Obama's Plan to Lower Health Care Costs

BARACK OBAMA AND JOE BIDEN’S PLAN TO LOWER HEALTH CARE COSTS
AND ENSURE AFFORDABLE, ACCESSIBLE HEALTH COVERAGE FOR ALL
Health care costs are skyrocketing. Health insurance premiums have doubled in the last 8 years, rising 3.7
times faster than wages in the past 8 years, and increasing co-pays and deductibles threaten access to care.1
Many insurance plans cover only a limited number of doctors’ visits or hospital days, exposing families to
unlimited financial liability. Over half of all personal bankruptcies today are caused by medical bills.2 Lack of
affordable health care is compounded by serious flaws in our health care delivery system. About 100,000
Americans die from medical errors in hospitals every year.3 One-quarter of all medical spending goes to
administrative and overhead costs, and reliance on antiquated paper-based record and information systems
needlessly increases these costs.4
Tens of millions of Americans are uninsured because of rising costs. Over 45 million Americans5—
including over 8 million children6—lack health insurance. Eighty percent of the uninsured are in working
families.7 Even those with health coverage are struggling to cope with soaring medical costs. Skyrocketing
health care costs are making it increasingly difficult for employers, particularly small businesses, to provide
health insurance to their employees.
Underinvestment in prevention and public health. Too many Americans go without high-value preventive
services, such as cancer screening and immunizations to protect against flu or pneumonia. The nation faces
epidemics of obesity and chronic diseases as well as new threats of pandemic flu and bioterrorism. Yet despite
all of this less than 4 cents of every health care dollar is spent on prevention and public health.8 Our health care
system has become a disease care system, and the time for change is well overdue.
OBAMA-BIDEN PLAN TO PROVIDE AFFORDABLE, ACCESSIBLE HEALTH CARE TO ALL
Barack Obama and Joe Biden’s plan strengthens employer–based coverage, makes insurance companies
accountable and ensures patient choice of doctor and care without government interference. Under the plan, if
you like your current health insurance, nothing changes, except your costs will go down by as much as $2,500
per year. If you don’t have health insurance, you will have a choice of new, affordable health insurance
options.
Inefficient and poor quality care costs the nation at least $50 to $100 billion every year.9 Billions more are
wasted on administration and overhead because of inefficiencies in the health care system.10 And given current
trends, this problem will only get worse as health care spending is expected to double within the next decade.11
A growing body of research points to substantial opportunities to improve quality while reducing the costs of
care. Health care systems in many parts of the country deliver high quality care to the populations they serve at
half the cost of other equally renowned academic medical centers in other parts of the country.12 The key is to
provide information, incentives and support to help physicians and others work together to improve quality of
care while reducing costs.
Barack Obama and Joe Biden believe we must redesign our health system to reduce inefficiency and waste and
improve health care quality, which will drive down costs for families and individuals. The Obama-Biden plan
will improve efficiency and lower costs in the health care system by: (1) adopting state-of-the-art health
information technology systems; (2) ensuring that patients receive and providers deliver the best possible care,
including prevention and chronic disease management services; (3) reforming our market structure to increase
competition; and offering federal reinsurance to employers to help ensure that unexpected or catastrophic
illnesses do not make health insurance unaffordable or out of reach for businesses and their employees.
(1) INVEST IN ELECTRONIC HEALTH INFORMATION TECHNOLOGY SYSTEMS. Most medical records are still
stored on paper, which makes them difficult to use to coordinate care, measure quality, or reduce medical errors.
