Statement to the American Medical Association
Thanks for that kind introduction, Dr. Palmisano. I’m happy to be here today. Just over ayear ago, I reached an important milestone in my life. I turned 60. Since then, I’ve tried tosurround myself with as many doctors as possible. Just in case. And I’m pleased to be in thecompany of such a distinguished group today. I’d like to take a minute to recognize a few ofthem.
First, I’d like to thank the AMA’s entire Board of Trustees. I’d also like to thank yourPresident, Dr. Yank Coble, for all of his hard work and dedication. I understand that Dr.Palmisano will be taking over for Dr. Coble as President this July – Congratulations. You’ll beleading a great organization. We have much to discuss today but not a lot of time, so let me getstarted.
In the next few months, Congress will consider Medicare and Medicaid reforms. Ourdecisions will touch the lives of tens of millions of Americans. And will affect the way youpractice medicine.
As we move forward with reform, it will be vital that your insights and ideas are part ofthe dialogue. Such large reforms shouldn’t be based on inside-the-beltway experiences. Yourfront- line perspective on health care issues is invaluable.
PHYSICIAN PAYMENT FIX
Let me start off on an issue that I know is near and dear to many of you – Medicarephysician payments. Last year, thanks to the formula that’s in place, CMS cut payments by 5.4percent. This year, payments were scheduled to drop another 4.4 percent.
America’s doctors were rightly upset by these cuts. You told Congress that you couldn’tcontinue serving seniors without adequate compensation. We heard you. Both Democrats andRepublicans were determined to fix this problem. I worked closely with Finance ChairmanGrassley, Majority Leader Frist, and our House counterparts to find a solution. And last monthCongress passed legislation that replaced the cut – which would have gone into effect onMarch 1 – with a 1.6 percent increase.
This is not just a victory for all of you. It’s a victory for 40 million elderly and disabledAmericans who depend on Medicare. But we’re not out of the woods. The physician paymentformula is still faulty. And future cuts are possible. I’ll continue my efforts to fix these flawsand ensure access to physician services.
MEDICARE
As if provider payments were not challenging enough, this year, Congress will revisit oneof the most complex and contentious issues around: Medicare reform.
We all know Medicare can be improved. Physicians, in particular, know first-hand thatMedicare has a laundry list of shortcomings. For example:
• Medicare does a poor job of coordinating care.
• It focuses too much on acute care, and not enough on prevention.
• There are significant geographic inequities in provider payments.
• And perhaps most pressing of all, Medicare fails to cover prescription drugs.
This morning, President Bush outlined a framework for Medicare reform, includingprescription drug coverage. He’s allocated more funding for prescription drugs than he did lastyear and has made some improvements from the Medicare reform proposal he started withearlier this year. BUT, his program still doesn’t go far enough.
Under the president’s proposal, in order to obtain comprehensive drug coverage, seniorsmust enroll in a private plan. Those who stay in traditional Medicare would receive minimalcoverage. This creates an uneven playing field for rural and urban seniors because rural seniorsoften don’t have access to private Medicare plans.
Does it make sense that a senior in California who joins an HMO gets coverage for drugsto lower her cholesterol and treat her glaucoma, while her sister – who lives in Montana andstays in the traditional Medicare program – cannot? I don’t believe so.
That’s why every major drug benefit proposal debated by Congress last year wasavailable to all Medicare beneficiaries, in equal measure. Republicans and Democrats, Houseand Senate, all agreed on this point. We should not back away from that consensus.
Medicare has never before discriminated against beneficiaries based on their choice ofhealth plans. We can’t start now. And on top of discriminating against our rural seniors, there isno proof that private plans are any more efficient than traditional Medicare. Take theMedicare+Choice program as an example.
An estimated 64 % of Medicare+Choice enrollees are in plans that are paid as much – ormore than – local fee- for-service. Some plans receive a per capita rate that is 140 % of fee- forservicepayments. Yet private plans are still leaving Medicare. That should not be a model forreform.
Finally, any changes to Medicare must preserve and protect the most important choice ofall: the ability to choose your doctor. Remember, that’s what the Patients’ Bill of Rights wasabout. And that’s what seniors want when they talk about choice.
Taking all of these factors into account, I’m not able to support the Administration’s planas currently written. Medicare works for millions of Americans. And while we need to makesome real improvements, traditional Medicare should remain a viable option.
