Value-Driven Care

Value-Driven Care: CMS Updates Data on Payments for Physician Services

72 Commonly Performed Services in a Non-Office Facility Setting Across all Specialties, CY 2008 Data

72 Commonly Performed Services in a Non-Office Facility Setting Across all Specialties – Continued, CY 2008 Data

19 Other Commonly Performed Services Provided in an Office Setting, CY 2008 Data

Medicare Preventive Services Provided in an Office Setting, CY 2008 Data

Physician Payments Example, CY 2008 Data

Cost of Healthcare

In a roundtable discussion moderated by Dr. Atul Gawande, three experts in health economics — Drs. Elliott Fisher, Jonathan Gruber, and Meredith Rosenthal — explore the most promising ways of slowing the growth of health care costs, their potential effects on medical practice, and the likelihood that the current healthcare reform effort will be a step in the right direction. The transcript of the session is below.

Watch the Video Here

Perspective Roundtable: The Cost of Health Care

Introduction

DR. ATUL GAWANDE: Welcome to a Perspective Roundtable from the New England Journal of Medicine. I’m Atul Gawande, a staff surgeon at Brigham and Women’s Hospital and an associate professor of surgery at Harvard Medical School and of health policy and management at theHarvard School ofPublicHealth.

One of the key goals of the current health care reform effort in our country is to achieve universal health coverage. But everyone agrees that it will be impossible to afford health care for all, even afford it for those who have it now, if we don’t find a way to contain our very high and rapidly rising health care costs. Today, we want to discuss the economic dimension of health care reform. How can we reduce overall health care spending, or at least its growth, before it bankrupts the country?

With me here to discuss the economics of health care reform are Elliott Fisher, a professor of community and family medicineat Dartmouth Medical School and director of theCenterforHealth Policy Research at theDartmouth Institute for Health Policy and Clinical Practice.WehaveJonathan Gruber,aprofessor ofeconomics at MIT,and Meredith Rosenthal,an associateprofessor ofhealth economics and policy at the Harvard School of Public Health.

Why We Need Cost Control

So let me start with you, Professor Gruber. Is it actually that important that we reduce how much we spend on health care?

DR. JONATHAN GRUBER: In the long run, cost control is what it’s all about, because ultimately the federal government will be bankrupted by the costs of medical care. Here’s one simple example. Just to pay off what Medicare is going to owe under projected law with no changes, we’d have to raise the existing payroll tax rate which is 2, a little over 2%,to about 14%. And that’s just — and that’s under very conservative projections,actually.So if wewant to keep our fiscal system in order, we need to control the cost of health care.

DR. GAWANDE: Well, but if this is what it takes to save people’s lives, if it’s taking more of our economy, and this is what people want to spend their dollars on . . . . We’re spending more and more dollars on little tiny electronic gadgets. Why not on health care?

DR. GRUBER: If you want to take that perspective, then we need to move to a system where voters and consumers understand that set of priorities. That means, for example, not including a bunch of subsidies towards health care that are sort of hidden in our tax system and in our spending system,but making clear to consumers what they’re spending. If, in that situation, America decides that they vote 50% of GDP to health care, great. What’s more important than your health? But we’re in a situation today where Americans don’t understand what they’re devoting to it and don’t understand that they’re not really getting the value for their dollars.

DR. GAWANDE: Professor Rosenthal, do you agree that inflation of health care costs is this fundamental as Professor Gruber lays it out to be? And if so what are the kinds of options or strategies we have, if you do agree?

DR. MEREDITH ROSENTHAL: I think surely this is true. And I think aside from the public burden of increased Medicare and other government spending on health care, I think we have to recognize that the high and growing cost of health care also means that we can afford to cover fewer people and to subsidize less the health care for the low-income folks. Even if we do get universal coverage, there are going to be serious equity implications for high cost growth.

So I think looking at reforming the health care payment system would be number one on my list for ways to start approaching cost control. But I think more broadly, we need to have a more open societal dialogue, I think going back to what Jon said, about what our priorities are. And we have never in this country been comfortable talking about rationing explicitly. And I think there’s a need for that dialogue informed by evidence.

The Payment System

DR. GAWANDE: So I’m interested that the first place you went to is the payment system, how I get paid as a surgeon. And that implies that our payment system, when we think about the runaway health care inflation problem, that the payment system is the root cause of it.