Processing paper claims also costs twice as much as processing electronic claims.13 Barack Obama and Joe
Biden will invest $10 billion a year over the next five years to move the U.S. health care system to broad
adoption of standards-based electronic health information systems, including electronic health records. They
will also phase in requirements for full implementation of health IT and commit the necessary federal resources
to make it happen. Barack Obama and Joe Biden will ensure that these systems are developed in coordination
with providers and frontline workers, including those in rural and underserved areas. Barack Obama and Joe
Biden will ensure that patients’ privacy is protected. A study by the Rand Corporation found that if most
hospitals and doctors offices adopted electronic health records, up to $77 billion of savings would be realized
each year through improvements such as reduced hospital stays, avoidance of duplicative and unnecessary
testing, more appropriate drug utilization, and other efficiencies.14
(2) IMPROVE ACCESS TO PREVENTION AND PROVEN DISEASE MANAGEMENT PROGRAMS. Experts agree that
several steps should be taken immediately to help patients get the care they need and to help providers improve
medical practice. Barack Obama and Joe Biden will expand and support these and other efforts to lower costs
and improve health outcomes.
HELP PATIENTS
􀂾 Support disease management programs. Over seventy-five percent of total health care dollars are
spent on patients with one or more chronic conditions, such as diabetes, heart disease, and high blood
pressure.15 Many patients with chronic diseases benefit greatly from disease management programs,
which help patients manage their condition and get the care they need.16 Barack Obama and Joe Biden
will require that plans that participate in the new public plan, Medicare or the Federal Employee Health
Benefits Program (FEHBP) utilize proven disease management programs. This will improve quality of
care and lower costs, as well.
LOWER COSTS TO MAKE OUR HEALTH CARE SYSTEM
WORK FOR PEOPLE AND BUSINESSES – NOT JUST
INSURANCE COMPANIES
􀂾 Coordinate and integrate care. Rates of chronic diseases have skyrocketed in the last 2 decades.17
Over 133 million Americans have at least one chronic disease.18 With proper care, the onset and
progression of these diseases can be contained for many years. In addition to the needless suffering and
early death they cause, these chronic conditions cost a staggering $1.7 trillion yearly.19 Barack Obama
and Joe Biden will support providers to put in place care management programs and encourage team
care through implementation of medical home type models that will improve coordination and
integration of care of those with chronic conditions.
􀂾 Require full transparency regarding quality and costs. Health care quality and costs can vary
tremendously among hospitals and providers; however, patients have limited access to this
information.20 Barack Obama and Joe Biden will require hospitals and providers to collect and publicly
report measures of health care costs and quality, including data on preventable medical errors, nurse
staffing ratios, hospital-acquired infections, and disparities in care and costs. Health plans will be
required to disclose the percentage of premiums that actually goes to paying for patient care as opposed
to administrative costs.
ENSURE PROVIDERS DELIVER QUALITY CARE
􀂾 Promote patient safety. Barack Obama and Joe Biden will require providers to report preventable
medical errors, and support hospital and physician practice improvement to prevent future errors.
􀂾 Align incentives for excellence. Both public and private insurers tend to pay providers based on the
volume of services provided, rather than the quality or effectiveness of care.21 Barack Obama and Joe
Biden will accelerate efforts to develop and disseminate best practices, and align reimbursement with
provision of high quality health care. Providers who see patients enrolled in the new public plan, the
National Health Insurance Exchange, Medicare and FEHB will be rewarded for achieving performance
thresholds on physician-validated outcome measures.
􀂾 Comparative effectiveness reviews and research. One of the keys to eliminating waste and missed
opportunities is to increase our investment in comparative effectiveness reviews and research. This
information is developed by reviewing existing literature, analyzing electronic health care data, and
conducting simple, real world studies of new technologies. Barack Obama and Joe Biden will establish
an independent institute to guide reviews and research on comparative effectiveness, so that Americans
and their doctors will have accurate and objective information to make the best decisions for their health
and well-being.
􀂾 Tackle disparities in health care. Although all Americans are affected by problems with our health
care delivery system, an overwhelming body of evidence demonstrates that certain populations are
significantly more likely to receive lower quality health care than others. Barack Obama and Joe Biden
will tackle the root causes of health disparities by addressing differences in access to health coverage
and promoting prevention and public health, both of which play a major role in addressing disparities.
