Let's integrate a flow
of information,'' and they've done it with standardized
information systems so that we see nearly all primary care
practice having a system, and they're building that up so they
can exchange information. Their national governments were
supportive of making it possible for everyone to start to
communicate with each other.
Fourth, we lack comparative information and transparency.
As we just heard from Canada, but there are multiple other
countries, there is assessment going on to provide physicians
and hospitals and clinicians with independent sources of
information on what works well for which patients, but there's
also an effort to track performance. I believe Dr. Epstein will
talk about some of this, but I can talk more later. In Germany,
there's benchmarking, with multiple indicators of hospital
performance, and feedback systems, where higher-performing
hospitals talk with less---lower-performing hospitals in a
dialog to bring everyone up. There's transparency on public
websites that is meant to encourage choice. But, also, people
learn from each other when they can see someone else doing
well.
As was mentioned, we have a very expensive insurance system
with high administrative costs. We often look just at the part
that's inside the insurance system. This is due to marketing,
underwriting, churning, a variety of benefit designs. But,
we've also imposed very high costs on our primary care doctors
and our hospitals. You can see administrative staff in our
practices that just don't exist in other countries. Instead,
the people in the practice are delivering care.
To close, we have much to learn from shared strategies, and
there are core strategies that really do span very different
countries. They each do it in different way. Insurance for
everyone provides a foundation for payment and system reforms.
It's not just coverage, but it's also a foundation.
The way they buy care is as a group. They use group
purchasing power, coordinated incentives focused on value.
There is information system and system reforms that are really
trying to guide markets. Markets don't work well if you don't
know the price and you don't know what works well for which
people. They're building that up. There's leadership to bring
all of this together, including in multipayer systems, to bring
the payers back together.
We have an opportunity for major change in the United
States, and we can look at the variations, and have the benefit
of saying, ``This works relatively better, relatively worse,''
as we all seek to move forward.
Thank you.
[The prepared statement of Ms. Schoen follows:]
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The Chairman. Thank you very much, Dr. Schoen.
Dr. Epstein.
STATEMENT OF ARNOLD EPSTEIN, CHAIR, DEPARTMENT OF HEALTH POLICY
AND MANAGEMENT, HARVARD SCHOOL OF PUBLIC HEALTH, BOSTON, MA
Dr. Epstein. Good morning, Mr. Chairman, distinguished
committee members. I speak to you this morning as someone who
has studied quality of care and related issues for well more
than two decades, as someone who's a primary care practitioner
today with an ongoing clinical practice, as someone who has
chaired the OECD panel comparing international quality
indicators, and as someone who, in a former administration,
worked in the Executive Branch with policy responsibility for
quality of care.
At the end of the day, I want to make three simple points.
First, that we have, in the last few years, developed increased
ability to measure quality of care; and, while not
comprehensive or perfect, we can now start to talk about how to
gauge quality of care across different regions within our
country, and across countries.
Second, the overwhelming amount of the evidence--and I'll
present a good deal of it very specifically to you--suggests
that, in some cases, the U.S. has the best quality in the
world; in some case, we're at the bottom of the heap; and
often, we're right in the middle.
Third, juxtaposing with the data you've already heard about
on costs, is that these figures raise important concerns about
value.
Let me start by just trying to puncture two important
myths:
The first myth is one that probably everyone in this room
shares. If I was to ask all of you, ``Is your doctor average or
better than average?'' almost all of you would say your doctor
is average or better than average. Even though statistically,
that's just not plausible.
The other myth we share is the often-repeated refrain that
care in the United States is the best in the world. I'm going
to show you some data which suggests that that may not be the
case.
Starting in 2001, I chaired a group for a few years, that
was dedicated to comparing quality of care internationally. The
OECD has continued that work, covering representatives of
approximately 30 countries across the world to compare measures
of quality of care. The measures are not comprehensive, but
they are broad and cover important aspects of care and
prevalent clinical conditions. As I've said, the bulk of those
data show very variable quality of care. The measures are
scientifically valid and have been based on data that are
comparable across countries or as much so as possible.
Let me start--and I hope you have a set of displays from
me--exhibit number 1 really identifies--and I won't, in
interest of time, call them out one by one--23 different
measures that cover care for chronic conditions, acute
exacerbations, mental health disorders, cancer care, and
communicable disorders. What you should take away is that there
are a broad range of quality measures that we can now examine.
On exhibit number 2, I've listed asthma admission rates
across different countries in the world. Asthma is a chronic
condition with a lot of morbidity. We now have treatments that
can effectively treat the inflammation, and bronchial spasm
that accompanies asthma. So, among quality experts, the belief
is that, high rates of hospitalization for asthma are a sign of
inadequate access to care and inadequate quality of care. The
United States is, deplorably, number 1 in the world, with the
highest rates of hospital admission for asthma.
Exhibit number 3 displays diabetic lower-extremity
amputation rates. Glycemic control is associated with vascular
side effects from diabetes. WHO reports suggest that up to 80
percent of diabetic lower-extremity amputations can be
prevented. If you look at the rates across countries, again the
United States is No. 1 in the world.
Exhibit number 4, shows in-hospital case fatality rates
after acute myocardial infarction. We know that aspirin
therapy, beta-blocker therapy, thrombolysis, and coronary
revascularization can all be very helpful therapies for someone
with an acute myocardial infarction. So, there's a lot we can
do to bring down mortality rates. The United States rate, in
the middle of the pack, is 5.1 percent, far higher than
Iceland's 2.4 percent, far better than Korea's 8.1 percent,
13th out of 20.
If you go to Exhibits number 5 and number 6, these are for
breast cancer, the most common malignancy for females in our
country. One out of nine women in our country has breast
cancer. It is certainly a plague. Exhibit 5, shows mammography
rates. There is hard evidence that mammography allows us to
diagnose breast cancer earlier before it's spread, when it's
more treatable, when we will have better outcomes. The United
States rate is 72 percent, far less than the Netherland's, at
89, although we're better than many other countries.
