February 16, 2006

CONSUMER GOOD:

President Discusses Health Care (George W. Bush, Wendy's International, Inc., Dublin, Ohio, 2/15/06)

I now want to talk to you about how the rest of us need to have a health care system if you don't fall into those categories. What should the role of the government be? And I believe the role of the government ought to be to empower consumers to make choices. And so let me talk to you about five ideas I have to make sure that health care is more available and more affordable.

And the first one is to expand health savings accounts. I call them HSAs. When you hear me say HSA, that's kind of government-speak for health savings account. They -- HSAs are helping to begin a movement away from what's called a third-party payer system to one where the consumer is very much involved in making wise purchases of health care. That's a very important philosophical point.

The traditional insurance today will cover your health care costs -- most of your health care costs -- in exchange for a high premium payment up front. The costs are generally shared by you and your employer. You may also pay a small deductible and co-payment at the time of treatment. What's interesting about this system is that those payments cover only a fraction of the actual costs of health care, the rest of which are picked up by a third party, basically your insurance company.

It means most Americans have no idea what their actual cost of treatment is. You show up, you got a traditional plan, you got your down payment, you pay a little co-pay, but you have no idea what the cost is. Somebody else pays it for you. And so there's no reason at all to kind of worry about price. If somebody else is paying the bill, you just kind of -- hey, it seems like a pretty good deal. There's no pressure for an industry to lower price. And so what you're seeing is price going up. If you don't care what you're paying, and the provider doesn't have any incentive to lower, the natural inclination is for the cost to go up and the insurance companies, sure enough, pass on the costs -- the increase in cost to you and your employer. That's what's happening.

The fundamental problem with traditional coverage is that there's no incentive to control how their health care dollars are spent. You don't have any incentive, whatsoever. And that's one of the cost drivers in our system. If we want to solve health care problems, if we want to make health care affordable and available, we've got to analyze and address the cost drivers of health care. And there's one right there. If patients controlled how their health care dollars are spent, the result is better treatment at lower cost.

I'll give you an interesting example of a procedure called LASIK -- laser eye surgeries. It's a good example of how the market can work when there's not a third-party payer involved. You might remember when LASIK first appeared, was approved about a decade ago for its use. It went through the process of getting government approval, and when approved it was an opportunity for people to have their eyesight -- feeling a little nervous about LASIK surgery when it first came out, and it was awfully expensive. Consumers began to, however, inquire as to why something costs the way it costs, how safe it was; doctors felt more comfortable starting to offer more and more of the surgery; more providers came in the market, there was transparency of pricing. You might -- I can remember billboards springing up with people advertising LASIK surgery. Today the price of LASIK surgery has dropped dramatically. More people are getting the surgery -- they're giving up their glasses and contact lenses.

The market is working. I think if you go back and look at the history of the pricing of LASIK surgery, the availability of LASIK surgery, you'll find that when consumers start showing up saying, I want to know information, I'm interested in this idea, how about -- how does your cost compare to old Joe's over here -- the market began to adjust. LASIK surgery is now more widespread, at much more reasonable cost for consumers.

And so, how to affect those kinds of cost changes in the health care industry -- that's what we're really here to discuss. And one way to do so is to -- to make health care more responsive is through health savings accounts. Many people in our country don't know what a health savings account is. I will start to try to explain it here.

First, it is a part of our drive to make health care more consumer-driven. There's two components to a health savings account; one is low-cost catastrophic insurance coverage, and a tax-free health savings account. Those are the two components of what I'm talking about. Catastrophic coverage protects you and the family in the event of devastating medical illness -- if you're really sick, a catastrophic plan kicks in.

The health savings account portion of this product allows you and your employer to contribute tax-free to pay for routine medical costs. In other words, your company, or yourself, or a combination of the two makes a tax-free contribution into a health savings plan, a savings plan that you own. It's yours to call your own. And the savings within that plan are tax-free. In other words, you're not just going to put it under your pillow, you put it into a bank until you use it. The interest will be tax-free. Your money is growing.

It means that if you don't spend money in your savings account on health care, you can roll it over to the next year, tax-free. You have money growing for health care to pay incidental expenses; it's growing at a reasonable interest rate; it's yours you call your own, and if you don't spend it in a year you can put it into the next year, and the next year, and the next year.

