The White House
President George W. Bush
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For Immediate Release
Office of the Press Secretary
August 22, 2006

Press Gaggle by Dana Perino and Health and Human Services Secretary Leavitt
Aboard Air Force One
En route Minneapolis, Minnesota

1:59 P.M. EDT

MS. PERINO: Good afternoon. We are on our way to Minnesota. I have a couple of scheduling matters and an update for next week's week-ahead, and then because we're going to be doing -- the President is going to be doing a panel on health care, (inaudible), my special guest is Secretary Leavitt, who is going to give you a bit of a rundown of what the President will be talking about, the executive order he's going to be signing and answer a few questions on that. And then I'll take the rest of your questions afterward.

Just to go over the schedule quickly. The President had his regular briefings this morning. He also had a meeting with his Homeland Security Council, the topic was pandemic flu, an update on pandemic flu. As I said, we're on our way to Minnesota for this panel on health transparency. And he will attend the Bachmann for Congress and Minnesota Republican Party reception. We arrive back tonight at 9:40 p.m.

One foreign leader call to mention. The President called President Karzai of Afghanistan this morning. The call lasted about 10 minutes; it was initiated by the President. He called President Karzai to congratulate him on Afghanistan's Independence Day. They discussed security, education and regional cooperation.

An update to next week's schedule, for your planning purposes. Obviously, next week the nation will mark the anniversary of Hurricane Katrina. On Monday, August 28th, the President will visit Gulfport and Biloxi, Mississippi. He will remain overnight in New Orleans. On Tuesday, August 29th, the President will have events in New Orleans, and then remain overnight in Crawford.

On Wednesday, August 30th, the President will have events in Little Rock, Arkansas, and Nashville, Tennessee, and remain overnight in Salt Lake City, Utah. On Thursday, August 31st, the President will have events in Salt Lake City, and then he'll remain overnight in Camp David for the weekend. I don't know if he's coming back Sunday or Monday -- I believe Sunday. We'll get that for you later.

Let me turn it over to Secretary Leavitt to give you a little bit about today, and then I'll take the rest of your questions.

SECRETARY LEAVITT: The subject of the executive order is health care. Let me just put this in a short context. A lot of anxiety about health care. If you're a consumer, you're feeling your paycheck erode because of health care costs. If you're an employer, you're feeling your competitiveness slip. We're paying about twice about as much as a country for health care than our economic competitors. If you're a hospital or a doctor, you're feeling the worry of how the system is going to work in the future. There are a lot of issues related to how physicians are reimbursed by health plans and Medicare.

Virtually everyone calls for a transformation of the system, a big change. The question is, change to what, transformation to what. In some respects, today is a big step toward answering that question. It's a significant step toward an interoperable system of value-based competition. I want to repeat that, because it's an important phrase, a system of -- an interoperable system of value-based competition.

Let me break that down. By interoperable, most of you will be familiar with the fact that many of the systems we depend on are interoperable. If you pick up a telephone, cell phone, and you call someone who bought their cell phone and their cell minutes from another carrier, it still works, because the systems are interoperable. If you have an ATM or a credit card, you can use it anywhere in the world and it works, because it's interoperable. Everybody competes but uses the same system, basically, to transact their affairs.

Health care isn't like that. Roughly 85 percent of all health care records are still paper. So a part of what we'll be talking about today is the interoperability of systems that manage health records.

The second phrase, value-based. Value is made up of two components. The first is quality, and the other is price. The reality is, very few people have a clue what their health treatments cost. And even fewer understand the quality that they're receiving as it relates to other alternatives. The consequence of that is that you have a system where, essentially, there are no limits, and no one has an idea of what it's costing.

So value -- part of the executive order today will be dealing with developing standards of quality so that consumers will have a better idea of the quality of the care they're receiving. Part of it will deal with price, being able to organize the health care system in a way that people can have episodes of care, but they can compare one provider to another.

And then, of course, competition. We know as a matter of fact that if people have information about what they're purchasing, that the quality goes up and the price goes down. So an interoperable system of value-based competition.

Now the -- if you're a consumer, what this means is that at some point in the future, you'll get more information about not just the cost, but also the quality. Over time, most insurance plans now are beginning to reward those who are cost conscious, and in some ways, penalize those who are not. They will have information about whether or not various doctors or various hospitals provide high quality or low quality. If you're a doctor or a hospital, it means that you will have information about the quality of the care you're providing to your patients.

In the last two months, I visited 27 cities where there are quality initiatives. Almost all of them were instigated by physicians looking for ways to know whether the care they're providing is as high a quality as the rest of the market. If you are an employer, it means that in the future you will be able to inspire your employees to be more cost conscious by rewarding those who choose high quality, low cost care.