Exhibit number 6, shows breast cancer 5-year relative
survival rates, and the United States is far and away the best,
an instance where in--we're really leading the pack and doing
well, and we think other countries can learn from us.
Finally, to conclude, exhibit 7 and 8 are two vaccination
rates; the first, for Hepatitis B, a vaccination that we think
is very important 95-percent efficacy, highly cost effective.
Our rate is 92 percent, trailing a whole host of other
countries.
On the last page, exhibit number 8, shows data on influenza
vaccination timely vaccination can overt tremendous morbidity
and mortality for the elderly. It can also reduce work loss
among the working population. Our rate, again, 65 percent, is
far less than optimal.
I've put those exhibits, and labored through those, so you
can get a sense of the hard data, and the variability of it.
But, I think the takeaways here are very clear: We can, now
measure quality of care--not perfectly, but better than even
before; there is a lot of variability in quality,
internationally, and there is strong evidence that we're just
not, far and away, consistently the best in the world, taken
together these data raise very important questions about how we
spend our money and the value we obtain for it.
In the interest of time, I'll stop there. If there are
further questions, I will be happy to field them.
Thank you for the opportunity to address the committee.
[The prepared statement of Dr. Epstein follows:]
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The Chairman. Thank you very much, Dr. Epstein.
Mr. Tanner.
STATEMENT OF MICHAEL TANNER, SENIOR FELLOW, CATO INSTITUTE,
WASHINGTON, DC
Mr. Tanner. Thank you, Mr. Chairman, Senator Corker,
members of the committee.
I've been studying healthcare for over 20 years, including
16 years with the Cato Institute, author of a number of books
on the issue, and a number of studies, including those looking
at healthcare in other countries.
I'd like to say, to start, that, in examining how other
countries handle the tradeoff between controlling costs and
preserving quality, it is very important to remember that each
country's system is a product of its unique conditions,
history, politics, and national character. These systems range
from the managed-competition approach of the Netherlands and
Switzerland to the more rigid single-payer systems of Great
Britain, Canada, Norway, and others, with great many variations
in between.
Some of these countries have a true single-payer system,
prohibiting private insurance and even restricting the ability
of patients to spend their own money on healthcare. Others are
multipayer systems, with private, competing insurers in varying
degrees of government subsidy and regulation. Some countries
base their systems around employment, while others have
completely divorced work and insurance. Some require consumers
to share a significant part of healthcare costs through high
deductibles or high copayments, others subsidize virtually
first-dollar coverage. Some allow unfettered choice of
physicians, others allow a choice of primary care physicians,
but require referrals for specialists. Still others restrict
even the choice of primary care physician.
Even so, I believe it's possible to draw some important
lessons and some important comparisons. First, when it comes to
healthcare quality, on various measures the United States
actually fares quite well, despite many of the criticisms we've
heard. Measures such as life expectancy and infant mortality
are actually very poor measures of a country's healthcare
system and the quality thereof. Much better is to look at
outcomes for specific diseases and whether your--what your
survival rates are if you actually get sick. Here, the United
States fares very well.
Recently, the British medical journal, The Lancet, looked
at 5-year survival rates for cancer, to cite just one example.
For both men and women, the United States was not only No. 1,
in terms of survival rates, but it was far superior to most of
the other countries that we are compared with.
Second, while the United States clearly spends far more
than other countries when it comes to healthcare, healthcare--
the rising healthcare spending is not a uniquely American
phenomenon. Both as a percentage of GDP and per capita,
healthcare costs are rising in many other countries. To cite
just one example, in 2004, the year in which I was conducting a
survey, healthcare spending in OECD countries rose at about
5.55 percent, and the U.S. was about 6.21 percent. We're
higher, but theirs is still rising significantly, putting
significant strains on their budgets, leading to increased debt
and tax increases or benefit cuts.
Third, universal health insurance does not necessarily mean
universal access to care. In practice, many countries promise
universal coverage, but ration care or have extremely long
waits for treatment. Some countries with ostensibly universal
systems actually fall far short of true universal coverage.
Even the best tend to leave a small remnant, 1 or 2 percent, of
the population as uninsured.
Fourth, those countries that have single-payer systems, or
systems heavily weighted toward government control, are the
most likely to face waiting lists, rationing, and restrictions
on the choice of physician or other barriers to care, while
those countries with national healthcare systems that work
better, such as France, the Netherlands, and Switzerland, are
successful to the degree that they incorporate market
mechanisms such as competition, cost consciousness, cost
sharing, market prices, and consumer choice.
Finally, while no country with universal coverage is
contemplating abandoning a universal system, the broad and
growing trend across countries with national healthcare systems
is to move away from centralized government control and to
introduce more market-oriented features. As Richard Saltman and
Josep Figueras of the World Health Organization put it, to
quote, ``The presumption of public primacy is being
reassessed.''
Alan Jacobs, of Harvard--I'm sure, a colleague of yours--
has--points out that, ``While there are significant differences
in goals, content, and strategies, there is a general
convergence toward market practices among European nations when
it comes to healthcare.'' Thus, even as we are talking about
moving in a more European direction, toward more government
control of our healthcare in this country, many European
systems are debating how to add more U.S.-like market-oriented
features into theirs.
Mr. Chairman, members of the committee, I believe that
there is a great deal we can learn from the successes of other
countries in controlling costs and improving quality, but
probably even more that we can learn from their failures. We
should bear those in mind, as well.
Thank you. I look forward to the committee's questions.
[The prepared statement of Mr. Tanner follows:]
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The Chairman. Thank you very much, Mr. Tanner.
