Pharm Exec Q&A: Tommy Thompson

Oct 31, 2008

By the time you read this, the 2008 Presidential election will have already been decided. And all the debate and discussion over the candidates' merits will instead be directed toward better understanding how the impending presidential policies will translate into action.

But if you're like us, the discussions surrounding healthcare in the run-off left a lot to be desired. It all just seemed so, well, vague.

So we called up someone decidedly in the know, Tommy Thompson, who served a long career in government, most recently as the Secretary of Health and Human Services during the outgoing prez's first administration, to offer a reality check on the most pressing healthcare issues. Today, Thompson is an independent senior advisor of the Deloitte Center for Health Solutions and a partner at the law firm of Akin Gump Strauss Hauer & Feld. But perhaps his tenure in government is hard to leave behind: He backs the current system of healthcare with small changes that can have a big impact—and that have bipartisan support.

Thompson sat down with Pharm Exec in October and provided some hard numbers and also some hard-to-avoid scenarios—particularly with Medicare, now on schedule to go bankrupt. The data show there are efficiencies throughout the system to be gained (including implementing a mandatory diabetes screening for seniors and an employee retention program at FDA). Indeed, in an election where "change" has been the mantra, Thompson offers some solid steps in moving the system in a new direction—toward keeping people healthy rather than treating them when they are sick. What follows is an edited transcript of our discussion. —Patrick Clinton, Editor in Chief

People forget that you were a candidate in the current presidential race. If you were still on the stump, what would you be telling voters about healthcare?

Tommy Thompson: The first thing you have to look at is Medicare. Medicare is going broke in the 2012, and it has the potential of sinking our healthcare system just because it is so big.

When I was secretary, we wrote into the Medicare Modernization Act a provision called the Trigger. Once Medicare in two consecutive years spends 45 percent of the cost of healthcare out of the General Fund, the president is required to put a fix-it bill in front of Congress. The two years are up, and when the next president gets sworn in on January 20, he has 90 days to put a repair bill in front of Congress. Congress doesn't have to take it up, but it will bring front and center to Congress how serious the situation is.

Second, the continuing resolution that's keeping SCHIP [the State Children's Health Insurance Program] alive expires March 31.

Third, there are two areas of healthcare where Democrats and Republicans have reached some agreement. The first is wellness, chronic diseases, disease prevention, and disease management. There's a bipartisan coalition developing around this area—which accounts for 75 or 80 percent of the cost of healthcare. The second is information technology—including electronic medical records. Information technology also has bipartisan support—both presidential candidates are talking about it, both parties are talking about it in Congress—and Speaker [Nancy] Pelosi says it's going to be taken up early in the next session.

So with that, you have the areas that comprise 80 percent of the cost of healthcare, plus IT that will drive efficiencies, transparency, and more communications in the system. You've got Medicare which has to have the fix-it bill, and you have SCHIP. Those four proposals are going to be in front of Congress next year, and I absolutely believe that is going to drive the largest transformation of healthcare that any of us have ever seen.

What's going to happen?

Now, I don't believe that Congress can handle the Medicare problem, it is so large. Right now, Medicare takes up about 3 percent of the Gross National Product. Social Security takes up about five percent. But in 75 years, Medicare goes from 3 percent to 15 percent of GNP. Social Security only goes from 5 percent to 7 percent. The second thing is, the Gross National Product in America today is $13 trillion. The unfunded liability of Social Security is about $12.5 trillion in 75 years. What do you think the unfunded liability of Medicare is going to be in 75 years?

More than the current Gross Domestic Product?

By a large amount. The lowest estimate is $33 trillion. The highest estimate is $68 trillion. When you look at those numbers, it's impossible for Medicare to continue. Nobody's willing to talk about it in detail, but that's what's facing this country.

And what will it take to fix it?

First, you're going to have to means-test Medicare. The more money you make, the more you're going to have to pay for Medicare. It's not going to be free anymore.

Second, [right now] you don't get Social Security at age 65 anymore. Every year it's extended out one or two months, so if you're 65 now, you won't get your first Social Security check until you're 66. The same kind of thing is going to have to happen with Medicare.

And third, you're not going to have all the Medicare benefits we currently get. There are going to have to be some limitations on new medicines coming on the market or new devices that cost thousands of dollars. We're going to have to do something about the end of life because 30 percent of the cost of Medicare comes in the last year of life.

Do you know any Republican or Democratic representative or senator who will raise any of these issues?

I believe sincerely that the only way to fix Medicare is to handle it like a Base Closing Commission setup. Congress cannot close military bases on their own. They have to set up a Base Closing Commission, with an equal number of Republicans and Democrats. They make these tough decisions and then have Congress vote it either up or down. And that's the same type of commission that we need for Medicare.

Next you have to take a look at where the money is being spent. It turns out that 75 to 80 percent of what we spend is for chronic illnesses. And most chronic illnesses are behavioral—meaning that you or I have some control over them. So we have to figure out a way to do wellness and prevention. For instance, we should be selling insurance to keep you from getting sick instead of insurance to pay for you after you get sick.


Tommy Thompson IN BRIEF
One of the big drivers is tobacco. It costs us $150 billion in healthcare costs—442,000 Americans died last year from tobacco-related illness. We have to look at ways to encourage smoking cessation in America.

There's enormous opposition to things like regulation of tobacco by FDA.

We should regulate it, without a doubt. Why not? Why should we allow a company to put out a product that kills 442,000 people each year and costs you and me $150 billion?