 I'm delighted to welcome you to the McLean Center for Clinical Medical Ethics and the Institute of Politics lecture in the Health Reform series. As you know, it's a year-long series that started last week with David Axelrod talking about the politics of health reform and continues today with Dr. Mark McLean. I want to again thank the Institute of Politics. I see some of the representatives here for their help in co-sponsoring this event. Before I introduce Dr. McLean, I just want to give you a very brief preview of two upcoming events. Last week in this series, Casey Mulligan, a professor of economics here at the University of Chicago, will talk about the Affordable Care Act and the labor market. Tomorrow evening at the Bowman Society Lectures, a lecture series named for a late and distinguished faculty member in the Department of Medicine and one of my original teachers here at the University of Chicago, Dr. Jim Bowman. Tomorrow's Bowman lecture will feature Daniel Dawes. Mr. Dawes is the Executive Director of Government Relations and Health Policy at the Morehouse School of Medicine and Mr. Dawes will be speaking tomorrow on health care reform and the role of the ACA in addressing health disparities and promoting health equity. The lecture will be from 5.30 to 6.30 in the DCAM building on the fourth floor atrium. For more information about the Bowman lecture, please pick up a flyer from the table on your way out. All of you interested in health reform might find Mr. Dawes lecture particularly useful. And now it is my pleasure to introduce today's speaker, Dr. Mark McLean, whose flight from Washington DC was delayed for a medical emergency in which I'm happy to report Dr. McLean became involved. Dr. McLean earned his MD from the Harvard MIT Division of Health Sciences and his PhD in economics from MIT. He completed residency training in internal medicine at the Brigham and Women's Hospital. I think it's that rich background that enabled him to recognize today's problem and to address it. Dr. McLean is the Director of the Engelberg Center for Health Care Reform and holds the Leonard Schaefer Chair in Health Policy at the Brookings Institution in Washington. Dr. McLean also is Co-Director of the Bipartisan Policy Center's Leaders Project on the State of American Health Care and is a member of the Institute of Medicine of the National Academies of Science. From 2001 to 2002, Dr. McLean served as a member of the President's Council of Economic Advisors and as Senior Director for Health Care Policy at the White House under President George W. Bush. From 2002 to 2004, Dr. McLean was the Commissioner of the Food and Drug Administration. And from 2004 to 2006, he served as Director of CMS. In these leadership roles, Dr. McLean developed and implemented many major reforms in health policy. They include SCHIP, the State Children's Health Insurance Program, and the FDA's Critical Path Initiative. Today, as part of our series, Dr. McLean's topic is Next Steps for Health Care Reform. Please join me in giving a very warm welcome to Dr. Mark McLean. It's a real privilege to be here with you all today and to be part of this distinguished seminar series. I understand from Dr. Siegel that it's now 50 years just about since he's been at the University of Chicago, and the seminar series has been a fixture for much of that time, so I'm very pleased to be a part of it, especially on such a timely set of issues as the series is addressing this year. Last week, you got to hear about, I think, the politics around the Affordable Care Act. Next week, you're going to hear about some of the economics. I'm going to try to fit in between those topics with covering both some of the economic issues, some political issues, but mainly focusing on something I think is very important to all of you health care professionals in this room, and that is the opportunity and the need for leadership, for further steps to make sure our steps on health care reform, our policies on health care reform actually have the intended effects. I did have a delayed flight this morning, fortunately for the patient involved, the emergency happened right before we took off, not afterwards. But remember, as I was sitting there trying to help with the response to that with one other physician who happened to be on board, just how long of a way we have to go, as the wife was looking on, a person wasn't responsive, just how long of a way we have to go and still solving these problems. So, again, thanks for the opportunity to be here with you today while we talk about the intersection between what health care policy is trying to do and health care reform is trying to do, and what ultimately comes down to the role of health professionals in working with the public in this country and actually getting to better health. So I'm going to cover four topics, the health care reform and health care fundamentals, some of what I see is the big drivers in the politics of the moment and the policy debates of the moment in health policy, then spend a bit of time on what's my take on what's going on now with the implementation of the ACA and some other current issues in Washington where the government is shut down, essentially over a debate about the future of health care reform in the United States, and then I want to spend most of my time talking about this third topic, steps towards transforming care, it's what I would call real health care reform, which is not something that's possible just by expanding insurance coverage, trying to lower prices, as important as those steps might be, but to actually changing the way that health care is delivered to get to better health and lower cost, which I think is the only sustainable path for this country. So in terms of fundamentals, there really two. There's cost and quality and access on the other hand. This is a chart that I think some of you may have seen before that highlights the important role of health care spending in our nation's current fiscal crisis and more generally the current role of health care in the problems facing state governments, problems facing businesses and households in terms of rising health care costs. The chart divides federal spending of all types into three categories. There's the blue, that's spending on Social Security Program started in 1965. The red is the health care entitlement, so that's Medicare, Medicaid and the new subsidies for insurance coverage under the ACA. And the light blue at the top is everything else that the federal government spends money on, so national defense, infrastructure, research and development, education programs, low income assistance programs, everything else. The chart runs from 1973 out to near 2040. That big blip in the light blue in the middle was the great recession of 2008. You see upturns in the so-called non-defense discretionary spending in periods of economic downturn. We're on the backside of that right now as a result of the stimulus funding ending and further steps that the federal government has taken to reduce federal outlays. But aside from those bumps up with recessions, the big story over 40 years has been rising health care spending as a share of GDP. That's the vertical axis. So going from around a couple of percent of GDP in the 70s to over 6% today and on track increased by another 3 percentage points over the next 20 years or so as the baby boom retires. More people go into public programs and as we expect health care costs to continue to increase, this is what the recent slowdown and spending growth already built in. So security is contributing a bit to the long-term fiscal pressures facing the United States. It's about 1% more of GDP over the retirement of the baby boom. But a big story as you can see from this chart now and in the past and in the future really is the growth in health care spending. This is the spending side of the cost challenges facing our country. Same kind of chart applies at the state level. This is trends in state expenditures on Medicaid versus K to 12 education. Over time, the last year for which we had complete data, 2012 versus 2011, it was part of that same ongoing