DR. ROSENTHAL: Well, of course it’s complicated. The payment system interacts with things like norms and other aspects of the institutional nature of health care. But we have very good reason to believe that because we pay for units of service, for visits, for surgeries, for days in the hospital, that we get more of these things. And there’s good evidence from experiments and natural experiments that show very significant changes in patterns of health care when payments change.

DR. ELLIOTT FISHER: I think it’s a subconscious influence on the way many of us practice. And a lot of it is driven by the environment within which we practice. Hospitals are paid the same way, and hospitals need to balance their books, and often are recruiting more physicians who have — provide services that have higher margins that are more profitable, so that the hospitals can balance their books.

But I think the way it influences our practice is in very subtle ways. Medical care system currently, fee for service does not pay for us to have long conversations with our patients. When we’re feeling constrained, as many of us are in the current system (price for an office visit isn’t very much), it’s much harder for us to have that long conversation with a patient with heart failure to see if we can safely manage them at home.

The default position in many communities becomes, “Gosh, I’m too busy. I better send them to the emergency room.” The emergency room physician recognizes full well that they don’t have time to manage the patient with heart failure in the emergency room, so admits them to the hospital. To the extent that those resources are available for us and we’re not paid to do the things that we really would like to do or know we should do, we see huge differences in the likelihood of really unnecessary hospitalizations in different communities.

DR. GAWANDE: So if payment systems are one of the core things to address, how do you address it? What are the proposals that are actually out there being offered? And Jon, I think you’re being asked to actually make cost estimates based on some of these proposals and what they’re going to do.

DR. GRUBER: Okay, the right answer is, managed care 2.0 done smart. And by “done smart,” what we mean is the following: a) smarter on the input side, which is, don’t just pay a flat fee, pay in a risk-adjusted way based on what’s wrong with the patients. And the second change is on the output side; don’t just reimburse them flat out, but reimburse them based on the quality and the value of what they deliver. And put it together in what we call an accountable care organization, we know what to do.

The problem is, we’re pretty far from legislative language. And there’s not that, quite frankly, can be in a bill by October 15th or by November 15th or probably even in the next couple of years. My feeling is, as we look to this round of reform, the science of coverage has gotten so farpast thescienceof cost control that that’s why I feel likethePresident,on one level, did a bit of disservice holding up cost control as such a key feature of this round of reform. Because quite frankly, we can’t do yet what Elliott wants us to do. We know theoretically what to do.

What we need to do in this round is set the predicates, set the landscape so that that can happen. That means, I think importantly, setting up institutions to study comparative effectiveness so we can get that information in place, and importantly in my view, making consumers more cost-conscious so that they’re more receptive.

Until we’re willing to tell doctors and the patients they can’t have everything they want, we can’t control costs.

DR. FISHER: Boy, I think there’s so much unnecessary care in the current system that right now we can give patients everything they need and would want if well informed. I’m absolutely convinced. I don’t think patients want unnecessary hospital stays. I think they’d much rather stay home than go to the hospital when they have heart failure. And we as physicians would much rather be able to take care of them in ways that are safer for them. I think the payment system and a number of other things, our sort of cultural norms in many places, drive us to do unnecessary things.

DR. GAWANDE: There is no solution like, “Put everybody on salary. That’ll solve the problem.” We — first of all, we’re not sure that works. But second of all, we don’t know how to do it in a safe way. So what is a possible next step?

DR. ROSENTHAL: It’s not just that we don’t know what the end goal should absolutely look like. Even if we knew the global payment system, risk adjusted with quality incentives, at the end of the day that we’d like to see, we have a delivery system that can’t operate under that payment system. We have a very fragmented delivery system. And obviously conversations about accountable care organizations is part of trying to knit that together. But there needs to be a transitional payment model that would be paired with a transition in the delivery system.

And I think most of the proposals along those lines involve bundled payment of one form or another. Bundling payment for readmissions with the primary admission is the smallest piece of that. But there are payment models like Prometheus payment that are looking to put together all the components of care for a clinically defined episode, and try to get various clusters of providers maybe acting as medical groups, maybe working together collaboratively to accept risk for those episodes. So I think that’s the path towards a more global payment model.