They will also challenge the medical system to eliminate inequities in health care by requiring hospitals
and health plans to collect, analyze and report health care quality for disparity populations and holding
them accountable for any differences found; diversifying the workforce to ensure culturally effective
care; implementing and funding evidence-based interventions, such as patient navigator programs; and
supporting and expanding the capacity of safety-net institutions, which provide a disproportionate
amount of care for underserved populations with inadequate funding and technical resources.
􀂾 Reform medical malpractice while preserving patient rights. Increasing medical malpractice
insurance rates are making it harder for doctors to practice medicine22 and raising the costs of health
care for everyone.23 Barack Obama and Joe Biden will strengthen antitrust laws to prevent insurers
from overcharging physicians for their malpractice insurance. Barack Obama and Joe Biden will also
promote new models for addressing physician errors that improve patient safety, strengthen the doctorpatient
relationship, and reduce the need for malpractice suits.
(3) LOWER COSTS BY TAKING ON ANTICOMPETITIVE ACTIONS IN THE DRUG AND INSURANCE COMPANIES. It
is not right that Americans families are paying skyrocketing premiums while drug and insurance industries are
enjoying record profits. These companies benefit most from the status quo and in many cases are the greatest
obstacles to reform. The Obama-Biden plan will tackle needless waste and spiraling costs by increasing
competition in the insurance and drug markets.
􀂾 Increasing competition in the insurance industry. The insurance business today is dominated by a
small group of large companies that has been gobbling up their rivals. In recent years, for-profit
companies have bought up not-for-profit insurers around the country. There have been over 400 health
care mergers in the last 10 years and just two companies dominate a full third of the national market.24
These changes were supposed to make the industry more efficient, but instead premiums have
skyrocketed, increasing over 87 percent over the past six years.25 Over the same time period, insurance
administrative overhead has been the fastest-growing component of health spending. The 2007
Commonwealth Fund Commission on a High Performance Health System reported that between 2000
and 2005, administrative overhead – including both administrative expenses and insurance industry
profits – increased 12.0 percent per year, 3.4 percentage points faster than the average health
expenditure growth of 8.6 percent.26
And while health care costs continue to rise for families, CEOs of these insurance companies have
received multi-million dollar bonuses.27 Barack Obama and Joe Biden will prevent companies from
abusing their monopoly power through unjustified price increases. In markets where the insurance
business is not competitive, their plan will force insurers to pay out a reasonable share of their premiums
for patient care instead of keeping exorbitant amounts for profits and administration. Barack Obama and
Joe Biden’s new National Health Insurance Exchange will also help increase competition by insurers.
􀂾 Prevent private insurance waste and abuse in Medicare. Medicare’s private plan alternative, called
Medicare Advantage, was established to increase competition and reduce costs. But independent reports
show that on average the government pays 12 percent more than it costs to treat comparable
beneficiaries through traditional Medicare.28 These excessive subsidies cost the government billions of
dollars every year and create an incentive structure that has led to fraudulent abuses of seniors. Barack
Obama and Joe Biden believe we need to eliminate the excessive subsidies to Medicare Advantage plans
and pay them the same amount it would cost to treat the same patients under regular Medicare.
􀂾 Allow consumers to import safe drugs from other countries. The second-fastest growing type of
health expenses is prescription drugs.29 Pharmaceutical companies should profit when their research and
development results in a groundbreaking new drug. But some companies are exploiting Americans by
dramatically overcharging U.S. consumers. These companies are selling the exact same drugs in Europe
and Canada but charging Americans a 67 percent premium.30 Barack Obama and Joe Biden will allow
Americans to buy their medicines from other developed countries if the drugs are safe and prices are
lower outside the U.S.
􀂾 Prevent drug companies from blocking generic drugs from consumers. Some drug manufacturers
are explicitly paying generic drug makers not to enter the market so they can preserve their monopolies
and keep charging Americans exorbitant prices for brand name products.31 The Obama-Biden plan will
work to ensure that market power does not lead to higher prices for consumers. Their plan will work to
increase use of generic drugs in the new public plan, Medicare, Medicaid, FEHBP and prohibit large
drug companies from keeping generics out of markets.