trend, increases in Medicaid spending and pretty much reductions in everything else that states spend money on overall. So this is a big issue in terms of the national and state fiscal outlook and same thing contributing to limited growth in take-home wages for American workers as their health care costs have gone up. Now, many of you have probably seen these kinds of numbers, but there is a flip side to this too. At the same time, we've been spending more on health care. We've also seen some notable improvements in health outcomes for the population. You all who are involved in medicine know that just about every condition is treated significantly differently and significantly better than it was years ago. And there have been actually a number of economic studies on this, including some very widely recognized studies by professors from right here at the University of Chicago on the benefits versus the cost of this increase in spending on health care over time. Now, what this shows is ratios based on reasonable valuations of the increases in the length of life that had happened for a range of conditions. These studies generally don't even get into quality of life issues, which also if you look at trends from any illnesses have improved, less time spent in the hospital, more time spent if you have heart failure with higher level of activity, if you've got non-fatal but still debilitating conditions like arthritis, substantial improvements in functionality and quality of life over time, all of which are very valuable. And the bottom line from all this is that the cost versus the benefits don't even come close. According to that Chicago study that I mentioned by Kevin Murphy and Bob Topel, they viewed the improvements in longevity alone that have happened over the last 50 years in the United States as a result of improved biomedical knowledge, which again it's not all changes in medical technology, not just the advent of aspirin used for heart attacks and CCUs and beta blockers and so forth, all of those contributed. But biomedical knowledge overall, it's not even close. So the improvements that have happened in health care from greater biomedical knowledge outweigh in terms of value the improvements in every other sector of the economy combined. So it's great to have iPods and jet travel and lots of cable stations, but what people really enjoy is the time to use all those things as well as sunsets and more time with family members, loved ones, their mom. It's tremendously valuable. And this is kind of the rock in the hard place that's behind why health care politics, I think are so difficult. What the American public has consistently shown over the last 40 years is that when push comes to shove and there's a choice between spending on health care programs versus spending on just about everything else, health care spending wins. Why? Because I think of just what I just told you, how important it is for their quality and length of life and how much they know that. It's not to say that there aren't opportunities for real improvements in health care. I'll get to those in a minute, but this is why it is such an important issue and this is why it's so important, especially for those who are involved in medicine, to help us find a way forward to address both the concerns of the American public about the benefits that continued improvements in health care and medical technology and biomedical knowledge can bring to them on the one hand versus the scarce resources available for other things on the up. People have paid a lot of attention in the past year to the so-called sequestration that's in effect for the federal budget now, which essentially has retained most of Medicare spending growth, all of Medicaid spending growth at the expense of squeezing down everything else in the federal government. So that's what's accounting for this most recent decline in the light blue part of there and the continued increase in the health care entitlements. But what I want you to take away from this chart is that that is absolutely not a new phenomenon. It has been going on consistently in American politics and decisions by Congress, president, leadership of both parties for now 40 years steadily. So that brings us to the current health care reform issues where the role of the ACA is obviously playing a central role in the current shutdown of the federal government, the debate over continuing resolution for funding the federal budget, as well as the federal debt limit. I've been predicting for a while that we were gonna have, I've been right about this so far, predicted that we'd have a short-term government shutdown over this being such an important issue. I think I'm about to be wrong because the shutdown is now continuing out into a longer time period with not really any resolution in sight. And again, it's really around how to deal with these rising costs on the one hand versus the concerns that the public has about access to high quality care on the other. As I said, this is not a new phenomenon. We did in 2011, we did in 2012, as the president pointed out in his press conference yesterday, in every single case, it's been the pressure from rising health care costs. It's the main contributor to this very tight situation with the nation's fiscal outlook. And I think correctly, many people are predicting at this point that we're gonna keep doing this. Maybe we'll find a short-term way through the current government shutdown. Maybe we'll find a way to increase the debt limit for another year or so. But we will probably keep doing this over and over and over again until we are able to get to a broader kind of grand bargain that deals both with the federal deficit outlook, which again is primarily driven by rising health care costs and the health care entitlements, and deals with getting to more of a national consensus about just how much the federal government should be spending on all of its activities, particularly the increases in health care costs. Against the backdrop of all of this, the Affordable Care Act is being implemented right now. A lot of people are asking me these days since I was at CMS in 2005, 2006, with the implementation of Medicare Part D, kind of the last big government program expansion. How does this compare? And I think the main difference is that this is gonna be a more gradual process. So when Medicare Part D started in late 2005 with the website getting up and running and then enrollment at the beginning of January, a very large number of Medicare beneficiaries switched over from their previous drug coverage to current Medicare Part D. So on January 1st, 2006, there were 7.5 million dual eligible Medicare Medicaid beneficiaries who switched into coverage, plus millions more beneficiaries who had previously been getting coverage through Medigap or somewhere else. We had our biggest implementation challenges right around then, even if our systems were working well to keep up to date with who was enrolled and what plan and what they were eligible for and so forth, even if they worked well 99% of the time, 1% times 10 million beneficiaries is still a huge number, especially when it comes to prescription drugs, which people need to take on a regular basis to prevent, especially Medicaid beneficiaries with multiple chronic conditions that they need to take to prevent serious complications. But after we got through those initial startup issues around the beginning of January, by the end of March, the vast majority of Medicare beneficiaries were in Part D coverage and the program has pretty much continued, actually expanded a bit since then. Same was true when Medicare was established in 1965, some rocky issues with the initial startup, but the program was pretty well established with most people enrolled by early 1966. That is not gonna be the case here. As you know, many states are chosen not to expand Medicaid at least yet. The states and kind of the medium blue on this map are ones that have not yet approved expansions but are planning to. This is very much like what happened when Medicaid was established in 1965. About half the state started coverage right