For many routine medical needs, HSAs mean you can shop around until you get the best treatment for the best price. In other words, it's your money; you're responsible for routine medical expenses; the insurance pays for the catastrophic care. You're responsible for paying for the portion of your health care costs up to your deductible. And so you -- you talk to your doctor, you say, can't we find this drug at a little cheaper cost? Or you go to a specialist, maybe we can do this a little better -- old Joe does it for X, I'm going -- why don't you try it for Y? It allows you to choose treatment or tests that meet your needs in a way that you're comfortable with when it comes to paying the bills. In other words, decisions about routine medical treatments are made by you and the doc, not by third-party people that you never know. And all of a sudden, when you inject this type of thinking in the system, price starts to matter. You're aware of price. You begin to say, well, maybe there's a better way to do this, and more cost-effective way.

The combined cost of catastrophic insurance coverage and HSA contributions are usually less expensive than traditional coverage. That's important to know. In other words, HSAs are making health care more affordable. By the way, these HSAs became expanded -- George tried to do it in the mid-1990s, 1996 I think -- yes -- medical savings accounts, he called them. He couldn't get them going. People who had the business didn't want any competition, which sometimes happens in the marketplace. (Laughter.) But he thought of the idea, it made sense. This really -- these HSAs have kicked off big time because of the Medicare bill I signed. They haven't been around a long time, they're just kind of a fresh product that the marketplace is becoming used to.

Forty percent of those who own HSAs have family incomes below $50,000 a year. In other words, if people are having trouble affording traditional insurance, all of a sudden the HSA becomes a more affordable product. HSAs make a difference -- are making health care more accessible to those without insurance. In the first year HSAs were available, more than a third of those who bought HSAs had been uninsured. In other words, as health care becomes more affordable, it makes it easier, obviously, for somebody who is uninsured to be able to pick up health insurance.

You know, a lot of young folks are uninsured. You might remember the days when you kind of felt like you were never going to get sick. (Laughter.) So why should you buy insurance? Why do you need coverage? A lot of young folks are saying, wait a minute, this is a pretty good deal. If I'm going to stay healthy and can save a portion of that money, tax-free, and I'm not going to spend money on health care for a while, all of a sudden a nest egg really begins to build. By the way, it's a nest egg they call their own, not something the government -- if there's excess money in your account, the government can't take it away, or insurance can't take it away, it's yours. You own the thing. It's -- a vital part of kind of a responsible society is when there's a sense of ownership in important parts of our economy.

Over the last 10 months, the number of HSAs has tripled. In other words, people are becoming aware. One of the reasons I'm here talking about HSAs at Wendy's is because you've decided to implement this product. I want people to be aware of it. The number of people who bought HSAs has gone from a million to 3 million. I'm going to talk today about ways to make sure that HSAs are -- even expand even further.

You know, I can remember the debate in Washington -- I'm sure you can, as well -- I remember one person who said, health savings accounts are not a solution for the uninsured, they're regressive, they favor the wealthy. It's just not the facts. They've helped the uninsured and a lot of folks with incomes under $50,000 are buying these plans. It's kind of basically saying, if you're not making a lot of money you can't make decisions for yourself. That's kind of a Washington attitude, isn't it -- we'll decide for you, you can't figure it out yourself. I think a lot of folks here at Wendy's would argue that point of view is just simply backwards and not true.

People have said that expanding HSAs would fail to reduce health care costs. It's just not the case. I just talked to Joe Cava -- he knows what it's done to your costs. Wendy's decided to take on this product. You were facing double-digit increases in the cost of providing health care. That's a strain if you're a CEO. In order to have a workforce you've got to have a workforce that's comfortable with the health care plan, and all of a sudden it's beginning to take big bites out of the balance sheet. It's hard to grow when more and more of your costs are being consumed by health care. And it provides a real tension for small business owners or large business managers -- how do you take care of your people? No corporation, no entity can run unless the people are taken care of, and at the same time expand your business.