􀂾 Allow Medicare to negotiate for cheaper drug prices. The 2003 Medicare Prescription Drug
Improvement and Modernization Act bans the government from negotiating down the prices of
prescription drugs, even though the Department of Veterans Affairs’ negotiation of prescription drug
prices with drug companies has garnered significant savings for taxpayers.32 Barack Obama and Joe
Biden will repeal the ban on direct negotiation with drug companies and use the resulting savings, which
could be as high as $30 billion,33 to further invest in improving health care coverage and quality.
(4) REDUCE COSTS OF CATASTROPHIC ILLNESSES FOR EMPLOYERS AND THEIR EMPLOYEES. Catastrophic
health expenditures account for a high percentage of medical expenses for private insurers.34 In fact, the most
recent data available reveals that the top five percent of people with the greatest health care expenses in the U.S.
account for 49 percent of the overall health care dollar.35 For small businesses, having a single employee with
catastrophic expenditures can make insurance unaffordable to all of the workers in the firm. The Obama-Biden
plan would reimburse employer health plans for a portion of the catastrophic costs they incur above a threshold
if they guarantee such savings are used to reduce the cost of workers' premiums. Offsetting some of the
catastrophic costs would make health care more affordable for employers, workers and their families.
Barack Obama and Joe Biden will guarantee affordable, accessible health care coverage for all Americans.
Currently, there are over 45 million Americans lacking health insurance, and millions more are at risk of losing
their coverage due to rising costs.36 Rising costs are also a burden on employers, particularly small businesses,
which are increasingly unable to provide health insurance coverage for their employees and remain competitive.
Nearly two million fewer Americans receive health insurance coverage through their employers now compared
to eight years ago,37 and this trend shows no sign of slowing down. It is simply too expensive for individuals
and families to buy insurance directly on the open market and impossible for many with pre-existing conditions.
The Obama-Biden plan both builds on and improves our current insurance system, which most Americans
continue to rely upon, and leaves Medicare intact for older and disabled Americans. Under the Obama-Biden
plan, Americans will be able to maintain their current coverage, have access to new affordable options, and see
the quality of their health care improve and their costs go down. The Obama-Biden plan provides new
affordable health insurance options by: (1) guaranteeing eligibility for all health insurance plans; (2) creating a
National Health Insurance Exchange to help Americans and businesses purchase private health insurance; (3)
providing new tax credits to families who can’t afford health insurance and to small businesses with a new
Small Business Health Tax Credit; (4) requiring all large employers to contribute towards health coverage for
their employees or towards the cost of the public plan; (5) requiring all children have health care coverage; (5)
expanding eligibility for the Medicaid and SCHIP programs; and (6) allowing flexibility for state health reform
plans.
(1) GUARANTEED ELIGIBILITY. Obama and Biden will require insurance companies to cover pre-existing
conditions so all Americans, regardless of their health status or history, can get comprehensive benefits at fair
and stable premiums.
(2) NEW AFFORDABLE, ACCESSIBLE HEALTH INSURANCE OPTIONS. The Obama-Biden plan will create a
National Health Insurance Exchange to help individuals purchase new affordable health care options if they are
uninsured or want new health insurance. Through the Exchange, any American will have the opportunity to
enroll in the new public plan or an approved private plan, and income-based sliding scale tax credits will be
AFFORDABLE, ACCESSIBLE COVERAGE OPTIONS FOR ALL
provided for people and families who need it. Insurers would have to issue every applicant a policy and charge
fair and stable premiums that will not depend upon health status. The Exchange will require that all the plans
offered are at least as generous as the new public plan and meet the same standards for quality and efficiency.
Insurers would be required to justify an above-average premium increase to the Exchange. The Exchange
would evaluate plans and make the differences among the plans, including cost of services, transparent.