We'll now begin our questioning with 5-minute rounds.
My first question is to the whole panel. Where OECD
countries have chosen to use private insurance companies to
administer healthcare benefits, the insurance companies, unlike
most of the United States insurance companies, are nonprofit.
Does this distinction have an effect on the cost of healthcare
or barriers to access to healthcare for the United States?
Mr. Pearson.
Mr. Pearson. I would expect that it would have some effect.
I don't think it's the most important feature in health
systems, about whether we're talking about profits or
nonprofits. I think what really matters are the incentives and
the fees that are paid for the services by the insurance
companies. So----
Thank you.
The Chairman. What do you think, Dr. Bennett?
Dr. Bennett. We used to have an insurance that was run by
the physicians, before we had----
The Chairman. Your mic.
Dr. Bennett [continuing]. Medicare that--it was a--sorry--
it was a--the physicians themselves came together to develop a
system such that they wouldn't have to worry about whether
people could pay or not. I think profit gets in the way, where
we're what many Americans have described to me as denial-based
care, that--where the sick people are cutoff if there is a
desire for profit in the insurance, so that you watch, if--the
majority of people don't need healthcare--80 percent--20
percent are the high users. If you can get rid of those people,
because of preexisting conditions or because they've gotten
sick and now changed jobs, you are going to take--that is an
incentive, if you are responsible to a board of directors that
wants you to have profit.
I must say that--to Mr. LeMieux, that my parents used to
love going to Florida, every year for 40 years, but when my
mother got cancer and my father had arrhythmia, they could
never--they could not any longer find insurance that would
cover them at all, so they stopped coming to Florida. That's
bad for you.
The Chairman. Dr. Schoen.
Ms. Schoen. I think, when you look closely at other
countries that do rely on private insurers--in fact, the
Netherlands and the Swiss systems use those carriers--you find
several things that dramatically lower overhead costs. One, the
benefits are very standardized; you can really compare plans.
They go out of their way to avoid churning, so you can stay
with a plan for as long as you want to stay. Marketing costs
are extremely low, because there are public websites, where I
can get on and compare. There's accountability for the type of
insurance market behaviors that we've just heard about. Those
are prohibited, any sort of risk rating or turning down, and
they're doing risk adjustment. They're very aggressively trying
to get the carriers focusing on quality and value.
When we asked the Swiss people how it is the Swiss private
insurance run for 5 percent overhead, the Germans run for 5
percent, the Netherlands do, and ours average 15 percent, they
said, ``No one would tolerate more than 5 percent in
Switzerland.'' I mean, ``What are you talking about?'' So, the
margins are extremely low, there's a large amount of public
transparency that's going on, and the competition is around
quality, so you can't really have a big margin, even if you're
for-profit. So, these systems have sort of done nonprofit or
for-profit, but the way they compete with each other forces
that overhead down.
The Chairman. Thank you.
Dr. Epstein.
Dr. Epstein. I will say something, if I'm permitted, about
national data on this question we are all aware of potential
concerns about for-profit medicine prior studies have examined
use of high-cost procedures among elderly persons in the
Medicare population who are in Medicare Advantage plans both on
for-profit plans and not-for-profit plans. They show no
evidence of skimping in the for-profit sector. But that is just
evidence from our country.
The Chairman. Mr. Tanner?
Mr. Tanner. Yeah, likewise, looking at the evidence largely
in our country, about 40 percent of insurers are actually
nonprofits in this country, and there's no significant evidence
that I've seen, in terms of difference in cost between the for-
profits and nonprofits, or in the quality that they produce.
I would also just note that insurance company profits are
not particularly high as a percentage of healthcare costs. If
you look at the actual profit margin that insurers make, they
range from about 3 percent in the--for HMOs, to about 5 and a
half percent under fee-for-service plans, which is relatively
modest by most corporate standards. So, they're--it's not
insurance company profits that are really driving healthcare
costs in this country.
The Chairman. All right.
Senator Corker.
Senator Corker. Well, thank you, Mr. Chairman.
Thank each of you for your testimony. I'm not going to
pursue the OECD comparisons, because I don't think that really
helps much, and--it's interesting to look at, but the
characteristics of the--countries are so different, I'm not
sure it's useful as far as helping us look inward and figure
out what we need to do. I think Mr. Tanner's done a good job of
sort of teasing some of that out.
What I do want to focus on, though, are some of those
things that, within our own country, create issues. Again, I
really do appreciate all of the testimony. I read all of it
early this morning.
Dr. Bennett, one of the things that has troubled me greatly
about our system is the fact that we pay more for
pharmaceuticals and devices than other countries. Yet, it--it's
not really our country so much that's the problem, it's the--
sort of the parasitic relationship that Canada and France and
other countries have toward us; meaning that you set prices,
and, unfortunately, all the innovation, all the technology
breakthroughs, just about, take place in our country, and we
have to pay for it. So, you're living off of us. What you use
typically is older, but--I just had a meeting--I've met with
our former Trade Representative; I met, this morning, with
PhRMA to, you know, if you will, put a stick in their eye over
this. But, I will say that you benefit from us, and we pay for
that. I resent that, and I want to figure out a way of solving
that. I wonder if there's a way that--if you have any ideas in
that regard.
Dr. Bennett. Well, Senator, I think--with due respect.
These are multinational corporations and that--when we don't
treat our pharmaceuticals companies properly, they invest
somewhere else, and they take their----
Senator Corker. They invest here.
Dr. Bennett [continuing]. Research dollars somewhere else.
Senator Corker. That's right. That's right.
Dr. Bennett. So, it is a global issue, and that whether
it's Switzerland or whether it's the United States or whether
it's Canada, we're all in this together. We want the
breakthrough drugs, we want--and, frankly, in our country, our
generics are way too expensive----
Senator Corker. Ours are less.