The company wanted to reduce projected health care increases. You didn't want to keep passing on the high costs of -- increasing costs to your employees. So they adopted HSAs. About 9,000 of Wendy's full-time employees and their families have got HSAs. In other words, Wendy's said, why don't we give people a chance to make health care decisions themselves. They don't have some of the attitude in Washington. If you believe like Washington believes, you would never try an HSA, because people can't decide for themselves, see? That's not what the folks here at Wendy's thought.

At the end of the first year with HSAs, more than 90 percent of Wendy's employees had positive balances in their savings accounts. In other words, there's a sharing ratio. The company helped pay the premium for the catastrophic care. They shared the money that goes in to help pay for incidental or routine expenses. But 90 percent of the folks didn't use all the money for the routine expenses. It's kind of interesting, maybe it helps preventative medicine, I guess -- when you're watching your own money, and you realize that if you take care of your body and you exercise and you don't do stupid things, you end up saving money. (Laughter.) And when you save money, it's your money, not the company's money. (Applause.)

Medical claims through this company have decreased by 17 percent since they've implemented HSAs. It's an interesting statistic, I think. After more than 5 years of health care costs going at double-digit rates, Wendy's overall health care costs rose only by 1 percent last year. HSAs have had a positive effect. This has a positive effect on the individual employee, it's had a positive effect on the income statement of the company. They work.

And, Jeff, you made a good -- get the boy a raise. (Laughter.) Here's what he said -- you know, never mind. He said, "We entered into this plan to use our money more wisely, and to allow our employees to use their money wisely." Kind of an interesting corporate concept, to allow our employees to use their own -- more money wisely. "It's making health care more transparent," Jeff says, "and making improved health more sustainable for our employees and for all the consumers of health care." I think he gets it. He gets the philosophy of having a consumer-driven system.

The savings have allowed Wendy's to raise the company's contribution to its employees' HSA accounts. By saving money on health insurance, it enables them to put more money into your account, which has got to be a heck of a good benefit, working for this company. It's your money now, it grows tax-free. It goes in tax-free, it grows tax-free, and you take it out tax-free.

I met with Marla Hipsher. Thanks for coming, Marla. She works here. She is a senior paralegal for four years. She was part of the briefing party that was there when I arrived. She is a single mom with a 24-year-old daughter and two teenage sons. As an aside, she has the toughest job in America, being a single mother. She obviously cares about her health care for herself, and more importantly, for her children. Marla's sons are on her HSA plan with her. In other words, it's a family plan. She enjoys the choice. She's comfortable with the control she has over her HSA. Marla's premiums with her HSA are 18 percent lower than the traditional plan she used to have at Wendy's. She's saving money. It makes it easier to do the hardest job in America, which is being a single mother. She likes her HSA so much, she's helping her 24-year-old daughter look into setting one up herself. Listen to your mother, it makes a lot of sense. (Laughter and applause.)

I want folks who don't understand HSAs to listen to what Marla has to say: "It has made me more informed, because you discuss it with your doctor now." She's talking about health care. "You want to know up front what it's going to cost and what you need to know. You become a better informed consumer." HSAs are working, they're working. And I'm looking forward to working with Congress to expand them to more Americans.

I'm going to talk about three ways to make them more attractive, so more people can have the benefits of an HSA, like Marla, or the small business owners we've had. The greatest obstacle -- one of the greatest obstacles to expansion of HSAs is the tax code. One problem is that under current law, employers and employees pay no income or payroll tax on any health insurance provided through the workplace. The health care plan here at Wendy's, you don't pay for it. It's a benefit that's not taxable. Those who buy their insurance on their own don't get the same tax break. That means that the self-employed, the unemployed, and workers at companies that do not provide insurance are at a disadvantage. The playing field isn't level. And so I believe that one thing Congress needs to do is to give Americans who purchase their own HSA policies the same tax breaks as those who get their health insurance from their employers. (Applause.)

Another problem is that under current law, the amount you can put into your HSA tax-free is limited to the amount of your deductible. But sometimes your out-of-pocket expenses are greater than your deductible. That's because on some catastrophic plans, there is an additional co-pay and, therefore, when you -- you're paying after-tax dollars under the current law if you exceed the amount of money you spend beyond your deductible. We can change that. We can raise the cap on the amount of money you put into your HSA so it remains tax-free, so that all out-of-pocket expenses can be covered. (Applause.)