The Exchange will have the following features:
􀂾 Comprehensive benefits. The benefit package will be similar to that offered through the Federal
Employees Health Benefits Program (FEHBP), the program through which Members of Congress get
their own health care. Plans will include coverage of all essential medical services, including preventive,
maternity and mental health care.
􀂾 Affordable premiums, co-pays and deductibles. Participants will be charged fair premiums and
minimal co-pays for deductibles for preventive services.
􀂾 Simplified paperwork. The plan will simplify paperwork for providers and will increase savings to the
system overall.
􀂾 Easy enrollment. All Exchange health insurance plans will be simple to enroll in and provide ready
access to coverage.
􀂾 Portability and choice. Participants will be able to move from job to job without changing or
jeopardizing their health care coverage.
􀂾 Quality and efficiency. Participating hospitals and providers that participate in the new public plan will
be required to collect and report data to ensure that standards for health care quality, health information
technology and administration are being met.
(3) TAX CREDITS FOR FAMILIES AND SMALL BUSINESSES. Barack Obama and Joe Biden understand that too
many families that do not qualify for public health programs like Medicaid and SCHIP have trouble finding
affordable health insurance. They know from talking to small business owners across the nation that the
skyrocketing cost of healthcare poses a serious competitive threat to America’s small businesses. The Obama-
Biden health care plan will provide tax credits to all individuals who need it for their premiums. They will also
create a new Small Business Health Tax Credit to provide small businesses with a refundable tax credit of up to
50 percent on premiums paid by small businesses on behalf of their employees. To be eligible for the credit,
small businesses will have to offer a quality health plan to all of their employees and cover a meaningful share
of the cost of employee health premiums.
(4) EMPLOYER CONTRIBUTION. Large employers that do not offer meaningful coverage or make a meaningful
contribution to the cost of quality health coverage for their employees will be required to contribute a
percentage of payroll toward the costs of the national plan. Small businesses will be exempt from this
requirement.
(5) REQUIRE COVERAGE OF CHILDREN. Barack Obama and Joe Biden will require that all children have health
care coverage. Barack Obama and Joe Biden will expand the number of options for young adults to get
coverage by allowing young people up to age 25 to continue coverage through their parents’ plans.
(6) EXPANSION OF MEDICAID AND SCHIP. Barack Obama and Joe Biden will expand eligibility for the
Medicaid and SCHIP programs and ensure that these programs continue to serve their critical safety net
function.
(7) FLEXIBILITY FOR STATE PLANS. Due to federal inaction, some states have taken the lead in health care
reform. Under the Obama-Biden plan, states can continue to experiment, provided they meet the minimum
standards of the national plan.
Covering the uninsured and modernizing America’s health care system are urgent priorities, but they are not
enough. This nation is facing a true epidemic of chronic disease. An increasing number of Americans are
suffering and dying needlessly from diseases such as obesity, diabetes, heart disease, asthma and HIV/AIDS, all
of which can be delayed in onset if not prevented entirely. One in 3 Americans—133 million—have a chronic
condition, and children are increasingly being affected.38 Five chronic diseases—heart disease, cancer, stroke,
chronic obstructive pulmonary disease, and diabetes—cause over two-thirds of all deaths each year.39
In addition to the tremendous human cost, chronic diseases exact a tremendous financial toll on our health care
resources. Care for patients with diabetes costs $130 billion each year alone, and this amount is growing.40
Tackling chronic diseases is also straining our public health departments and finances, which are already
stretched too thin carrying out traditional public health functions, which include ensuring our water is safe to
drink, the air is safe to breathe, and our food is safe to eat.
Barack Obama and Joe Biden believe that protecting and promoting health and wellness in this nation is a
shared responsibility among individuals and families, school systems, employers, the medical and public health
workforce, and federal and state and local governments. All parties must do their part, as well as collaborate
with one another, to create the conditions and opportunities that will allow and encourage Americans to adopt
healthy lifestyles.