away and then there was a tail out afterwards with the last state expanding coverage and anybody know what year? 1982, so it's pretty long tailed in. Similarly for the state children's health insurance program in the 1990s, half of states are so right away tail out after that. There's a lot of overlap between the states that are running their own exchanges versus states that have opted to have nothing to do with the federal implementation of the program. And I think a sign that you'll look forward to see when this program is really becoming better stabilized and more established is when some more of the light blue states in this chart decide that they want to take over for the federal government in running their exchanges because they can do it better and frankly because a lot of the startup issues that have made some, especially Republican governors not want to get too close to this program. A lot of those bumpy startup issues will be behind us. Not sure how and when that will happen. We can maybe come back to that in the discussion but it's probably going to be at least a couple of years from now. If you look at the administration's own projections about enrollment in the ACA, about 7 million people in exchanges in the first year as you all know that's a fraction of the number of Americans who are uninsured. So this is going to take a bit of time to sort out like on the order of several years at least. There are some issues to watch now. I'm not going to spend much time on this. I think you've covered the ACA some last week. You're going to cover it more next week. I want to talk about some big picture issues but right now we're working through the outreach and enrollment support systems and there will be a process for working through those. I think unfortunately for the administration there's still kind of on the first round of access issues on the exchanges but they do have time to work through that in the coming weeks. Then you're likely to see some variation across states in how much enrollment there is in plans. Also probably some stories coming up in November and December about people who, remember about 7 million people expected to enroll in the exchanges. They're kind of a comparable number, actually slightly larger number who are in individual insurance coverage now or the small number of small businesses that actually offer insurance coverage. Some of them are going to be significantly better off on those programs. Some of them will face higher premiums, especially younger and healthier workers and small firms. So there will be some stories about that. Then come January issues around how well this coverage is actually working. Again, this is where we had a difficult time in Medicare Part D. This will be easier for the administration because there are not going to be so many people shifting such critical coverage at one time immediately at the beginning of January. It's going to be a more gradual process than that. Many of the people are getting coverage now, haven't had it before and they'll certainly want to use it starting early in 2014 but it won't be quite the same thing as needing to get seven prescriptions filled that day in order to keep their current conditions stable. They won't have, there won't be that big of a burst so that'll probably be a bit easier. There will be some questions about given the formularies and the size of the networks of providers in some of the plans that look like are going to be the lowest cost plans and going to be the most popular, how well those will go over in terms of access and quality of care. But again, these are all issues that are manageable. I think that the biggest challenge and I'll come back to this five time at the end is going to be around adverse selection. Is the penalty really enough to drive up a big spike in enrollment in March before the open enrollment period ends? Again, with Medicare Part D, we did have a big surge enrollment among relatively healthy seniors in the end of the open enrollment period in early 2006 because I think they basically, well, first of all, it was gonna be sort of the social norm to get into Medicare Part D and in second, they really did care about the penalty. It's a significant penalty like Medicare Part B. You pay 10% more for the rest of your life if you don't sign up the first time that you're eligible and that gets bigger and bigger the longer you wait. So people signed up. This penalty is not gonna be as large. There may be some, because again, some bumps around this initial implementation, what will be a gradual several year process. This issue of adverse selection may be around for a while too. So we obviously haven't, we were actually making some, there's some very important decisions and issues going on right now in terms of healthcare reform, but it's playing against this backdrop of, on the one hand, concerns about rising costs and access of care, but on the other hand, assuring that the care that is provided is high quality. And so it's sort of the traditional way and this is a bit of an oversimplification, but I wanna use it to illustrate some points about what I think is gonna be important in the future of healthcare reform. The traditional way of trying to control these rising costs has been to squeeze payment rates. And for all of you who are healthcare providers, you know how this works. This is what was the mainstay of the so-called scored savings in the last time we had a grand bargain to try to reduce the federal deficit outlook. That was in 1997 with the Balanced Budget Act. It was the main source of the savings used to offset the cost of the coverage expansions under the ACA, about a trillion dollars worth. And that is to squeeze down payment rates in public programs, particularly Medicare. So the new normal in Medicare post ACA is an increase in payments for providers that's a little bit less than the overall measured cost of inflation. Around 1.1% or thereabouts, a little more, a little less. 1.1% may not seem like much, but over time through the miracle of compound interest, it adds up to a lot, adds up to a trillion dollars over 10 years. This is why some of the Medicare actuaries have expressed skepticism that that cumulative impact on squeezing prices will be sustained. After all, they say, look at what's happened with physician payment, where back in the last budget savings effort brought the sustainable growth rate, which for next year is scheduled to lead to a 25% reduction in physician payments. That's almost certainly not gonna happen. Who says Congress can't act in a bipartisan way on healthcare issues? We'll find a way to address that problem. But it just kind of highlights that squeezing down the prices alone isn't really a very effective strategy for cost control. It does nothing by itself to improve quality of care. It does nothing to promote coordination. In fact, it may get in the way of it by providing some more incentives for increased volume. And I think most importantly for where medical innovation is headed, we're headed hopefully to a healthcare system that is gonna rely a lot more on personalized care. So knowing through genomics, information technology, lots of other approaches to reach and communicate with patients more easily in a more individualized way, wireless technology, smartphones, and so forth, hopefully getting the care that is more customized and much more prevention oriented. And if you think of what that means for payment, it means that instead of aiming for treatments that are low cost and delivered very widely, they're really looking for combinations of treatments that are much more individually tailored to a particular patient. And in that patient may be very, very valuable. So it's sort of the opposite of trying to hold down costs by squeezing down prices and not covering or being slow in covering new types of technologies that haven't traditionally been part of healthcare. And so that's that fundamental is what I think is gonna be driving real healthcare reform and the major further steps in healthcare reform in the years ahead. And that's what I'm calling this alternative approach, which is