And finally, HSAs -- we want to make sure they meet the practical needs of today's workers. I told you people are changing jobs. And one of the problems is, a lot of folks fear that when they choose jobs, they're going to lose their health care. And that means -- people feel like they've got to get locked into a job because of health care. And that's not right. They need to be more thoughtful to our workers, and recognize that this is a changing world in which we live. And so we ought to make sure people can take their own health savings account with them job to job.

Today the savings in your health account -- health savings account are portable -- portable means you can take it job to job. So you've got savings in your own account, you can take it with you. But the health insurance that comes with the account you can't take with you, because of outdated laws and practices that prevent insurers from offering portable policies. So I believe that health insurers should be allowed to sell portable HSA policies nationwide.

You see, it's like car insurance. If you change jobs, you can take your car insurance with you. You can't take your insurance in your HSA with you. In order to make sure this economy works better, in order to make sure the health care system functions better for our workers, we've got to make sure portability in HSAs is consistent and real. It's going to make a difference in people's lives when Congress gets that done.

The second policy -- way to make sure health care is affordable and accessible is to increase transparency in our health care system. (Applause.) To be smart consumers, you need to be informed consumers. It's hard to make wise choices unless you have information available. In order to spend your HSA dollars wisely, you need to know in advance what your options are. You need to know the quality of doctors and hospitals in your area; you need to know the full extent of procedures that someone recommends to you. You know, like when you buy a new car, you have access to consumer research on safety, you have access to information on reliability, you can compare price. There's performance data. You can become an informed consumer before you purchase your automobile. And that same sense of transparency and information ought to be available in health care. A modern health care system recognizes that people ought to be encouraged to shop for quality and price. And so the health care industry, and the insurance industry, needs to provide reliable information about prices and quality on most common medical procedures.

Tomorrow I'm going to have a little visit with people in the insurance industry and the health care industry and the business industry to encourage transparency. I know members of Congress are working on a bill. It would be better this be done with people saying, oh, we understand it's important to be transparent. There's always a bill out there in case the volunteerism is not quite as strong as it should be. (Laughter.)

Third policy that's important is to apply modern information technology to our medical system. Doctors practice 21st century medicine, they still have 19th century filing systems. And this is an important issue. One reason it's an important issue, because when a doc writes their files by hand, you generally can't read the writing. (Laughter.) That leads to inefficiency and error. In hospital there is more risk of preventable medical error when records are handwritten, instead of being cross-checked on a computer. Oftentimes doctors duplicate expensive tests because they do not have access to previous results. In other words, the medical system has not taken advantage of information technology like I'm sure Wendy's has, or other industries around the country.

And so I set a goal in 2004 that most Americans would have an electronic health record within 10 years. You'd have your own health record on a chip. And we're making pretty good progress toward that goal. Mike Leavitt is the Secretary of Health and Human Services. He's got a whole division inside HHS aiming towards getting information technology spread throughout health care.

First thing is, they've got to have a language that kind of can talk between a hospital in Dublin and a hospital in Crawford, you know? Well, they don't have a hospital in Crawford. (Laughter.) How about a hospital close to Crawford? (Laughter.) And that's important, because there's a lot of different -- the language needs to be standardized. And Mike is making pretty good progress on that.

We're developing solutions for a nationwide health information network. One of the things I've insisted upon is that it's got to be secure and private. There's nothing more private than your own health records. And so any system that works is one that is -- it's your record -- you decide the disclosure of your health records.

So let me give you an example about how such a system can work and what I'm trying to explain to you about how to help control costs and reduce medical errors. After Katrina hit, there was hundreds of veterans that had to be relocated. What's interesting is, is that the Veterans Department has already started this information technology modernization. There are medical -- electronic medical records for veterans. And so when these poor folks got scattered around the country, the doctors and providers had access to the electronic records of our veterans.

So if a person had a diabetes issue, up pops on the screen the information, the latest test, the medicine being taken. It was an incredibly efficient way to make sure that the health care needs of our veterans were met during this time of catastrophe. It helped people fill out the prescription drugs of our seniors without fear of error. It helped a local doc say, well, gosh, look, you've been taking this medicine in the past, I'm going to prescribe it for you in the future, in order to make sure that your health care needs continue. If you have your own medical record, your own electronic medical record, and you get sick in a remote part of our country, people instantly see your blood type, the issues that you've faced in the past, really important information about who you are and what you're going to need to help you.

