Thank you, Judy, for that introduction. And thank you, Dick, for having me here today. I am grateful for the time and thoughtfulness you and Alice devoted to our recent health care legislation. Thanks to you both, it's a better bill.
In my six years in office, health care has been a central issue: how to expand access, how to improve quality, how to control cost. In one form or another, health care affects government, business and household budgets; people's ability to get a job; a child's readiness to learn. Given the significance of health care to every aspect of our lives, I think we have been right to pay attention to these issues. Six years in, let me give you my perspective on where we are and where we're going. I'll be brief so that we can spend most of our time in conversation.
Let's start with where we are. Six years after we passed the 2006 law, health care reform is working in Massachusetts. We have expanded coverage to 98.2 percent of our total population. 99.8 percent of children. No other state in the country can touch that. While the national trend was going in the other direction, we increased the number of insured in Massachusetts by more than 400,000 people. When you listen to all the tortuous debate about the wisdom of universal care around the country, step back and ask yourself: what can be wrong about 99.8% of children having health coverage? Why should it be any other way?
There was fear that our health care law would result in fewer employers offering coverage, but the opposite has happened. More businesses offer health insurance to their employees today than before our 2006 reforms took effect, some 78 percent of Massachusetts businesses as compared to the national average of about 69 percent.
So-called Minimum Creditable Coverage in Massachusetts includes not only primary care, but also cancer screenings, emergency care, mental health and substance abuse programs and lifesaving medications and treatments. This was the right approach both to help keep people healthy and to save the system money in the long run. And we're healthier because of it.
Preventive care is up: more people are receiving cancer screenings, more women are getting pre-natal care and visits to emergency rooms have decreased. 150,000 people have stopped smoking because we expanded coverage for smoking cessation programs. A recent study by the National Bureau of Economic Research documents improvements in physical health, mental health, functional limitations, and joint disorders as a result of increased access to care in Massachusetts. Women, minorities and low-income people have experienced the biggest health improvements.
For example, among Hispanic males, a notably under-insured population in Massachusetts before health care reform, the detection of testicular cancer has more than doubled and the majority of cases are now detected at an early stage. And with wider access to screenings, we've seen a 36 percent decrease in cervical cancer in women.
By the way, the capacity shortage is real, but less profound than we expected. Over 90 percent of our residents have a primary care physician, and 4 out of 5 have seen their doctor in the last 12 months.
And I should add that expanding coverage to 98% of our residents added about 1% more of state spending to our budget.
Those are the stats. But even better are the stories. I remember meeting a young woman named Jaclyn Michalos, a cancer survivor who got the care she needed to save her life through the Commonwealth Connector. She had no affordable way before Massachusetts's health care reform -- it saved her life.
A self-employed man named Ken Brynildsen ignored his gastrointestinal symptoms for 3 years because he could not afford to see a doctor or pay for possible treatments. Once insured, he was seen and treated for Stage III colon cancer and is cancer free today.
The expansion of access has been a policy success in Massachusetts, I believe, because we started with the belief that health is a public good and that everyone deserves access to affordable, quality care. For us, it's an expression of the kind of Commonwealth we want to live in. That understanding, that belief, was meaningful enough to compel a Republican Governor, a Democratic legislature and a Democratic United States Senator to work together with organized labor, business groups, medical professionals, and patient advocates to develop and pass a landmark health care reform law -- and then to stick together to refine it as we went along. So, in my view, it's a pretty good model for good politics, too.
I am also proud that what we have here in Massachusetts serves as the model for what the President and the Congress have done for the country. Over the next few years, the whole country will begin to see the benefits of what we pioneered here.
For all the success of health care reform in Massachusetts, there was and is still a separate challenge: the rising cost of health care, especially the rapid increases in premiums for families and small businesses. Having insurance premiums that rise sharply year after year, even during the Recession, is a national problem, not unique to us. Some of the conservative commentators want you to believe that this is happening because of our health care reform, but they are wrong. In Mississippi, a state with no commitment to universal care, premium rates increased faster in the last six years than they did here.
Nationally, spending on health care increased 6.5 percent annually in the last ten years, while real incomes fell by more than 7 percent over that period. Spending on health care makes up 18% of all spending in the United States -- one of the largest single sectors of our economy. In recent years, growth in health care costs has outstripped growth in GDP even as the share of Americans with health insurance has fallen. Across the Nation, just like across the Commonwealth, working families, small businesses and governments are being squeezed by cost increases that we could do little about. As spending on health care programs and emergency care grows, it weakens our ability to compete and slows job growth.
This problem predates and is unrelated to health care reform. And it is unsustainable.