focusing more on aligning needed reforms in care that get the American public what they really want, better health, what they've clearly shown that they want to pay for and they wanna see their healthcare system deliver, get that aligned with our financing systems better. And to do that, you really can't get there through the traditional way we've paid for healthcare, both paid for providers and on the consumer side by the way that we've designed health insurance benefits. So this is about focusing on ways to reduce overall healthcare costs while at the same time improving outcomes, it's not doing more with less, it's doing things differently. And as I said, I think it's critical for getting to more personalized prevention oriented healthcare that involves more tailored and non-traditional types of services and better integrated care. You all know that despite what I described earlier as the very high average value of spending in healthcare, there's a lot of evidence of what economists would call low or zero margin old value of many healthcare expenditures. We don't do a very good job with prevention in this country with even when preventive benefits are free, as many are in Medicare, close to half the time, many beneficiaries don't get very evidence-based treatments. We don't do a very good job of managing chronic diseases, patients with hypertension, diabetes and other conditions in Medicare and other good insurance programs are only on effective treatment for the long term, around 50% of the time, lots of opportunities to reduce errors and improve the handoffs and acute care episodes. And again, fundamentally, this move towards more patient-focused prevention-oriented support that may not even be delivered in traditional healthcare institutions, it may increasingly be delivered at home using new kinds of devices that have not been part of medicine. Here's just a list of some examples of how healthcare is being delivered differently, including some programs that are being implemented here at the University of Chicago, which just don't fit very well with this traditional approach to care. At Brookings, we do a number of programs that try to match the changes in healthcare payment and policy opportunities with changes in care delivery that are coming from many healthcare organizations. Just to tell you one story in this regard, I'm gonna try to fit in two more before I finish my remarks. One of the early meetings that I had at CMS when I went there in 2004, this was around the time of implementing Medicare Part D, was with the CEOs of a number of physician group practices. They were implementing a number of steps like these to try to, like what I've just been talking about, to try to improve care. So they were doing email programs and phone reminders to their Medicare beneficiaries about using preventive benefits. So they'd set up registries of their patients and were tracking the ones that had not had their colonoscopies or recommended mammograms or flu vaccines. They had set up, in some cases, teams of providers to assist patients who had chronic diseases like diabetes or heart failure using sometimes pharmacists or nurse practitioners to assist with medication adherence in a targeted way or with diet and lifestyle modifications to reduce the risk factors for progression of these diseases. In many cases, they had set up teams to handle both evidence-based protocols or pathway-based care and checklists in the hospital for surgical procedures and for the handoffs to the post-acute care providers and making sure that there was a smooth medication management transition between settings of care and that readmissions could be prevented. And they had numbers to back all this up. So, you know, they identified some steps to improve care and lower costs. They were measuring the impact of these steps. But they said, you know, look, all these steps are working. You know, they were showing reductions in costs, improvements in outcomes, better use of preventive services, better control of diabetes and so forth. They said, look, we're getting killed because, you know, first of all, Medicare doesn't pay for any of these services. A traditional fee-for-service doesn't include things like outreach to patients and coordination of care and use of teams of care, including non-physician providers for the most part. But then we're also getting killed for a second reason, which is that to the extent that these treatments actually work, we're getting reimbursed less for the stuff that Medicare does pay for. For the hospital services, the lab tests, the imaging procedures, even the doctor's visits. You know, many of these programs were successful in keeping patients completely at home. And so we worked with them to set up a pilot program, which I'll talk more about in a second, that tried to align the goals that they had for better care for patients with accountability for the results, with what we were actually paying for, actually paying more for better care at a lower cost. That kind of idea is what I think is sort of the core of these alternative approaches to health care reform that I've been describing, that I want to spend a little bit more time on. Just a quick note about report. Mark mentioned the bipartisan work that we've done in this area. This is a report that we released from Brookings of Spring that was supported by people like Tom Dashel, former Democratic Majority Leader Peter Orszag, former Budget Director for President Obama, Glenn Hubbard, President Bush, and Governor Romney's Chief Economic Advisor, Mike Levitt, former HHS Secretary with President Bush, and a range of health economic experts on a framework for implementing these kinds of reforms throughout our health care system. So the bipartisan support and a feasible path to get from where we are now to where we'd like to be, a way of getting to lower spending growth at the same time as we're actually measuring and showing that health outcomes for the populations affected by all these programs are getting better. And behind these ideas are really four key points that I want to spend the rest of my time on. One is measurement and evidence. Traditionally in our health care system, we've done a great job of measuring the volume and intensity of services. We have very good systems for tracking that, not so good systems for tracking what really matters to patients, the results, the outcomes, the use of the best approaches to care. With better measures, it's possible to change payments in a way that aligns the results that we want to get with what we're actually paying for. And while that's gotten a lot of attention, I think there's probably been less attention directed to the third item here, which is benefit design and consumer engagement, the same kinds of opportunities to help providers get more resources for supporting kinds of care reforms that they want can apply to patients as well. And this also has implications for insurance choice. So I want to tell a couple of stories along the way while I'm doing this and we'll see how we're doing on time. By the way, I come from four generations of very fast talking Texans, so I can keep doing this for quite a while. So measuring what matters. So it's not like people haven't been paying attention to quality and value of care at all. Obviously it's been important consideration for health professionals and certainly the goal of all of us involved in care, but it has been hard to do. So historically a lot of the efforts to measure quality have started with measures that can be collected from things like payment systems or relatively low cost patient surveys. So did patients get treatments that you can observe in claims that look like they're evidence-based and effective? Things like hemoglobin A1c, treat testing in patients with diabetes. What were the overall costs of care? As care measurement capabilities have gotten better with more use of electronic records and the like, we've moved to the use of more clinically enhanced measures, including measures of not just whether or not diabetic testing was done, but hemoglobin A1c levels in patients with diabetes and