And we're on our way to providing a nationwide information network. It's going to help save maybe 25 percent of the costs in medical care. I told you that one of the important things we've got to be worried about is how to deal with the cost drivers, how to come up with ways to, practically, with a common-sense solution, deal with rising costs. One way is to modernize health care. Another way is to put consumers in charge of making decisions with transparency in pricing.

I want to talk a little bit about small businesses. Obviously, I've told you once and I really mean it, I understand how important small businesses are for the economy. I also love the thought of America being a great place for entrepreneurship. There's nothing better than talking to somebody and saying, I started my own business, or, I own my own company. It's refreshing to me. It's just really an important part of the American experience. And, obviously, as I mentioned, health care is a really important issue for small business. If you sat down with a roundtable of small businesses, the first issue that comes to their mind is, I can't provide health care for my people; how do you expect me to stay in business when health care costs are driving us out? Well, HSAs help a lot, and I really urge American small businesses to take a look at HSAs. They're good for Wendy's, they'll be good for you, as well.

Here's another idea. One of the problems that small businesses have is that they enter into the market, if they're trying to provide traditional insurance, without any risk pool behind them. If you've got three people you're trying to insure, it's a heck of a lot more expensive then if you're trying to insure 3,000 people or 10,000 people. In other words, the more people that are in the risk pool, the lower the cost of traditional insurance is for a small business. And so I look forward to working with the Congress to expand what we call associated health plans. That's kind of Washington-speak for allowing small firms to band together to buy insurance at the same discounts that big companies get. (Applause.)

I'll give you an example. You've got yourself a family restaurant here in Dublin, Ohio. They've got 10 employees, and you try to go in the marketplace and it's prohibitively expensive. It seems to make sense to me that the family restaurant in Dublin ought to team up with family restaurants all across the country, so that the employees provide one big risk pool to help lower the cost for small businesses. It is a practical way of helping small businesses that choose not to go into HSAs to be able to buy traditional insurance in a cost-effective way.

The bill passed the House of Representatives; it remains stuck in the United States Senate. I urge the Senate -- I urge the Senate -- for the sake of affordable health care for small businesses and their employees, to pass associated health plans.

I'll talk about one other issue. I hope you're hanging in there with me here. (Laughter.) And that issue is one that I remember well when I was traveling your state, and that is the number of good docs that are getting driven out of practice because of frivolous lawsuits. (Applause.) If you're worried about affordabilty of health care and availability of health care, then you have got to be concerned about junk lawsuits. You just have to be, because a lot of docs and providers, thinking they're going to get sued, practice what's called defensive medicine. They order tests, they write prescriptions that simply are not necessary, so they can protect themselves from being sued in a court of law by a trial lawyer. That's just a fact of life.

I find interesting a quote from an emergency physician here. Here's what this person said: "In an effort to reduce our malpractice exposure" -- that means, in an effort not to get sued -- "we're being encouraged to over-treat, over-test, and over-admit patients." And it has to be driving medical costs right out of the roof, and it is. It is. In order to address the rising cost of health care we've got to have a rational liability system. If you're harmed, you ought to have your day in court. There ought to be justice for you, if you're injured. But we can write laws that make sure that you get you due claims without encouraging a plethora of junk lawsuits that is costing you a lot of money.

I'll tell you how it's costing you money. The cost of defensive medicine -- in other words, practicing medicine that is otherwise not necessary -- is estimated to cost our society $60 billion to $100 billion a year. It raises the cost of Medicare, Medicaid, Veterans Affairs, and other health programs by an estimated $28 billion a year.

You're paying it. You're working hard, you're putting money into the -- paying your taxes, and $28 billion of those taxes goes to pay for the cost of frivolous and junk lawsuits. As equal -- more importantly, in my judgment, actually, is that good docs are leaving the practice of medicine.