Dr. Bennett [continuing]. Yours are less. So, you know, I
think it's a matter of us learning from one another as to how
this works. But, we want the research, we want--we need drug
companies to be making more. I mean, in my country, quite often
they say, ``We're now spending more on drugs than we are on
doctors.'' You're going, ``Well, maybe that's a good thing,''
that--you know, that my father is now on a drug that previously
would have required a pacemaker. So, it is a shared----
Senator Corker. I think----
Dr. Bennett [continuing]. But, I think that we are, I
think, very in favor of our price controls. In some of our
things, like even bulk buying, you know, on pandemic
preparedness, we have got a good price because we've decided to
buy, as a country, enough vaccine for the whole country.
Therefore, we are self-sufficient as we come forward looking at
the pandemic.
Senator Corker. I think my goal would be, over time, to--
for us not to pay more than you, because you set prices and
cause us to pay more, when we're doing all the innovation. So,
I hope that we can figure out, on a world basis--have you--and
I want to move on to another question.
Dr. Bennett. Well, I just want to say, please don't think
that you can import cheap drugs from Canada. It'd last us about
36 days.
Senator Corker. No, no, no. That's a----
Dr. Bennett. OK.
Senator Corker [continuing]. That's a silly way of dealing
with it, but a way to at least get it started, because, in
essence, the Canadian government and its citizens are taking
advantage of our citizens by virtue of setting prices that are
lower than competitive prices.
Dr. Bennett. No, I think it's the drug companies, sir.
Senator Corker. Well----
Dr. Bennett [continuing]. They're multinational. It's
nothing about the----
Senator Corker. Yeah.
Dr. Bennett [continuing]. United States of America.
Senator Corker. Yeah. All right. Well, thank you for that.
I think that's something we all need to work together on and
even it out across the world, so that our citizens are paying
less.
Dr. Schoen, I appreciated the contributions you made about
the frailties in our system. I agree with most of those, as far
as the incentives go. I noticed that one of the things you
alluded to was capitation or some hybrid thereof, where we have
capitation plus, maybe, incentives.
I came into a situation after a capitation program had been
put in place in Tennessee. It was called, TennCare. I came in
about a year later. What I saw in that--and that was
interesting to me, by the way; you pay so much per member, per
month, to keep people healthy--what I saw happening, though,
was something very different. By the way, a lot of these
providers were nonprofits, I might add. But, in essence, what
they were doing is denying care. I mean, in essence, what you
had was the private sector, through capitation--you might get
paid a $110 per member, per month, or whatever the number was--
$6 of that was supposed to go to prevention. Never happened. In
essence, what happened was, there was a denying of care that
took place so that there was a profit margin. So, I agree that
we pay for activities here, and that's problematic, cause
there's a lot of self-referral, and we inflate costs. On the
other hand, I don't know yet what the solution is, and I'm
wondering if you might shed some light on that.
Dr. Schoen. I think, when you look at what other countries
have been doing, one of the things that's interesting is how
much variation there is on payment methods, both from what they
did two years ago and what they're doing now. The U.S. is, in
fact, the only one that does full capitation, like you've just
described, where the whole risk is underneath one risk-bearing
entity.
What other countries have started to do is what many of our
very innovative care systems are doing is saying, ``If you have
a heart attack, let's give you a global fee that covers all of
your treatment, including--we're going to be at risk that we
did it right the first time so you don't have a readmission.''
Geisinger is doing that, with a proven care--around very
specific episodes of care, and the bundled care for that, with
a high-quality promise. We see Germany experimenting with that,
moving from more tightly budgeted hospitals to something like
our DRGs, and expanding.
What other countries are doing with primary care is paying
doctors in a mixed way. They're paying them an average amount
per month to help them support teams, support nurses, support
after-hours-care systems, so when you call up, someone answers
or comes to see you, has time to talk to you; you don't have to
have a visit; but, they're also paying a fee for service to
make sure you respond to patients. They're paying more for
after-hours care. So, it's a blended capitation fee-for-service
that's trying very much to push a very responsive--patient
responsive system.
Increasingly, in countries like the Netherlands, they're
saying, ``How can those primary care doctors in the community
also work with the hospital, have transition-care nurses, that,
as I leave the hospital, someone's there to take care of me,
and someone know what's happening? '' So, there's a very
interesting mix of how do we get a more integrated care system,
when it's fragmented, and using the payment systems to move
with the quest to value.
Every single one of these initiatives has an accountability
feature, where an outcome is being measured to make sure that
there is not a shirking. But, what you see is a very responsive
system. Visits rates are higher in a lot of these other
countries. What's starting to be wonderful is, in the
Netherlands, you don't have to go to the doctor's office, you
can get a visit by an e-mail. The physician can fill a
prescription for you, if that's a better way of getting it. You
can contact through multiple sites. We're seeing this in the
U.S., some experiments. The difference is, the other countries
take it nationwide.
The Chairman. Thank you.
Senator Corker. My time is up, I apologize.
The Chairman. Senator Franken.
Senator Franken. Thank you, Mr. Chairman.
So many things I want to ask about. Mr. Tanner, how many
people have gone bankrupt in the last 10 years in Switzerland
because of a medical crisis?
Mr. Tanner. I don't have a number, but I would assume it's
relatively few.
Senator Franken. I believe it's zero.
Mr. Tanner. That's quite possible.
Senator Franken. How many in Germany?
Mr. Tanner. I assume you're going to say zero, as well. I
don't have bankruptcy numbers on any of the European countries.
Senator Franken. You don't.
Mr. Tanner. No.
Senator Franken. You've been studying this for 20 years.
Mr. Tanner. But, I have not looked at the bankruptcy
numbers in those countries.
Senator Franken. OK. Thank you, sir.
Mr. Tanner. I will say----
Senator Franken. No.
