Address by the Secretary of Health and Human Services Louis W. Sullivan, MD Secretary of Health and Human Services

Introduction by President W. Gerald Rainer The Luncheon speaker for today is the Honorable Dr Louis W . Sullivan, Secretary of Health and Human Services. 1 shall read only a very small portion of all of his credits because they are very lengthy. Dr Sullivan was nominated by President Bush in 1989 to his current post of Secretary of Health and Human Services. In this role, he oversees the federal agency that is responsible for the major health, welfare, food and drug safety, medical research, and income security programs serving the American people. He came to that position from Morehouse School of Medicine in Atlanta, Georgia, where he was its first Dean and President. He

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hey tell me that the first law of political campaign communications is that when somebody asks you a question and sticks a microphone in front of you, you own the microphone- in other words, if you do not like the question that was asked, you answer the question that you wanted asked. In your kind letter of invitation for me to speak to you today, you asked that I say a few words about that noncontroversial subject of physician payment reform. I am delighted to give you my thoughts today, about the designated hitter rule in the American League. More seriously, I am not hesitant to address the tough issue of physician payment reform squarely. Really, it is part of two larger issues in American socioeconomics: (1) the imperative to get health care costs under control and (2) the necessity of redirecting some of our health care resources to family doctors and rural areas. Unless we act now to close the disparity in health care between metropolitan areas and rural areas-and unless we can increase primary care options for the medically underserved-we could find ourselves with a critical mass of citizens demanding a total government takeover of health care. I doubt many (if any) in this room would welcome that development. As physicians, we have met many challenges during this century, transforming our profession from one mainly of diagnosis to one that can truly heal and cure. America and its citizens have been well served by our system of private physicians being able to give health care with relatively limited government control. Presented at the Interim Meeting of The Society of Thoracic Surgeons, Chicago, IL, Sep 21-23, 1990. Address reprint requests to Dr Sullivan, Secretary, Department of Health and Human Services, Hubert H. Humphrey Building, 200 Independence Ave, SW, Washington, DC 20201.

previously had been Professor of Medicine at Boston University School of Medicine. He was the founding president of the Association of Minority Health Profession Schools. He has many accomplishments to his credit, including AOA, Phi Beta Kappa, membership in the Institute of Medicine, and seventeen honorary degrees. That being said, in this brief time that we have had a chance to chat with Secretary Sullivan, I personally am most impressed with his humanness and his warmth. W e are absolutely delighted and honored to have him here as a speaker to our group.

We physicians have earned the right to be proud of our accomplishments. As this century comes to a close, I am confident that we will-in our proud tradition-summon the initiative to meet even greater challenges. And these new challenges will involve not only medical innovations, but also adapting to new financial constraints. It is unalterable that important adjustments need to be made. We can either participate in our existing free market medical system, or we can stand and watch as more radical changes are made. I believe physician payment reform is one of those accommodations that are wisely made within the system that has served us so well. President Bush and I are against nationalized medicine. But we are for a coherent national health care system-a private-public system of insurance and delivery. We recognize that too many Americans currently lack access to that system. But for the vast majority of our citizens, the system works extremely well. The challenge is to make access more universally available. At a time when most Americans are receiving the finest health care in the world, I find it remarkable to hear some people proposing that we scrap the existing system and make a radical reform to nationalized medicine. Perhaps they are not aware-as we in the medical profession are-that nationalized systems around the world are characterized by delays in vital medical procedures, de facto rationing, and even outright denial of care for some. Furthermore, in any system in which someone determines who wins and who loses the national health lottery, I fear that the poor and minority Americans will suffer disproportionately. The rich can always afford private care, but those who rely on a scheme of national health insurance-the poor and disadvantaged-will have to get in line. Nevertheless, we are all aware of how health care costs Ann Thorac Surg 1991;52:41&2