Now, back to the executive order. Health care is a challenge to change. It's a big system. It's almost 16 percent of the gross domestic product, and it's made up of literally thousands of different providers. So changing a system like that is difficult.

Some people argue that political will does not exist to change health care. I would suggest that the problem may be different than that. It may be that there's too much political will, and every time a proposal comes up, everybody unholsters their political will and (inaudible) at each other, and it creates a standoff that's existed for the last many years, and it will likely exist in the future.

So this executive order is about changing the system by using the purchasing power of the federal government to begin to shape the market in conjunction with other payers.

Let me be more specific. The federal government pays for as much as 40 percent of all health care in America, when you combine Medicare, Medicaid, Department of Defense, Veterans Administration, and the Office of Personnel Management, which pays for the employees. If federal purchasing began to make certain requirements of those from whom we purchase, in conjunction with unions, large employers and states, it would begin to make a clear signal to the market as to how it will be shaped in the future.

The executive order puts the federal government -- will change the federal government's procurement habits in four very significant ways when it comes to health care. The first is that standard health information technology will be made a very high priority in our procurement. In other words, if people in the future who sell to the federal government or are providers to the federal government desire to do business with us electronically, they'll have to use a set of standards that will be adopted uniformly across the industry.

The second point is that value needs to be defined in order to provide this quality price-value competition. So we'll be adopting a series of standards for health quality that have been developed by the medical industry.

The third is price. It will be a condition of doing business with the federal government if you're a health plan to make available information regarding your claims. It also indicates that the federal government will make available its Medicare claims information. Now, that's significant because it means that efforts to aggregate claims information into the episodes of care that can be compared, and quality that then can be compared will now be actuarially sound.

Many people have tried to do this, many organizations, but they have lacked one critical piece, and it's the information from the federal government. We're changing that. We're going to begin to be an active partner in those efforts.

And lastly, incentives. We will, as a result of this executive order, all of the agencies of the federal government that procure health care will begin to develop incentives that will provide that reward -- let me restate that, that will reward consumers and providers who provide -- who have high quality and low costs.

Now, as I indicated, this is a very important step toward an interoperable system of value-based competition. Many of the things I've talked about are happening in small measure today. It will continue to grow over the course of the next several years, but there's a clear move, and we believe by the end of the year, we will have not just the federal government, but a very high number of this country's largest employers who will be adopting a similar set of practices. We're approaching the larger unions in the country, as well as the states to do the same thing. And so if 55 percent or 60 percent of the health care purchasers in the country, or at least the (inaudible), are adopting the same practices, it will clearly begin to reshape the market. So that's the reason the executive order is of such significance.

Minnesota has a -- one of six pilot sites where they are experimenting with ways of defining quality and comparing it to price to compare value. And, consequently, we chose to go there.

Q -- rewarding health providers (inaudible). Do these stand to confirm or discriminate against providers dealing with a sicker population, or people who (inaudible)?

SECRETARY LEAVITT: That's a very good question. The science of measuring quality is still in its pioneering phase. One of the problems that will need to be refined is being able to weigh those that have more serious conditions from those who do not. Learning to categorize not just the treatments, but the type of patients they are treating is a significant part of what we're learning.

We currently have -- there are collaborative groups in, I would say, more than two dozen cities that have been formed by doctors, hospitals, insurance companies and employers to try to learn how to do this. We are forming a network of both collaborative organizations and beginning to harmonize their efforts so that we can learn how to deal with problems like the one that you raise. That's one of the reasons that the measurement of quality will start off in a quite basic way.

I'll give you an example. One of the quality measures is diabetes -- has to do with diabetes. The measure is, have you checked the hemoglobin A1C on a diabetic every quarter? We know that those who do have a check every quarter have fewer complications, and ultimately their cost is less. So one of the basic measures of quality is to determine whether or not a physician or a practice has followed that. Another measure, if you were doing hip operations, for example, would be how many re-admissions did you have because of complications? So you can see in the future if I need a hip operation.

Today if I wanted to pick a physician, I would get a list of physicians and hospitals from my insurance company that they would pay for, but I'd know nothing about it. In the future, a patient will be able to say, here are the doctors in my area that my insurer will pay for; here's how many hip operations they did, and here's the quality of them, based against a standard; and here's how much they cost, based on the kind of patient I will be; and, also, how satisfied were the patients. But you can see that not only gives the patient more information, but it also begins to give the physician a better sense of the quality that they're providing.

We've done this in nursing homes, and it works. Instantly, when this is measured and people begin to -- and it's transparent -- the nursing homes, the hospitals and the doctors begin to work hard to get better, make certain that they're among the highest quality.

Q I can see why patients would want to maximize their quality when choosing a doctor. What incentives do they have to choose one that's also cost-effective, given that their health care premiums or contributions are usually fixed?