Mr. Pearson, your testimony mentions high administration
costs as a primary reason that our healthcare spending is so
high. What's included in these administrative costs?
Mr. Pearson. Yeah, there's international standards that we
agree what is included and what isn't included. So, the OECD
definition is actually more narrow than the one that you
usually use in the United States. It concentrates very much on
the payment systems and the reimbursement systems and misses
out some of the things that you would use in your national
definition, which is why, when we do the international
comparisons, you see a smaller number in the--when we look at
the OECD, what the United States spending on administration
than you're used to seeing. So, on our figures it's about, if I
remember rightly, 7 percent of your total health spending. I
think you're used to seeing a much larger number. But,
relatively, it is still by far and away the highest in the
OECD, together with some of the multipayer--multipayer systems
are also similarly expensive.
Senator Franken. Ms. Schoen, we were talking, before, about
nonprofits--insurance. Minnesota is covered all--it's all
nonprofit. We--for every dollar, in Minnesota, that goes to
health insurance, 91 cents comes back in healthcare. There's a
thing called ``medical-loss ratio,'' that--our medical-loss
ratio is 91. For private individual plans in this country, it's
60.
Voice. 70.
Senator Franken. Can we pay for healthcare if we bring up
that number from 60 to 90?
Ms. Schoen. If you--I've included a chart in my testimony,
figure 26, the McKinsey study, that compared our excessive
costs. We're looking at those kinds of medical-loss ratios, as
well as transaction costs. They estimate that the excess is in
the neighborhood of $90 billion per year. It's a lot of money.
Those high medical-loss ratios that you mentioned, particularly
in the small group and individual market, you're actually even
on the low side. When Maine opened up its books, it found one
that's only paying 40 cents out in claims.
Senator Franken. OK.
Ms. Schoen. The highest, particularly in the individual and
small group market. Other--every other country--and we can see
it in our large group--when you bring group risk back together,
the running of the health plan, the overhead comes way down,
and when you simplify. It's critical we do both.
Senator Franken. Let me continue, cause I don't have that
much time. Some estimates--continue with you, Ms. Schoen--show
that we can save billions by streamlining the claims process so
clinicians waste less time on paperwork and redundancies. Do
you think there'd be a benefit in this country having a unified
system for billing and payments in healthcare?
Ms. Schoen. Absolutely.
Senator Franken. If we were to create a streamlined system
for all payers, would the Medicare administration structure for
billing and payment be a good option to buildupon? Just to be
clear, I'm talking about Medicare's administrative system, not
Medicare's payment schedule.
Ms. Schoen. Well, it's--as I think you know, Medicare uses
private carriers to pay claims. So, I think any effort that
would say, ``Let's have our claims form use common codes, let's
start to make it electronic''--I often hold up my insurance
card and say ``It's plastic, but we Xerox it; in Germany, they
swipe it.'' It's electronic. It just--we know what you're going
to pay. If we could move toward that, we remove layers in the
physician's office, in the hospital office, as well as the
insurance companies.
All I've talked about so far is the overhead in insurance.
So, yes, I think we don't even--we can't even foresee how many
layers are there that don't need to be there.
Senator Franken. Right.
Dr. Tanner, are you aware of--I--in your written testimony,
you talked about 7,000 patients coming from abroad to Mayo. Are
you aware that there are 750,000 Americans who traveled abroad
for medical care in 2007?
Mr. Tanner. Yes, I am.
Senator Franken. That they went to places like Mexico and
India because they found less expensive healthcare in those
countries?
Mr. Tanner. Yeah, the primary destinations are India and
Thailand, but----
Senator Franken. Do you find anything wrong with that----
Mr. Tanner. No, they are not getting----
Senator Franken [continuing]. Picture?
Mr. Tanner [continuing]. The quality of care that Indians
and Thais get in their country. They are getting a specialized
care that's available for tourists who pay with U.S. dollars in
those countries. It is not the quality----
Senator Franken. Why are they leaving the----
Mr. Tanner.--the overall quality of care.
Senator Franken. ``Why are they leaving the United
States?'' is the question, but I've run out of time.
Thank you.
The Chairman. Thank you so much.
Senator LeMieux.
Senator LeMieux. Thank you, again, for all the folks on the
panel. It's been very educational this morning.
I want to ask two sort of open-ended questions, and
hopefully there will be enough time for everyone to respond.
My first question is, is, What do other countries do to try
to prevent fraud, waste, and abuse? What procedures do they
have in place? We obviously have a huge problem with that in
our Medicare system and our Medicaid system in this country.
So, I would love to hear what other countries are doing to
address those issues.
I'll start with Mr. Pearson.
Mr. Pearson. I'm afraid I'm going to plead ignorance here.
I actually have no knowledge of this area of policy.
Senator LeMieux. Dr. Bennett.
Dr. Bennett. We now have a----
Senator LeMieux. Microphone, please.
Dr. Bennett [continuing]. Now have a photo ID card that
actually has begun to eliminate the fraud that was happening. I
am sorry to say that some of the fraud was not in--that the
health clinics very close to the American border, there were a
lot of Americans who had Ontario health cards and were coming
up to St. Catherine's to actually get their--the license plates
in those parking lots was filled with Americans. So, we ended
up having to change our health card in Ontario to one with a
photo on it, and we've begun to get there.
But, I think that having primary care, having a family
doctor who actually can coach somebody through the system, I
think actually--and----
Senator LeMieux. What about--if I can interrupt----
Dr. Bennett. Yeah.
Senator LeMieux [continuing]. Because I don't have much
time--how about provider fraud? Do you require a background
check for your healthcare providers or do extensive checks? We
don't do that in this country. I was wondering what you might
do in Canada.