DR. GAWANDE: Experimenting with these kinds of approaches makes perfect sense. Imposing it across the country as the way we’re now going to pay everybody as of January 1, 2010, would cause havoc, because we’re still figuring out if it even works for a single disease. And so, first of all, what are the provisions in health reform that can — that can push us down the path of trying these experiments?

DR. FISHER: I think the House legislation that we’ve seen so far and the drafts of the Senate legislation from the Senate Finance Committee that we saw earlier all include pretty aggressive pursuit of pilots on all of these dimensions, whether it’s medical home payments for primary care, essentially bundling payments to support--strengthen primary care or accountable care organizations, or bundled payments and readmission payments.

A Public Insurance Option

DR. GAWANDE: But then there’s all theseother possibleapproaches that people are suggesting.So onethat is very much on the table is the idea of a public option for insurance coverage.

DR. GRUBER: The important aspect of a public option is: will they regulate rates that are paid to providers within the public option, as is in the House legislation, for example? And that’s, among sort of the thinking people in this fight, what the battle is about. The less important part is who owns the plan. Is it GovCare or Aetna? Well, the truth is, if they’re paying competitive private rates, it doesn’t really matter that much.

DR. GAWANDE: So does paying providers less change the cost of the system?

DR. ROSENTHAL: If the public option could come to the table with a reformed payment system, a radically different payment system, and perhaps not contract with every provider, allow certain accountable care organizations and others to come forward, it could perhaps innovate in a way that’s just not possible based on the way health plans compete in our system now.

DR. FISHER: Although we don’t necessarily need a public option to do it. We have, for the Medicare population — a large population that is very interested in some of these pilot — you know, in some of these new ways of paying.

DR. GRUBER: The problem is, politically, we’ve tried Medicare pilots and they get killed. But if this legislation could bring the hammer down, say, you know, “We are going to have these pilots even if local politicians don’t want them. We are going to have these pilots,” then that would be a very significant step forward. We have a goal we’d like to achieve, which is to bring our health care costs under control in a sensible way. That’s a goal that we don’t know how to achieve yet.

DR. GAWANDE: What about the argument, though, that we do know how, single payer? If we had a single-payer system, this would control our costs.

DR. ROSENTHAL: I mean, I think if you — if you just look at Medicare today and all you did was expand it to the rest ofthecitizenry,then we’d still befacing thesameproblems that we’refacing now.So I think,again,you need a — you need a shift in social decision making around health care. And I think there’s been some conversation about creating an entity that would be somewhat politically insulated that could make and really implement decisions about reform — an entity with the legitimacy to guide the country towards making more reasonable tradeoffs in terms of--in terms of how much and--and what we want to spend our health care dollars on.

DR. FISHER: There are more optimistic visions of what a single payer might do, become an aggressive, you know, supporter of reorganized and improved care. That’s a different vision of what a single payer might be like, one that I could be attracted by.

Consumer-Based Approaches

DR. GAWANDE: The other point of view is that we should really be heading in the direction of creating medical savings accounts where people have high-deductible health care coverage, and they have some skin in the game as--as the economists like to say.

DR. ROSENTHAL: Well, first and foremost, we have lots of evidence that when people pay out of pocket, they don’t make terrific decisions about what to--what to seek and what not to seek. And second of all, because of the nature of insurance, we need to protect people against catastrophic risks, against high costs. This cost sharing would be limited to theend ofthedistribution ofhealth carespending that matters least.So what is driving high and growing health care spending in theU.S.is in thetail of the distribution,very high-cost interventions and very sick people.And cost sharing is totally inappropriate there.

DR. GRUBER: There’s no one who thinks seriously about this that thinks that a consumer-based approach can control costs in afundamental way.I mean,ultimately,thesupply sideis whereit has to happen.Physicians make the decisions.

Hospitals make the decisions. Consumers can’t shop from the back of an ambulance of where to get treatment for their heart attack.

That said, I think it’s very important to recognize, to learn from the lesson of the managed care backlash. I think the fundamental lesson there is people didn’t see the savings. We had 3 years where health care costs grew by--employersponsored premiums grew by 2% or less a year, which is amazing, below inflation for 3 years in the late ‘90s. But people don’t know that. And unless you give people a financial stake in what’s happening, there’s going to be a backlash against accountable care organizations, just like there was against managed care.