I said something in the State of the Union and it's a startling statistic, if you really take time to think about it, and that is there are 1,500 counties in America without an OB/GYN. There are 15 counties in your state of Ohio without an OB/GYN. Now, that isn't right. These are good docs who are involved with the precious -- the delivery of precious life. And they're getting sued -- a lot. And they're leaving the practice. And it's putting a lot of women in a bind. Women are having to travel miles. There's nothing worse than being -- having uncertainty at this very important time of life.

And we need to do something about it, you know. I thought when I got to Washington it was a state issue, Governor. Now when I see the effect on the federal budget of $28 billion a year, it's a national issue. It requires a national response. The House of Representatives passed a good piece of legislation. The trial lawyers have got it stuck in the United States Senate. For the sake of affordable health care and available health care, for the sake of good health care for our women across the United States of America, we need medical liability reform this year. (Applause.)

So that's what I wanted to talk about. (Laughter.) Ways to make health care more affordable and more available. I hope you can get a sense of my philosophy that when you trust the American people to make wise decisions about their health care, positive things happen. Free markets and competition transform our world. They have the power to transform our health care system. It's important to recognize -- Wendy's recognized that when you introduced health savings accounts.

The agenda I just talked about, one I'm looking forward to working with both Democrats and Republicans in Congress, builds on the strengths of the private sector, recognizes what's good and let's continue to build on that. It focuses on practical, market-based solutions. It offers the potential to deliver real improvements, genuine improvements in the lives of our fellow citizens.

The heart of the reform is that you got to trust the people of the United States of America. And I do. And I do. I want to thank you for giving me a chance to come by and visit with you. God bless you. God bless our country.


MORE:
Health Savings Accounts shot in arm for society (TERRY SAVAGE, 1/30/06, Chicago Sun-Times)

Most important, there's no reward anywhere in the system for staying healthy! That is, there was no reward until Health Savings Accounts came along two years ago. HSAs encourage people to stay healthy and spend wisely, because the money they don't spend belongs to them, and grows tax-deferred.

HSAs combine a high deductible health insurance policy and a tax-favored savings account. Instead of buying a health insurance policy with a $250 deductible, you'd buy a policy with a $5,000 deductible. It sounds scary, but that policy costs much less. The money you or the company saves on insurance premiums -- as much as 40 percent of traditional costs -- can go into a special, tax-deductible savings account and be used to pay for medical expenses tax-free. Unspent money grows for future years' expenses.

Many employers contribute some or all of their insurance premium savings into accounts for their employees. In 2006, an individual can put as much as $2,700 a year into an HSA, or $5,450 for families. But you can start an HSA account with a much lower amount. For those who can't afford a contribution, the high-deductible, low-cost medical insurance plan will at least protect them against bankruptcy caused by medical expenses.

If your company doesn't offer health insurance coverage, you can search for individual HSA plans at www.ehealthinsuranc-e.com, run by Bob Hurley, who says his site is seeing a higher percentage of people choosing this type of health insurance.

Hurley advises younger workers to turn down employee-sponsored plans in favor of these inexpensive HSA policies. He notes that with company plans, if you lose your job you'll be stuck with expensive COBRA interim insurance. And if you have a pre-existing condition, you might not find health insurance when COBRA runs out. An individually owned HSA plan is tax-advantaged, secure and portable.

The real benefit to society is that HSA incentives encourage people to spend wisely because it's their own money.

Posted by Orrin Judd at February 16, 2006 5:01 PM
Comments

This after the Chomsky white paper! Whatever happened to the 3 second sound byte?

Posted by: Genecis at February 16, 2006 5:18 PM

Speaking as someone who expects to get LASIK eventually, I can assure you that I will never get the procedure from someone known as "Old Joe," regardless of his prices.

Posted by: Timothy at February 16, 2006 5:22 PM

Health Savings Accounts Shot in Face For Society....more current.

Posted by: RC at February 16, 2006 5:23 PM

Our local barber at Colgate was Old Blind Woody. He retired at one point because his Parkinson's got so bad, but was bored so he came back. Much rejoicing ensued.

Posted by: oj at February 16, 2006 5:26 PM

Parkinson's + straight razor = ?

You obviously survived, but how?

Posted by: Jim in Chicago at February 16, 2006 7:51 PM

The beard is for protection.

Posted by: oj at February 16, 2006 8:17 PM

or hiding the scars?

Posted by: erp at February 16, 2006 11:32 PM
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