similarly proximate markers of outcome risk like cholesterol levels in patients with diabetes, as well as more sophisticated measures of expenditures and resource use by condition. Where we're hopefully headed is towards measures that are even more closely related to what matter to patients, things like patient-reported functional outcomes or comprehensive view of risk factors that patients have for developing coronary disease, blood pressure, cholesterol levels and so on, as well as more sophisticated measures of per capita expenditure and resource use. What I'd like to emphasize is that this can come from our actual healthcare system. It shouldn't be something that's an additional reporting burden for healthcare providers. And I wanna do a little bit of a sideline in terms of evidence development to illustrate this story using the issue of drug safety surveillance at the FDA. FDA over the last few years as a result of bipartisan legislation in 2007 has implemented a public-private partnership to do active surveillance of medical products. This was a result of really two things. One was concern about drugs like Vioxx that are on the market for many years used by millions of patients without either being able to detect clear adverse event problems quickly or not being able to get to more definitive evidence on whether the drug was associated with adverse safety events in certain populations combined with the growing use of electronic data for patient care. And the way that this program was set up was not as some big data warehouse for FDA to actively monitor every prescription in the United States but as a partnership with healthcare organizations starting with health plans but now increasingly integrated health systems like Kaiser and Harvard Pilgrim in Boston and electronic record-based healthcare systems like Partners Healthcare, Duke, I think Chicago may even be on the road participating in this program as well. With the idea that by collaborating FDA would be able to send out queries about questions that they had about a possible drug safety problem quickly to a large number of organizations that could get answers about related to those questions from their own data. So just to illustrate how this works the data that are used for patient care stay in use for patient care. Those walls with fire on them are our attempt to describe firewalls. So that's patient care data within under HIPAA within those firewalls. But because all these organizations are working together to have sort of a basic common data model to identify which patients are using certain medications and what patients have adverse events they can report out the relevant summary statistics. So what matters for these large scale evidence programs is not, you know, did Mrs. Smith use a particular drug last Tuesday and have an adverse event but how many patients like Mrs. Smith were there out of the whole population of patients or large part of the population of patients in the United States. And just to illustrate this this is a query that FDA ran on this program in the past year. They had gotten a few adverse event reports of an angiotensin to receptor blocker named Olmasartan with celiac disease, which the health professionals in here know is basically losing the lining of the gut, very serious adverse event. And with this system in place, FDA was able to do something they couldn't do as recently as three or four years ago. And that is ask how common is this adverse event with this drug in the bulk of the US population? So that sentinel program that I described before now involves all the major health plans as well as major integrated health systems and a number of others probably covers close to 150 million Americans not through a big data warehouse somewhere but just through a collaborative participation in this data sharing effort. So FDA query, this is how many patients taking Olmasartan had developed celiac disease compared to those taking other similar drugs, other drugs in the ERB class for high blood pressure and they also compared to some baseline populations. This is something that because of the establishment of common data model in this network FDA could get back the answers to within a few days. So this is all new users who met the criteria for use of these different ARBs and for celiac disease. Another advantage of having a distributed approach here is that the health plans and healthcare organizations that get the claims data report of a serious condition like celiac disease can go back and look behind that data within their own health system and they have sort of standard criteria for confirming whether these cases were really there or not. And as you can see, we have more than 100 million covered lives even if these drugs are relatively new and use relatively rarely in the overall population. So I'm up with tens of thousands of cases. And as you can see with Olmasartan it's not observed celiac complications or not observed at a rate out of line with other drugs in the class or with the background rate in the overall population. Very helpful and timely piece of evidence. This is not definitive evidence it's still observational data. It's got a lot of imperfections for drawing causal conclusions but a very helpful piece of evidence that just wasn't possible before building this kind of system up. So where I see more of the measures used for improving quality, defining what works and what doesn't and so forth coming from is coming out of the actual data exchange for care delivery that's happening in our healthcare system today. Especially with more use of electronic records and especially if healthcare providers and other organizations involved in care delivery have the incentives and support for producing these kinds of measures it's possible to do a much better job of measurement behind care as well. So what essentially has happened with medical product safety for drugs and FDA is aiming to implement the same kind of approach over the next few years for devices is being able to take out of through this coordinating center approach and this distributed data approach summary data from healthcare delivery from these different participating organizations about adverse events with medications. And that same kind of model is now being extended in other areas. For example, PCORI, the New Patient-Centered Outcomes Research Institute just awarded a large grant to a network of academic centers including Chicago and others that are going to implement this same kind of approach for doing comparative effectiveness studies including potentially randomized studies as well. This would highlight up here at the top right for quality measure reporting what you'd really like to do is have the data for improving quality as close to the providers as possible. So registries supporting tracking patients with care access to data from payers like Medicare or private insurers to support providers in their efforts to improve care for patients and identify opportunities for quality improvement. That should all be about care delivery first and foremost but in conjunction with the kinds of payment reforms I'm about to describe reporting out from providers using common data models of better measures of quality and results for their population can support the further improvements in quality on the one hand and the kind of payment reforms that I'm describing on the other. So that's where I think we're headed in terms of getting significantly better measures relevant to quality of care as well as medical biomedical evidence at the same time as we're supporting these kinds of improvements in care and the better data systems for healthcare providers to use that data to improve care. With better measures it's possible to reform payment. I mentioned that meeting that I had early on in my time at CMS with a number of physician groups. The outcome of that meeting was setting up a transition to a different payment system on a demonstration basis for 10 healthcare organizations that were committed to these kinds of reforms in care. And we didn't right away replace the whole fee for service payment system. There was a