Dr. Bennett. Well, in our College of Physicians and
Surgeons in--each of the provinces and territory does do a
background check for the physicians before they even try and
move provinces or come in. They're very serious, in terms of
prosecuting any sort of billing fraud. It is very seriously
dealt with.
Senator LeMieux. OK.
Ms. Schoen.
Ms. Schoen. I can't speak in depth about it, but, when you
look abroad, what you often find is systems that--- where the
specialists are paid on salary. They work with a hospital, that
there's a lot less of a fee-for-service incentive to just bill
for things that you didn't do. There's less ownership of labs.
The labs are more freestanding. They're in a nonprofit
facility, so there's less that I could take something by
prescribing you extra.
So, some of the oddities of the way we have--in ownership
arrangements, just do not exist in the same way. The
physicians' offices look quite different. Again, if you pay
primary care doctors, and have a very strong primary care
system, where they're accountable for patients with registries,
some of the fee-for-service ``just doing more'' goes away and
there's a much higher emphasis on prevention and keeping people
healthy.
Senator LeMieux. Dr. Epstein?
Dr. Epstein. Senator, it's a great question, but I can't
enlighten us further.
Senator LeMieux. OK.
Voice. Yeah, I also can't go into great depth, but I will
suggest that the level of fraud in various countries often has
as much to do with sort of national character and history as it
does with the actual system.
Even in those systems that have sort of rigid payment
systems so the doctors are sort of secondary corruption that
goes on--Greece, for example--there's often doctors who refuse
to treat patients during the day while they're on salary, and
they take what's called ``informal payments'' to treat patients
at night, off the books. A large portion of that goes on, as
well.
Senator LeMieux. Thank you very much. The last question I
have--and I think it's a question that you'll like answering,
which is, you know, we're trying to do a lot of things with
healthcare in this country, but what would be the first thing
that you would do? What's the lowest hanging piece of fruit to
reduce cost and increase the quality of care?
Mr. Pearson.
Mr. Pearson. You're right, I love that question. Moving
away from fee-for-service payments to episodic payments.
Senator LeMieux. Dr. Bennett.
Dr. Bennett. Well, I think having everybody covered, and
then have a coordinator for the system. But, I did want to talk
about the fee-for-service versus--the vets used to get paid for
the downer cow and going out and looking after them one at a
time. Now vets are being paid for herd health. They get paid if
they are able to keep the herd healthy. I think that if we
could look to a system where doctors were awarded for keeping
people well, that--in terms of what Senator Franken had said,
in terms of the--that they get rid of the perverse incentives
for churning patients through more and more tests and actually
reward them for keeping people well--do they have their
immunizations? Did they get their mammogram? It is a system
that is about health outcomes, not volume piecework.
Senator LeMieux. Thank you.
Ms. Schoen.
Ms. Schoen. You've asked for one, but I have to give you
two.
Senator LeMieux. OK.
Ms. Schoen. I think, unless we bring our insurance system
back together, we can't pay in a way that's rational, and then
we need to be starting to pay with a focus on value. We have
pricing system that's unbelievable, when you look at it right
now. You can't ask what the price is. It's behind a veil of
secrecy. So, we really need to do the insurance side, bring
everyone in, and start to focus on paying differently and using
our group purchasing power.
Senator LeMieux. Dr. Epstein.
Dr. Epstein. I'm going to say something which is similar to
Ms. Schoen. The usual shibboleths are primary prevention, the
medical home, public reporting, paying for results, comparative
effectiveness, information technology. I think they're all
going to be helpful, but none will provide dramatic relief. If
we're going to really make progress, we're going to have to
move towards more highly integrated care. In the best of all
worlds, we'd have certain parts of the population for whom they
would find it compatible in fully capitated systems, and in
other instances, we would use intermediate approaches such as
bundling and accountable-care organizations and the like. But,
I think we have to move in that direction.
Senator LeMieux. Mr. Tanner.
Mr. Tanner. I think what we need to do is have more
competition within the healthcare industry, and more consumer
involvement within the healthcare industry. The lowest hanging
fruit would simply be to allow people to buy insurance across
State lines. People should not be a captive of the insurance
cartels within their State, nor should they be captive of the
regulatory regimes within their State.
In the longer term, we need to move away from an employer-
based healthcare system to one where individual consumers have
healthcare, so that you don't lose your insurance when you lose
your job and so that you can get insurance in a long, lifetime
contract, where you can buy it when you're young and healthy,
and keep it the long term, which means you need to change the
tax incentives in the current tax code.
Senator LeMieux. Thank you very much.
Thank you, Mr. Chairman.
The Chairman. We have a--time for just one more round, two
minutes a Senator. I'd like to give one minute to Dr. Bennett
and one minute to Mr. Pearson.
Dr. Bennett, we hear, and we've heard today, about lines
and rationing and people apparently not very happy with their
healthcare in Canada. You said people in Canada are as much as
five times more pleased with their healthcare as we are. I'll
give you one minute to answer that.
Then, Mr. Pearson, regulation. I think you indicated that
countries that are doing a good job in controlling costs have a
good deal of government regulation, perhaps to an extent that
we do not have here. One minute.
Dr. Bennett would you speak first?
Dr. Bennett. I think that we are doing better on the wait-
times end, but, you know, as I was coming yesterday, one of my
former colleagues said to me--his father's a very wealthy man,
but had a heart attack and, within one hour, was on the table
getting a stent operated on in extraordinary way that--in terms
of a truly integrated system.
So, in our system, if you're sick, you do very well. The
``worried well,'' we have, sometimes, more trouble with. But,
there's no one in our country who is dying because they don't
have health insurance. I think the Harvard study, from two
weeks ago, that had 45,000 people a year dying in the United
States of America because they don't have healthcare, is,
again, where we need to focus.
The Chairman. Thank you.
Mr. Pearson.