I’m optimistic that differences of opinion with the Administration’s plan won’t keep usfrom passing a solid, widely supported Medicare reform bill this year. Last year, with thesupport of both Republican and Democratic senators, we came very close to a solution that Ibelieve could pass the House and Senate.
We nearly agreed on a framework for using private insurance companies to deliver drugbenefits. The benefit would be available to all beneficiaries – those in private plans, and thosewho remain in Medicare. Insurance risk would be phased in, over time. And a stronggovernment fallback would guarantee that seniors in every part of the country were served.If this group of Senators were to continue its work, then I believe we will finally pass aMedicare drug benefit and reform legislation this year.
MEDICAID
Now let me turn to the Administration’s proposal to reform Medicaid. We all know thatstate Medicaid programs are in trouble. States are facing their most dire fiscal crisis since WorldWar II. And Medicaid is on the chopping block. Forty- nine states have made cuts to theirMedicaid programs – or are planning future cuts. Including cuts to provider payments.
I’m willing to work with the Administration to improve Medicaid. To provide fiscalrelief and more flexibility for states. To improve provider participation. To increaseaccountability. But I have concerns about the Administration’s proposal.
For starters, states tell us they are in desperate need of fiscal relief. Without relief, stateswill have to cut Medicaid even further – just as they cut other spending and increase taxes. Inthe interest of stimulating our national economy, and preserving access to health care for ourpoorest and neediest citizens, we must help states balance their budgets and get their economy’smoving again.
But the President’s block- grant Medicaid proposal would not give states the assistancethey need. Yes, states would get some additional dollars up front. But that increased fundingwould be taken back through cuts in later years. If you read the fine print, the proposal isactually budget neutral.
The proposal would also put optional populations and benefits at risk. The term“optional” might sound like these people are less needy. But seniors with incomes as low as$6,600 are considered optional. So is a 7 year-old in a family with an income of $16,000.And prescription drugs are an “optional” benefit. In fact, 65 percent of all Medicaid spendinggoes to these “optional” people and services.
I also worry that the President’s proposal would put doctors in a difficult position. Forexample, it would allow states to provide varying levels of coverage and benefits in differentareas. So those of you practicing in rural areas might not receive Medicaid reimbursement forservices that would be covered in cities.
And it would allow states to offer meager benefit packages. States could cut costs bycovering physician visits – but not hospital services. A Medicaid patient could see his or herdoctor and get a diagnosis. But then might not be able to access the treatment you recommend.Finally, if fewer Americans are covered under Medicaid, the number of uninsured willgrow even higher. Obviously, this means even more charity care for you.
I look forward to working with the Administration to improve Medicaid. But we shouldnot throw the baby out with the bath water. Medicaid is too important for too many people.
MEDICAL MALPRACTICE
One final issue before I finish. Medical malpractice. I hear about this crisis every day.Last year, malpractice rates jumped 25 percent for internists and surgeons, and 20 percentfor obstetricians. And it’s not just a problem for doctors. I heard recently from a small hospitalin Big Timber, Montana. That hospital’s premiums have risen from $9,000 in 2001, to $19,000in 2002, to $90,000 this year. A one-thousand percent increase over three years.
Such increases are unsustainable, whatever their source. We must find lasting solutionsto this problem. Solutions that don’t compromise access to quality care. And we must actquickly.
The President suggests that this problem can be solved by imposing caps on damages.My state of Montana has already passed strict tort reforms. They are similar to the MICRAreforms in California, which impose a $250,000 cap on non-economic damages. Still, Montanaproviders – like the one in Big Timber – see dramatic malpractice premium increases. So capsaren’t enough.
Montana’s tort reform experience tells me we must look for broader solutions to stabilizemalpractice premiums. We should consider strategies to stabilize the insurance cycle.
Approaches to offer reinsurance to high-risk providers. Efforts to decrease medical errors. Andto encourage an atmosphere of openness when it comes to identifying and addressing theseerrors.
Ultimately, our solution must allow providers to continue to practice. It must allowpatients access to the services they need. And it must give justice and fair compensation forthose injured by medical errors.
CONCLUSION
Thank you for your attention. And thank you especially for dedicating your careers toimproving the health of this nation. I look forward to working together to make sure that ourhealth system works for physicians, for taxpayers, and – most importantly – for patients. We’vegot our work cut out for us. But by working together, we can advance the health of allAmericans. Thank you.
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