This is especially true for small businesses. I meet many small business owners who are beginning to see their commercial activity pick up and are ready to start hiring again -- until they get their annual health insurance hike. Double- digit increases sent businesses scrambling to find new carriers, with less coverage at the same price or the same coverage with higher deductibles, in an annual ring-around-the-rosy of shifting plans. I have yet to meet a business owner in Massachusetts, especially a small business owner, who didn't see health care costs as a significant impediment to adding jobs. And with small businesses making up 85 percent of the businesses in Massachusetts, if they don't start hiring, we don't get a recovery.
The growth in health care spending is also unnecessary. Experts estimate that as much as 20 to 30 percent of current health care spending is wasted on over-treatment, avoidable hospital re-admissions, preventable errors and unnecessary administration. All in, spending on health care is $67 billion every year in Massachusetts; so, that means we spend somewhere between $13 billion and $20 billion annually that we need not be spending.
That's why we have been working hard to find new ways to lower health care spending without hurting the quality of care.
In April of 2010, I directed the Commissioner of Insurance to disapprove nearly all of the proposed rate increases put forward by private insurers. It was ham-fisted, I know, but it got the ball rolling. We simply couldn't accept another year of unexplained double-digit increases in premiums. That decision set in motion a series of negotiations and settlements that led to a $106 million reduction in the base rates carriers originally proposed.
Then, later that year, I signed a law creating limited network health plans to give consumers opportunities to get great care in neighborhood settings at lower cost. There are now new plans tailored for small businesses, an especially exposed part of our economy, that promise to be as much as 20 percent cheaper than current rates. We also worked to end administrative duplication by requiring common codes and forms from insurers and providers. And now hospitals and insurance carriers have reopened their contracts and cut rate increases, in some cases by more than half.
We've seen the savings already. Two years ago, average premium increases were over 16 percent. Today, they are less than 2 percent.
We worked hand-in-hand with insurers and businesses to create limited network plans and small business co-ops, and are working with hospitals, community health centers, doctors and other providers to pilot patient-centered medical homes.
I am a capitalist. I respect the opportunity of people to create jobs and wealth, and have spent most of my working life in the private sector. I can't imagine a world without the freedom of people to develop and test competing ideas. But I am not a market-fundamentalist. I don't believe the market always gets everything just right. And the health care industry is most certainly not a perfectly rational market. Consumers don't always know what they are buying, how much it actually costs, or what the intrinsic value or outcome will be. People just don't choose a surgeon the way they do soap. For the sellers in the market there are huge barriers to entry. Most of the major players are not-for-profits. And the product sold or resource allocated by this market is often not optional. The fact is, we made this progress because the private sector and government worked together. And that's critical to keep in mind.
With all that we had accomplished, we needed to find a way to sustain the savings we had created for the next decade or more.
I have heard, time and again, from doctors and patients, from economists and health care executives, that one of the main reasons for the high cost of health care is the way we deliver health care. Many of you and your colleagues have emphasized how a "fee-for-service" model creates financial incentives for the quantity of care a patient receives, not necessarily the quality. We pay for individual procedures and appointments, not for coordinated care that treats the whole patient. Doctors who treat patients well or help them manage chronic medical problems are not rewarded for those outcomes. There is no financial incentive in the current system for good care, only for more care. What we have is an expensive system that fails to provide the best care to patients or give doctors the tools they need to take control. That has to change. And I believe that the health care cost containment bill I signed this summer will help us make that change real.
First, we have established a cost containment goal. With families and small businesses being squeezed with health care costs, we needed to set a goal that was both ambitious and attainable. It made sense to tie the growth in health care costs to the growth of the state's economy since all we were trying to do was make sure health care costs don't outgrow everything else. And so that's what we did. The bill sets a goal for health care costs to rise at the same rate as the state economy for the next five years and then at half a percentage point below that for five years after that.
Second, whatever the goal, we understood that the health care industry needs flexibility and may need new tools in order to meet it. It's lowering premiums and maintaining quality we care about, not necessarily the details of every method of care delivery. So we kept faith with that principle in the final bill.
Third, it was, and still is critical that the industry be accountable for reaching these goals. Government has to have a role in that, obviously working with health care experts and allowing sufficient latitude and time to get there. I am not interested in government intervention for the sake of government intervention. I remain committed to completing the vision of health care in Massachusetts: accessible, high quality and affordable care for everyone. Doing so is in the public's interest, and that's what government is for. That's why the bill I signed gives my administration the ability to work with all the players to make sure they are doing what they need to do to meet our growth goal.
And finally, but importantly, we included sensible tort reform to reduce unnecessary costs for so-called "defensive medicine" in the system. That is one point I heard time and again from many of you in this room.
All of this remains about more than just laws. This is all still about values, about who we are as a Commonwealth. What we codified was the fundamental belief that health care is a public good and that everyone in Massachusetts deserves access to quality, affordable care.
Policy matters only at the point when it touches people. For Jaclyn and Ken and hundreds of thousands of others whose lives are better because of it, these policies matter.