Mr. Pearson. Yes, thank you. I will focus on, if you like,
the multipayer systems, the systems most similar to the United
States. It's not much point in me talking about the regulation
in national health service systems. You're never going to be
having one of those.
Within those multipayer systems, they could use a lot more
regulation than happens in the United States. There's ex-post-
risk adjustment to make sure that the competing providers
compete on the grounds of price and quality. They don't try and
get a better mix of people.
So, in other words, what I think the regulations are doing
is that they're trying to channel the competition in a way
that's more productive for society. They're trying to channel
the competition into, Can we make sure that we get prices down?
So, they also regulate on making sure that the information is
made available to insurees. They regulate, maybe, on where--
what sort of pharmaceutical prices can be charged. So, again,
there's no, kind of, cost-gouging going on within the system.
So, what they're trying to do is to make sure--they are
regulating, but they're regulating to try and make sure the
competition works, rather than people just trying to find a way
around competition in order to maximize their profits.
The Chairman. Thank you.
Senator Corker.
Senator Corker. Thank you, Mr. Chairman, and again, all of
you, for your testimony.
Dr. Epstein, I--my guess is--you talked, in your testimony,
about racial minorities having difficulties getting the care
they need. I assume that's a pretty major indictment of the
Medicaid system itself. I saw you and Dr. Tanner sort of
agreeing with each other on many of the competition, the
notions that the nickels and the competition that ought to
occur.
I'd like for you, in the short time I have, to address two
things. You mentioned the integrated system that we need to
have. I think most of us agree with that. One of the things I
don't like at all about the debate we're having right now is,
you know, it's like a 100 folks sitting around the table,
changing that, where, in essence, it's tough sledding. We need
to figure out a--I agree that that needs to happen. It's tough
work. It's hard to do it in a piece of legislation. But,
working through Medicare and--not Medicaid so much--but, doing
pilots and seeing what works and spreading it out probably is
the best way to do it. Over an entire Presidential term, we
could probably do a lot of damage.
But, I'm wondering if you might--in a good way--and what
we're doing now, probably the other way--but, could you address
that, and also the fact that, in your testimony, you mentioned
that, under our system today, people really don't have any skin
in the game, they don't really have any money out, and so,
therefore, its--the cost to them, they're not aware--it seems
like, to me, that would be the same in the single-payer system,
too. I wonder if you might educate us there a little bit.
Dr. Epstein. I think you're asking a couple of different
questions, and I'll try and do my best to address them both.
I didn't address the latter, which is the issues that Mr.
Tanner talked about, which is particular individual incentives
and how they play out and where that goes.
In terms of integration, it is my sense--and I say this,
not only as someone who's studied health policy, but as a
primary care provider--that integration is really key for
providing better care. We see that in the appalling number of
readmissions we have, because we don't get transitions to
ambulatory care right or have proper incentives to keep
patients out of the hospital. I think we need to align those
incentives over time.
We also need to do it in a way that is attractive, to
patients who don't want to be constrained fully. So, I really
want to pick up on the----
Senator Corker. So, how do we make that happen in--you
know, with the legislative process we have that--so much of
what we do in the public sector affects the private sector--how
do we actually do that? You know, we have great universities
and Mayo Clinics and Vanderbilt and places like that, that talk
about this all the time, but they can't make it happen. How do
we do that?
Dr. Epstein. Sure. Delivery-system change is going to be
even harder and more difficult to accomplish than changing
coverage. Delivery system is very difficult to change. I
believe the current bills have funding and provisions for a
series of what I would hope will be more rapid-fire-than-before
demonstrations, which will lead to incremental knowledge and
guide us as we think about strategies, like bundling, and
creating organizations that are accountable for a broader range
of services. We need to empower and incent hospitals, not only
to do their job with inpatient care, but to do their job in
transitioning patients to ambulatory care, they need to work
with other providers to ensure that patients don't just cycle
back and forth to the ambulatory-care and hospital setting. The
exact details of that have got to be worked out.
But, what you can do at the Federal level is invest money
in it and give notice that you see the future being, not the
perpetuation of entropic fee-for-service going on and on, but,
in fact, changing the payment system and incentives so that we
move towards more integrated care.
Senator Corker. Thank you, Mr. Chairman.
The Chairman. Thank you very much, Senator Corker.
Senator Franken.
Senator Franken. Yeah. Haven't we had--haven't we seen what
works? Mr. Epstein--Dr. Epstein, haven't we seen what works?
Doesn't Mayo work? Doesn't Cleveland Clinic work? Doesn't
Geisinger work? Haven't we seen that?
Dr. Epstein. I don't know that we have the model that we
can bring to scale and transport comfortably across America and
say, ``We've got it.
Senator Franken. Yeah, but--but, I mean, do we need more
pilot programs, or do we need to do what we're doing in this
legislation, to try to encourage a quality and value versus fee
for service, say?
Dr. Epstein. I think, if I read the legislation correctly,
that there is money in there for starting pilot programs,
demonstrations, and evaluations of a host of different ideas
that will be brought to scale. You know, the history of medical
innovation is that you get a few zealots who can produce a
model that seems effective either in providing better quality
or lower cost, but it is hard to tease out the unique
contextual factors that have allowed them to succeed. When you
try and recapitulate the model elsewhere, it often doesn't
work. But that's what needs to happen here.
Senator Franken. But, aren't there things in common in
these places that seem to deliver quality healthcare for a
lower cost? Aren't there things in common? For example, let's
talk about your primary care physician. What's the ratio of
primary care physicians/specialists in this country?
Dr. Epstein. Right now?
Senator Franken. Yeah.
Dr. Epstein. About 0.35, depending on what you call a
primary care doctor. About 35 percent.
Senator Franken. What would it be in Europe?