SECRETARY LEAVITT: That's a very good point. But the reality is, where we are today, it's almost impolite to ask about quality, and nobody has a reason to care about the cost, because they just give their insurance card. Over the course of time, we will see -- because of the high costs of health care, we'll see more employers' health plans rewarding those who choose high quality and low cost. For example, they may say, we're prepared to pay 100 percent of a high quality, low cost provider. But if you choose a provider that is low quality and high priced, then we're not prepared to pay 100 percent. You may have to pay part of that yourself.

So it begins to give people a sense of value and a reason to care. And we know from previous experience that if people have that information, they begin to make better choices.

Q How do you create a system that quickly, get it up and running for that kind of data on quality and cost? I mean, how long of a project is this going to be?

SECRETARY LEAVITT: Well, this is an insightful question, and one that I want to be clear about. Some of this is happening today. But in order to collect quality data, the first step is to define what it is you're measuring; the second is to decide how you're going to measure it; and the third is how do you collect the data.

Because 85 percent of the medical records are paper, quality measurement in most places today is a nurse who comes in on a Saturday, has a two-foot stack of health records, has to go through and find out if the patient's hemoglobin A1C was checked last quarter, and then they have to bundle that up and send it somewhere. That's why electronic medical records are so important, because we have to define an electronic standard that will then allow that information to be gathered automatically and continually updated.

So the four major components are health IT, measuring value, being able to aggregate cost in a way that can be compared, and then providing the incentive. That is an interoperable system of value-based care. It will -- as we plan this out, see, this isn't the kind of thing you'll just flip a switch and it will work. It will happen in phases and it will develop over time. But I feel confident three years from now we'll look back and see substantially more consumer information available for decision-making and for doctors to improve their care.

Q What kind of feedback are you getting from professional groups, like the AMA? Are they on board, or do they have reservations?

SECRETARY LEAVITT: I think it's safe to say that virtually everyone wants this to happen, but for different reasons and for different concerns. Employers have their hair on fire right now with concern. Their costs are going up so fast they're beginning to lose their economic competitiveness. They're seeing the wages that they pay their workers eroded.

I was just reading about my home state. I was governor of Utah for a time, and I noted that the legislature gave teachers the biggest salary increase in decades. But their paycheck -- the paycheck of the average teacher, or many teachers, went down because of the health care cost. And that's happening to industries --


-- SECRETARY LEAVITT: -- that employers want this to happen real fast, and if it's imperfect, it's okay with them. Health care -- doctors and hospitals -- they want it to happen, but they want to make sure it's done perfectly (inaudible) tension between them as to how quickly this can happen. That's a healthy tension. It will keep us motivated to move forward, but it will (inaudible) us to be cautious to assure that we've done this well.

Q Thank you.


MS. PERINO: Okay, special guest, Mike Leavitt. So do you have other questions?

Q Any reaction on Iran? They say they are willing to start negotiations tomorrow, and that --

MS. PERINO: Well, as you know, the Security Council deadline was August 31st. I'm not going to parse the Iranian government document today here on the airplane. That is a job best left to the diplomats, the P-5 plus one, led by the United States and President Bush, for them to review it. I understand that the United States government has received a copy of it. We are aware of the rhetoric that's been coming out of the regime about a nuclear program, and the President made very clear to everyone yesterday in his press conference that he thinks that that would be a mistake, and dangerous for the region and the whole world.

So let's let the diplomats take a look at this response before we parse it out too much here.

Q Has the President actually seen a copy? Has he read any of it yet?

MS. PERINO: I don't believe so, no, because it came out as we were on our way here. I don't believe he's seen it yet.

Q The United Kingdom announced today that they're going to reduce their troop levels by mid next year in Iraq. Any response to that?

MS. PERINO: I think the report that I saw -- I think it's the article you're referring to -- was an unnamed source who said that troops could be reduced. And so I think that we'll wait for official word from the U.K. before having any further discussions. The issue about conditions on the ground and making troop decisions about -- based on conditions on the ground stands, and you heard the President talk about that yesterday.

Q But he hasn't spoken to Blair about this issue?

MS. PERINO: Not that I'm aware of. And, again, I point you back to the unnamed source that said it could happen, not that it would.

Q Why a George Allen fundraiser tomorrow? Is the President concerned about his statement the other day about the Webb staffer?

MS. PERINO: I was asked earlier if the President had qualms about attending, and the answer is, no. Senator Allen apologized and I think it's in everyone's best interest in this day of (inaudible) politics when everyone is trying to improve the tone and discourse to accept apologizes when they're offered. So the fundraiser will happen tomorrow evening, and Senator Allen will be there, as well.

Okay, thank you.

END 2:24 P.M. EDT

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