lot of uncertainty that providers were facing and understandable reluctance to do anything too radical in healthcare delivery given how strong the feelings of Medicare beneficiaries are about making sure that their access to care isn't disrupted. So we set up a second payment track for these organizations. So they still got their Part B payments for the physician services they provided, but in addition they started tracking a set of measures of results for their patients. So things like hemoglobin A1C levels for their patients with diabetes and cholesterol levels for their patients with coronary artery disease, blood pressure control for their patients with hypertension, measures of patient experience with care. And in addition to that, Medicare, we also tracked the overall spending of these patients. And the deal was that if the organizations could show improvements in most of those dimensions of quality and reductions in, if we saw reductions in overall cost trends at the same time, they could keep most of the savings as the idea of shared savings or accountable care. So you're getting paid not just on the basis of how many services and how intensive services your patients receive, but also on the basis of tracking how they're doing and what's going on with their overall costs. Now, when these early versions of what you might call accountable care organizations started, they were all about shared savings. It was a second payment track that didn't replace the first. As more of these organizations have become more familiar with the overall cost of care for their patients, have gotten better data in terms of those slides that I showed you before of the longitudinal care that patients were receiving, their overall costs, their complication rates and so forth. They've moved in many cases more of their payments away from the traditional fee for service payment track into this new accountable care payment track through models like two-sided risk and partial capitation. The advantage of that is it gives healthcare organizations more resources that are not tied to the traditional way of delivering care. So if you wanna set up a home monitoring program using smartphones, you've got more resources to do that. If you wanna pay for a social worker for your low income beneficiaries who have Medicare and Medicaid and also some and other healthcare problems in order to manage help them, make sure they've got their home situation taken care of and they're getting support and adhering to their medications, you can do that, you have more resources to do that. You are accountable for making sure that overall costs don't go up, but you have more flexibility in delivering more personalized care, more customized care to your patients. Now, there are a lot of risks understandably in doing this. Many providers are uncomfortable with taking on these new kinds of financial risk understandably. The outcomes for patients, the results for patients depend on a lot of other things besides the care that they're providing. It's important to know though that providers today under fee for service payment systems are also taking on a lot of risks every time you spend extra time with a patient or if your practice hires a nurse or someone else to help coordinate care for those patients, that's a financial risk. The difference is that it's one that many providers understand pretty well. So they can build into their budgets. And the goal of transitioning to these new kinds of accountable care payment systems is to help reduce, help change what has been uncertainty about dealing with these kinds of problems into more predictable risks. There are also understandable concerns about selection bias or patients that have serious chronic conditions not getting the care they need. All of those are reasons for having a stepwise approach to moving to these new payment systems, not doing it just all at once. But that is happening in our ACO learning network. We're now tracking over 400 different kinds of accountable care organizations across the country. And again, what I think these approaches have in common in terms of key features of the policies that can drive them effectively forward are first of all, having some common core performance measures and a feasible pathway for improving the measures, getting the better quality measures that I showed you on that earlier chart, having ways to share the underlying data that providers need to understand how they're performing and where the opportunities for improved performance are with them in a timely way. And we saw some progress to make on those with common measures and opportunities for rapid improvement. It should be possible to evaluate which of these payment reforms are working better or not. I think unlike the way that Medicare has traditionally done demonstrations where you try to change one thing and hold everything else constant, that's not the way that the healthcare world needs to work right now, but rather the focus should be on the overall results for the patients and getting a better understanding of how different reforms working together can help move there. If you think about it, so-called primary care medical homes are a piece of this. And what's happening there is some of the payments that primary care providers used to get on a fee-for-service basis are now going into a case-based payment associated with reporting on quality of care for patients. Many of the medical homes that we've worked with are now also part of ACOs where the primary care providers are taking on accountability for the not just process of care in their office but the overall outcomes for patients and the overall costs for patients. Those tend to work best if other providers are moving the same direction as well. So in many specialty areas of care, different kinds of bundled payment reforms are being implemented. For example, in oncology, oncology medical homes shift some of the payments that oncology providers get into a case-based payment that they can use to provide treatment plans and help manage complications for patients in ways that don't get paid for under fee-for-service. Again, they've got accountability for better results, more use of evidence-based care and the like. Similarly for moving towards bundled payments for say surgical services or other types of specialty services. I've talked about ACOs already. Again, all of these can reinforce each other. We're also working with a number of drug and device manufacturers on drug and device payment systems that are not based on the volume intensity of products that are used but rather the impacts on patient care, adherence in target populations and even reductions in outcomes. So for rheumatoid arthritis biologics, maybe a payment system that's at least in part based not on how often you use the drugs and what doses was given but on what happened to the patients in terms of reduced hospitalizations for RA flares and the like. So those are examples of what's happening where I think healthcare reform is headed in terms of the provider payment side. Again, all about supporting real reforms in care delivery to get to better care and lower costs. Before finishing, I wanna spend a few minutes on the patient side as well. I think this gets underappreciated. I did talk about, so it's my last story about Medicare Part D implementation. I alluded to this earlier. Medicare Part D was set up in a different way from every Medicare benefit up until then. As you all know, it was designed to be delivered by competing private insurance plan rather than a single plan that would be run by the government with its own formulary and price regulation and the like. The result of that was setting up a program that had a fixed subsidy available that people could use to choose among alternative providers. And it included a number of steps to try to address adverse selection, included risk adjustment, reinsurance, risk corridors, late enrollment penalties, as I mentioned before, things that have a lot of features in common with the implementation of the ACA. The drug benefit did include a standard benefit, a deductible followed by 