Dr. Epstein. It's variable quite a bit in Europe. The
prevailing wisdom is that is close to 0.5. In fact, if you look
across multiple different countries, it's really quite
variable.
Senator Franken. So, we need more primary care physicians,
wouldn't you say?
Dr. Epstein. I think that. It's becoming vogue to believe
that we do. But we've got a payment system that doesn't favor
that, as you well know.
Senator Franken. Right. Part of the health bill is for
workforces to try to steer people into that, incentivize them
to go into it, is it not?
Dr. Epstein. It's less in the health bills and more in the
popular dogma. What's in the health bills is the notion of a
medical home, which we hope will move us towards greater
emphasis on primary care--I think we could do much more.
Senator Franken. OK. My time's run out. I have so many more
questions, but, thank you, to all our witnesses.
Thank you.
The Chairman. Thank you so much, Senator Franken.
Senator LeMieux.
Senator LeMieux. I want to talk about the medical
malpractice issue. There was a--Dr. Bennett, in your comments
of the ways that--seven clear reasons why you pay less and feel
better in Canada, No. 4 was malpractice insurance, and you
mentioned that in your remarks.
We have a situation, in this country, where our doctors are
paying exorbitant amounts for medical malpractice insurance. My
wife, Meike, and I are expecting our fourth child. We live in
Tallahassee, FL, which is not a big town. I went to do the
sonogram with her, with the OB-GYN, and he told me that he's
paying $120,000 a year in Tallahassee, FL, for medical
malpractice insurance. There's ten OB-GYNs in a practice
together, so a million-two for medical malpractice. I wanted to
get a sense of what you're doing in your country, that you
outline, and then maybe hear from other folks on the panel of
what we need to do to reform this problem so that we can drive
costs down.
Dr. Bennett. I, at the time, delivered about 150 babies a
year, as a family physician, and my malpractice insurance was
about $10,000. It was reimbursed by the province. It--so, I
paid nothing. So, it is--what the Canadian Medical Protective
Association has done is the two phases. One is to keep the
premiums down--and it's an association and a board of
physicians who manage it; but also do huge education on risk.
Anybody who slightly got into trouble gets sort of taken to
school and told how to reduce their risk in those. Also, our
court system, that the jury system may decide whether somebody
is guilty or not, but it is only the judge that makes the
award. So, our tort system is very different, and so, the
payouts are lower.
But, I think that, again, nobody wants misadventure, and I
think that we are--you know, we need to reduce the problems in
our system. Yet, 100,000 people a year die because of medical
misadventure in this country; 10,000 in ours. We've got to get
that down.
I think that, if I was allowed one more thing to say, the
IT system, that--because of what Don Berwick says, in terms of
our--our system is forgetful. We forget about allergies, we
forget about many things that a really good IT system, like you
put in place for your Veterans Administration, that turned the
worst healthcare system to the best in less than 10 years--that
we've got to have people--make it easier that they don't make a
mistake, in the first place. If you've got a system that---
where you can push a button and get somebody's record, and can
remember the patient, and--truly patient-centered care.
The Chairman. Thank you, Senator LeMieux.
Thank you so much for being here today. You've shed a lot
of light on a very important topic in the United States today,
as you know. So, we appreciate your being here.
I--that's it, we're done.
[Whereupon, at 12:33 p.m., the hearing was adjourned.]
A P P E N D I X
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Prepared Statement of Senator Robert P. Casey, Jr.
I would like to thank Chairman Kohl for scheduling this
important hearing and welcome our new ranking member, Senator
Corker to his new position. This hearing will examine how
certain systems have kept the costs of health care low while
keeping quality high. Right now we are in the midst of deciding
how best to reform the health care system in this country and
one of the most important questions we confront is how we can
lower costs while increasing quality. To some this idea may
seem contradictory, but it does not have to be.
There are a number of models that we can examine when
considering health care reform, and I would like to share a
successful example from Pennsylvania. The Geisinger Health
System stands out because of its commitment to quality and
innovative care. Though the context for Geisinger's success is
unique, surely the measures this hospital has taken to reduce
patients' costs while increasing the quality of their care can
be an example for the rest of the country. Geisinger is a
comprehensive, integrated and physician driven health care
network of 45 community sites across Pennsylvania with
physicians who practice in more than 75 specialties and sub-
specialties.
The focus of this network is quality patient care.
Geisinger uses a system of quality metrics called Quality
Measure Scores. Patients and consumers have access to these
metrics on Geisinger's website. We know that the measure of the
quality of one patient's care is unique to that patient, so
Geisinger also allows its patients to score the hospital and
allows potential patients to compare these scores to other
institutions across the state and the nation.
Geisinger also measures the level of patient satisfaction
through an independent researcher, and they make the outcome
and performance data of every procedure and course of treatment
available online, once again so that patients can know and
evaluate their options. Through an innovative program called
ProvenCare, Geisinger was able to compile the data within the
electronic medical records of consenting patients to compare
what combinations of treatment work best for future patients
with similar conditions. Through their research with the
ProvenCare program, the average total length of stay at
Geisinger fell 0.5 days and the thirty-day readmission rate for
the hospital fell 44 percent.
Ultimately, the success of this hospital can be summarized
by two points. First, patients who are more informed about
their care options are better able to participate in their own
care. Second, doctors with a better knowledge of what
combination of procedures has worked in the past are better
able to streamline the treatment options they provide to their
patients. As the Geisinger system has demonstrated, patients
pay less because they're not receiving extraneous treatments,
they stay in the hospital for less time and they return to the
hospital less often. We can learn from this hospital, and I
think that as we advance in the health care reform process we
must consider examining what is working in Pennsylvania so that
we can make the best possible policy decisions.
Again, Mr. Chairman, I thank you for organizing this
important hearing. I look forward to working with you and the
rest of our colleagues on these important issues as we continue
to debate health care reform.
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