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have skyrocketed, and why this prompts some to explore the case for nationalized medicine. Preliminary figures indicate that America will spend $661 billion for health care in 1990; around $2,500 per capita. Government spending is estimated at just over $1,000 per capita for 1990. In and of themselves, these are not bad developments. A prosperous people, having satisfied other necessities of life, can devote large resources to living healthier and longer lives. What is worrisome-even startling-is the percentage of the economy that health care now consumes. Per capita spending is projected to have risen 130% during the past decade, two to three times the inflation rate. Whereas health care consumed 7.4% of gross national product in 1970, by 1980 it was consuming 9.1%, and it is estimated to consume 12% in 1990. What is particularly astonishing to me personally is that when I became Secretary of Health and Human Services less than 2 years ago, I was sounding the alarm about the unsustainable growth in health care spending by noting that it was consuming 11.1%of gross national product, and now it is 12%. Using these trend lines, if nothing is done, it can be projected that health care will consume 15% of gross national product by the year 2000. In other words, it will have more than doubled in just 30 years, from 7.4% in 1970 to 15% in 2000. Even more distressing is that health care costs continued to consume a larger and larger portion of gross national product during the 1980s, a decade during which the nation began its longest peacetime economic expansion in history. During the past 8 years, the country has gone from a roughly $2 trillion economy to a roughly $5 trillion economy. Still this growth could not stabilize health care spending as a percentage of gross national product. Thus, the greatest concern about health care costs is not that they are receiving a bigger slice of pie from a growing economic pie (that, in itself, is probably desirable). It is that they are consuming a much larger portion of the pie. In other words, they are causing other slices of the pie to be proportionately smaller. Health care is not the only public good. Obviously it ranks alongside food, clothing, and shelter as a necessity; and, as the old saying goes, ”when you’ve got your health, you‘ve got just about everything.” But spending ever larger portions of gross national product on health care necessarily diverts resources from other good uses-for example, increased wages, savings, capital investment, research and development, and human services such as drug rehabilitation, foster care, and family support. Thus, the physician payment reform plan is in the spirit of shared sacrifice in achieving a more efficient and effective medical marketplace and a growing economy. However, physician payment reform addresses only one of several factors causing spiraling health care costs. In this respect, physician payment reform in no way implies that high physician fees are the only problem.

INTERIM MEETING SULLIVAN SECRETARY OF HEALTH AND HUMAN SERVICES

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Cost containment in health care will require addressing five fundamental causes of increasing costs: public or pri1. Third party reimbursements-either vate-which shield doctors and patients from the financial implications of their health care decisions. 2. Inappropriate medicine and procedures, including defensive medicine. 3. Well-intentioned but burdensome state health insurance mandates, which drive up the costs of basic health insurance policies. 4. The diffusion of medical technology leading to ineffective practices. 5. The broad societal failure to recognize the role of individual responsibility in maintaining and assuring health.

I believe it should be a fundamental notion that everyone should be able to obtain necessary health care, and that the present private-public health and insurance system should be the primary means by which we fulfill this principle. Rather than radically revamping our health care system, we need to build on our achievements by getting an even higher percentage of people covered by insurance. In other words, we should not have nationalized medicine, but we should have a coherent national plan. Part of our strategy must be to facilitate technological advances. I know that many of you are concerned about the potential impact of health care payment constraints on technology development, particularly because thoracic and cardiovascular surgery has been at the forefront of such developments. We are confident that neither our hospital payment system nor the Medicare physician fee schedule will adversely affect the development and implementation of new technology. Medicare’s prospective payment system for hospitals includes an update that allows for increased costs incurred by hospitals due to technological advances. In addition, costs for capital intensive technology are taken into consideration under PPS. Under the Medicare fee schedule, the Health Care Financing Administration plans to develop an ongoing process for developing relative values for new services as they become established as acceptable medical practice. Similarly, the Health Care Financing Administration is required by law to review relative values for all services no less frequently than every 5 years. These processes will enable the Health Care Financing Administration to keep the Medicare fee schedule abreast of changes in technology. Furthermore, as you well know, advances in technology for physicians‘ services do not necessarily increase costs to physicians. Indeed, new services and procedures often require less work than those they replace, this being perhaps the most effective cost-containment mechanism. Our Health Care Financing Administration staff has held consultations with representatives of The Society of Thoracic Surgeons. We take your concerns and advice very seriously, and will continue to do so.

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INTERIM MEETING SULLIVAN SECRETARY OF HEALTH AND HUMAN SERVICES

Just as we continue to enter new ages in advanced technologies and techniques, so are we entering a new age in financing and improving access. Gone are the days when we could concern ourselves only with the latest medical developments; new realities of our practices now require us to be cognizant of the costs. This is the economic reality we face. We must fashion methods of health care delivery and financing that constrain growth in health care expenditures. Each party must understand this reality-providers, insurers, and health care recipients. The insurance market must offer an array of products that will meet individual needs, and it is important that the market force individuals, as well as health care providers, to be aware of the costs of health care.

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It is my intention to look at options that facilitate diversity, encourage individual responsibility, and constrain the growth in health care expenditures through greater efficiency. As physicians, we have a dual obligation: (1) to discharge diligently the public trust that has been placed in us as members of the healing profession and (2) to concern ourselves with an equal obligation to the overall economic health of the nation by recognizing that health care consumes an overly large share of our nation’s financial resources. I ask you, as fellow physicians, to help us meet those challenges and obligations. It is in the proud tradition of responsibility and leadership in our profession. Thank you, and God bless you.

Address by the Secretary of Health and Human Services.

Address by the Secretary of Health and Human Services Louis W. Sullivan, MD Secretary of Health and Human Services Introduction by President W. Geral...
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