25% co-insurance followed by catastrophic coverage on the backend with that famous donut hole in the middle. You guys may remember back then we thought the cost was gonna be higher than it turned out to be. Do you know how many people in Part D are on that traditional benefit design today? Almost none. So when seniors had an opportunity to choose up, choose among plans, the first thing they did understandably was complain. There were a lot of plan choices, very confusing. I can't tell you how much time I spent in 2005 and 2006 with seniors who were just very unhappy that the government couldn't just give them a drug benefit that they had to choose among all these different alternatives. What they did was choose plans that had relatively low premiums that had a different kind of benefit design than traditional insurance in Medicare. The way that the benefits they chose were set up was in tiers. So the most cost effective drugs, the generics, were basically free. They may cost like a dollar on their plan. In the classes of drugs, they were still the most common account for most of the cost in outpatient prescriptions today where there are competing different drugs that work in a similar way. So think of like oral hypoglycemic agents or cholesterol lowering agents or number of drugs that work similarly for most people. Drug plans would typically negotiate with two of the manufacturers, put those drugs on a preferred tier. So those would cost like 30 bucks a month. Most everything else would be covered. In fact, now they're in many of the Part D plans for five tiers. But the difference is compared traditional insurance design, seniors get to share in a lot more of the savings when they meet their drug needs at a lower cost. So Mrs. Smith was on a brand name beta blocker in 2005 and she signed up for one of these drug plans in 2006. She would typically get a no from her drug plan and may also get this, her pharmacist may have brought it up to her as well. And Mrs. Smith, you're on this brand name beta blocker. That's costing you $85 a month because it would be on that higher tier. Did you know that there's a generic version of exactly the same drug regulated exactly the same way by the FDA? It would cost you a dollar. So that's $84 in savings under traditional insurance plan. You might say 15, 20 bucks, which is not trivial, but definitely not of the same order of magnitude. We expected a lot of complaints from seniors, not just about the confusion of choosing among plans, but also about dealing with these new kinds of benefit designs for them and potentially having to switch from a brand to a generic, also similar things for switching from non-preferred to preferred brand named drugs. We never got many complaints about that. Never had a higher rate than one per 10,000 beneficiaries per month. And that's what seniors did, they overwhelmingly switched. So the use of generics among people over 65 went from about 50% in 2005 to over 80% today. And that is huge savings in healthcare costs. It's not like a squeeze down the prices, one or two percent per year. That's a reduction, say 80% per prescription. Similarly, they switched from non-preferred to preferred brand named drugs. And this is one reason why healthcare spending growth in part D has been basically non-existent over the last few years. Premiums are now running, I've continued in running 40 to 50% below projections. That's a lower growth rate on this curve. And premiums have been flat for the last three years under this program. And with the ACA, as you all know, Medicare Part D was actually expanded to fill in the donut hole. Now this could be due to a lot of people who says to you, well, the way that manufacturers are developing drugs has changed. They're no longer doing Me Too drugs, they're focusing on drugs that meet unmet medical needs, some of which are very expensive and are typically targeted to smaller groups of patients. But that's exactly what you'd expect to happen with this change in incentives. So maybe a little bit hard to sort out causality, but it seems like it'd be awfully hard to get to this result if we didn't have that level of patient engagement, consumer engagement, in changing the way that healthcare is delivered. This notion of more value-based insurance design is harder to apply in other areas of healthcare, but it's coming. There are a number of private employers today, like Marriott Safeway and others, that have set up similar kinds of tiered benefits or reference pricing approaches in particular areas of care, like colonoscopies, where they feel like they can get pretty good measures of quality and there's also big variation in costs. So instead of paying 80% of the costs with some unlimited cap, they're making a fixed contribution on behalf of their beneficiaries, along with providing beneficiaries information on the quality and cost of providers of these elective services. Again, you're limited in applying these approaches by the quality of the quality measures available, the quality of the data, but it is coming to other parts of healthcare. Also, there's a lot of really interesting work going on now in more creative ways to engage consumers in care. This is not just high-deductible health plans. As I've said, tiered benefit designs and ways relying on things like behavioral economics to help change behavior more. And I have to say, having worked a lot with both the supply side changes like accountable care organizations and these demand side changes in care, care healthcare reform that have been driven by things like Medicare Part D, you get much more powerful responses faster if patients are engaged and especially if you can provide convincing information to them and opportunities for them to save or gain in terms of either health benefits or cost reductions from participating. So those I think are the most promising approaches to healthcare reform. We obviously have a long way to go to get from here to there, but one thing that I think is a common theme across everything I've discussed is the importance of healthcare provider engagement. If we are headed towards an era with more personalized care, more prevention-oriented care, with more direct and individualized involvement of consumers, that is only gonna happen through people that they trust. American public does not trust insurance companies. They do not trust the government. They trust those of you who are healthcare providers and the most effective versions of all of these reforms that I've seen around the countries are ones where healthcare providers have been actively involved in leading on an ongoing basis. It's a marathon, not a sprint of culture change around value and around prevention, around doing what's right for patients. The challenge is getting our healthcare policies to keep up with that. I think this approach is gonna win in the end for basically the same reason that I showed you on that first slide. The American public cares deeply, more deeply than perhaps anything else, about getting the best care for themselves and their loved ones, and increasingly in the future, this is gonna be the way to do it. Thank you very much for the opportunity to join me today, thank you. Yeah, so it's a really good question. I think actually, Mark, one of your future seminars is gonna be about academic medical centers and health reform, so I'm sure you'll have more of a chance to talk about it then. One of the challenges that academic medical centers has faced is they do tend to have higher cost structures because of the research involved, the teaching involved, and everything else, and I think it is gonna get more difficult to continue to support those efforts as healthcare payments keep getting squeezed down. Some of the most promising approaches that I've seen from academic centers involve finding ways to lead on these kinds of care reform, so I think this is happening in some of the programs at Chicago. So David Meltzer here earlier, he's involved in a kind of community-based care program, which is very much about changing the way that payments work for vulnerable populations, and especially for urban academic medical