(1) EMPLOYERS. Reduced workforce productivity from illness and disability represents an additional drain on
business. To address employee health, an increasing number of employers are offering worksite health
promotion programs, onsite clinical preventive services such as flu vaccinations, nutritious foods in cafeterias
and vending machines, and exercise facilities. Equally important, many employers choose insurance plans that
cover preventive services for their employees. Barack Obama and Joe Biden believe that worksite interventions
hold tremendous potential to influence health and they will expand and reward these efforts.
(2) SCHOOL SYSTEMS. Childhood obesity is nearly epidemic,41 particularly among minority populations,42 and
school systems can play an important role in tackling this issue. For example, only about a quarter of schools
adhere to nutritional standards for fat content in school lunches.43 Barack Obama and Joe Biden will work with
schools to create more healthful environments for children, including assistance with contract policy
development for local vendors, grant support for school-based health screening programs and clinical services,
increased financial support for physical education, and educational programs for students.
(3) WORKFORCE. Primary care providers and public health practitioners have and will continue to lead efforts
to protect and promote the nation’s health. Yet, the numbers of both are dwindling,44 and the existing
workforce is further challenged by inadequate training for new health threats such as bioterrorism and avian flu,
antiquated funding and reimbursement mechanisms, and limited access to real-time information and technical
support. Barack Obama and Joe Biden will expand funding—including loan repayment, adequate
reimbursement, grants for training curricula, and infrastructure support to improve working conditions— to
ensure a strong workforce that will champion prevention and public health activities.
PROMOTING PREVENTION & STRENGTHENING
PUBLIC HEALTH
(4) INDIVIDUALS AND FAMILIES. Preventive care only works if Americans take personal responsibility for their
health and make the right decisions in their own lives – if they eat the right foods, stay active, and stop smoking.
Barack Obama and Joe Biden will ensure that all Americans are empowered to monitor their health by ensuring
coverage of essential clinical services in all federally supported health plans, including Medicare, Medicaid,
SCHIP and the new public plan. Americans also benefit from healthy environments that allow them to pursue
healthy choices and behaviors that can help ward off chronic and preventable diseases. Healthy environments
include sidewalks, biking paths and walking trails; local grocery stores with fruits and vegetables; restricted
advertising for tobacco and alcohol to children; and wellness and educational campaigns. In addition, Barack
Obama and Joe Biden will increase funding to expand community based preventive interventions to help
Americans make better choices to improve their health.
(5) FEDERAL, STATE, AND LOCAL GOVERNMENTS. The federal government and state and local governments
play critical roles across the full range of disease prevention and health promotion activities. First, working
together, governments at all levels should lead the effort to develop a national and regional strategy for public
health and align funding mechanisms to support its implementation. Second, the field of public health would
benefit from greater research to optimize organization of the 3,000 health departments in this nation,45
collaborative arrangements between levels of government and its private partners, performance and
accountability indicators, integrated and interoperable communication networks, and disaster preparedness and
response. Third, the government must invest in workforce recruitment as well as modernizing our physical
structures, particularly our public health laboratories. And finally, the government must examine its own
policies, including agricultural, educational, environmental and health policies, to assess and improve their
effect on public health in this nation. Barack Obama and Joe Biden will prioritize all of these activities, to
ensure a 21st century public health system and healthy America.
Paid for by Obama for America
Printed in House
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609996
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39 CDC, http://www.cdc.gov/nccdphp/overview.htm
40 CDC, http://www.cdc.gov/nccdphp/press/index.htm
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43 GAO (2003), School Lunch Program: Efforts Needed to Improve Nutrition and Encourage Healthy Eating,
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44 The Robert Graham Center (October 2003), http://www.graham-center.org/x468.xml; Institute of Medicine (2002), The Future of
the Public’s Health in the 21st Century, p.364.
45 Bob Prentice and George Flores (December 15, 2006), Local Health Departments and the Challenge of Chronic Disease: Lessons
From California, NIH, http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=1832141