centers, I think being in front of this movement towards accountable care payments, and especially towards combining funding streams with social services and other approaches is happening in some programs in Boston, in Minnesota, in Oregon, and their whole Medicaid program is now focused around coordinated care organizations, including social services, funding streams, and all of those are very promising, but I'd say it won't be easy, and I'm sympathetic to the challenges facing AMCs in this kind of environment. There's one last point to make. I try to emphasize measurement in my talk is boring stuff, but it's really the foundation for all of these reforms. We don't have very good measures of what it is that academic centers do well, sort of the value of the training, the value of the breakthroughs in research, both basic and applied, and some more attention to those, I think would help make a, help continue to make a case for the additional costs that academic centers face. Albert. Yeah, I did the first. Hi, Mark. Oh, Albert Huang. Hi, Mark. A question, actually, this bill's on the last question. So one of the things that this place prides itself on is developing innovative ways of personalizing. Domics, personalizing based on status, even for a disease as common as diabetes, but our quality measures that we use in the ACOs and are incredibly crude, use a population standard, everyone below that counts as, you know, high quality care. And actually this gets to what academic medical centers do is we provide personalization at a level beyond that. How do you, how should we measure that? How do we reward that kind of extra effort that goes into getting the number needed to treat down to one? Right, so getting the number needed to treat down to one goes through, there's sort of two parts to that. One is the, on the delivery side, it's figuring out what you need to do to identify those particular subgroups of patients and get them the best possible outcomes on I think more of the payment side in the healthcare financing and regulation side, it's finding the right ways of measuring that result in a generalizable way. We're not gonna come up with a payment system that is tailored to individual measures for each individual patient. So far, like he said, we've relied a lot on hemoglobin A1C levels, which is not really the thing that diabetic patients care most about. And that's why I think further development of measures, and you're working on this, so further development of measures related to what does matter for those patients, whether it's functional outcomes or more refined versions of replicable clinical lab measures, that's the right direction. The exact measures to use think are gonna depend on a particular clinical context, but this is an area where academic centers like Chicago could really lead. I mean, we've been stuck with hemoglobin A1C levels for the last few years. One of the other things I do with Marshall is work with the measure application partnership at the National Quality Forum, and the need for better validated measures of quality of care for more patient oriented measures of care is really a top priority there. So that is an area where we need some more support from academic medicine, and hopefully in the next round of healthcare reform there'll be more funding for it as well. Hard in that guidance on mobile apps that they issued back in September to say, look, we're not gonna go out of our way to regulate relatively minor apps that people have on their phones now that do things like track their caloric intake and things like work track their steps per day. These are things by the way that are being incorporated in some of the models for reform care that I talk about to try to really engage patients effectively. So I think all that's moving forward. FDA does try to take a risk-based approach generally with their regulation. So basically the closer these apps get to saying that if you use this app and do this, you will have a better outcome for your condition. The more that FDA is likely to regulate it like they do a class two or class three PMA. But from the standpoint of FDA regulation as I tried to illustrate in the Sentinel initiative, FDA is also trying to move towards relying more on actual data. So one reason that the regulatory process can be burdensome is if there is a claim of important health benefit associated with a drug or device or new app. And it's one that will significantly, would be significantly affected to influence practice if a manufacturer's able to make it. And if there also are some risks of safety problems or side effects if the app or the product doesn't work as intended, well, FDA's got to go through some work and the manufacturer's got to go through some work to demonstrate that the product is really effective and it's also safe and not only in under idealized conditions of use, but to address safety problems that could arise in real world populations with a better ability to track how patients are actually doing with the device on an ongoing basis much faster. And that's what Sentinel's enabling FDA to do around many aspects of drug safety surveillance. It may be possible to find a more efficient way to use these devices. So have some initial testing on a product before it's approved, having more limited use, what FDA's called in some of the proposals in this vein, special medical use, which would be in a narrower population of patients where it's relatively well understood and gradually expanded out from there in actual practice associated with ongoing data collection. So that's kind of the same version of an outcomes-oriented regulation that I described in outcomes-oriented payment. So I hope that will help, but my view is if you're developing an app, you ought to go ahead and develop it because for all the macro reasons that I talked about today, the financial opportunities that support it I think are gonna get better and better over time. I haven't reached out to you in a couple of years. I mean, those factors of four and six. Yeah, it's not close, yeah. Amazing. Yeah. You know, Rob Fockel, the Nobel Prize in Commons, who died this past year, wrote a paper a couple of years ago in which he predicted that the percent of GDP taken up by healthcare would rise to 29% by 2030. Largely driven by consumer demand and as they talk to their politicians and representatives, this is the service they would most be asking to support the economy. Well, I think Bob and a lot of the other Chicago economists who have worked on this issue are right. I mean, this is, if you think about it, I mean, this is what people are willing to pay for. You get asked just about every American, you know, would you rather have today's healthcare at today's cost or healthcare from 10 or 20 years ago at the old cost, they take today's, especially for their children and their mom, the people that they deeply care about. But that's why I think the big challenge for healthcare policy is can we do a better job of giving Americans what they really want at a lower cost? And that's why the leadership on these issues really, you know, has to come from health professionals finding and implementing these new ways of delivering care and not getting too frustrated when they don't get paid for developing or using the new app or they don't get paid for the extra time they're spending online with their patients or for the new way that they've set up to deliver care at home, but recognize that there are some opportunities to support those reforms in care. They're not automatic, they're not built into our payment systems yet, but for all the reasons I talked about, they're coming. They're pilot opportunities with private plans, they're more and more examples of these programs actually succeeding. So, you know, that's the long-term challenge, really, in healthcare policy is we're gonna get there. The American public has made clear that they want better health, they want to keep supporting it. It's just a question of how quickly and how much resources we're gonna have left over for other things. Join me again. Thank you. Thank you. Thank you all very much.