Comparative-Effectiveness Research

DR. GAWANDE: There are a number of provisions that would--that would come into--as a part of health reform and make a difference in care. And you mentioned one early on, comparative effectiveness. Exactly how does someone doing research in Washington on whether one statin or another statin works, and having a result 5 years from now, how does that translate into savings? Or am I misunderstanding what comparative effectiveness really is?

DR. ROSENTHAL: I do think in general, we have a grave lack of head-to-head evidence on the effectiveness of clinical interventions. And without that information, commercial payers in particular, but also Medicare really lacks the ability to try to impose rules that might improve the value of health care spending.

DR. FISHER: As a clinician, it would be wonderful for us to understand better what the real risks and benefits of these treatments are so that we can help our patients make wiser choices. And that’s the fundamental issue. You know, lung reduction surgery for chronic obstructive pulmonary disease, if it doesn’t work, gosh, we really shouldn’t be doing it.

So the other thing that’s missing from the comparative effectiveness discussion is that we really need to be understanding the effectiveness of different delivery systems and different approaches to delivery. Because that’s where the real opportunities for both improving care and reducing spending are.

DR. GRUBER: This is actually almost certainly a no-brainer. It’s just impossible to argue that more information here wouldn’t be good. And I think the notion that, gee, somehow making the information available will turn the government into Big Brother is just crazy within the context of our political system. Right now we are so far away from Big Brother, we are so hands-off, we do so little to really talk about what’s effective, that we can only move in the right direction at this point.

DR. GAWANDE: I’m suspicious we won’t have enough information in the next 5 or 10 years to actually make a significant dent in the system. We will always have to be making decisions in the gray zone, even with comparative effectiveness. I mean, can we claim billions and billions of dollars from the research that will come out of this?

DR. FISHER: I think it depends on--I agree with you. Judgment is essential. This information, especially Treatment A versus Treatment B, is not going to dramatically deflect the growth of health care spending.

DR. GAWANDE: Especially when it shows us that the 10-times-more-expensive Treatment A was better.

DR. FISHER: — was better, that would probably, could increase costs.

DR. GRUBER: Maybe you do learn that the 10-times-more-expensive Treatment A is better. Great. Then do Treatment A, as long as the public understands its costs, and we understand its effectiveness. Then super, then let’s do that. The problem is, neither’s true today. Both those need to be addressed. And it’s never going to take out the huge share of decisions that are gray zone. But look — even a tiny, tiny effect on the growth rate is billions and billions of dollars over time.

DR. FISHER: Weseehugedifferences in growth rates across communities.So,you know,you haveSan Francisco,San Diego, central Pennsylvania, many other communities around the country, Tallahassee, Richmond, Virginia, where cost growth has been at least a percentage point below the national average. And no one in those communities is aware of rationing. None of the physicians in those communities would say, “We aren’t providing the beneficial treatments.” So the kinds of deflections that we need to achieve trillions of dollars of savings are relatively modest. And they’re mostly going to come, I think, from reorganizing care delivery, not from eliminating beneficial and wanted care.

The Need for Reform

DR. GAWANDE: What do we need to see coming out this year and what might happen if we don’t?

DR. GRUBER: I really think what we need to see coming out of this year is coverage. I think that even if this bill fails, I think cost control’s a longer-run battle of which this is just a very small part. The critical part is about covering the uninsured Americans. It’s our moral obligation to do so.

DR. ROSENTHAL: I think passing coverage may be critical in part because it’s an opportunity to be giving with one hand and asking with the other. And so giving to the pharmaceutical industry, giving to the insurance industry, and asking for reform, for changes in the way these private entities, which have such an important role in our health care system, do business. And I think without having that authority, it’s going to be hard for the federal government to--to begin us down the road of cost control. So I think it’s a political balancing act, but I think that coverage creates an opportunity.

DR. FISHER: Well, I think it would be a tragedy to miss this opportunity to expand coverage, in part because it helps fix so many of the problems that Jon and Meredith have identified with the health insurance system. I think the cost issues, I agree, are a longer-term issue. But gosh, it’d be too bad to miss this opportunity to get our children covered.

DR. GAWANDE: Well, thank you for that important sum-up, bringing back how the coverage fits together with the costs. This is an important moment for the country, a vital debate. And costs have been in the center of it, in part because it is the question of whetherwecan afford that coveragefor everybody.So thank you.And thank you all from the New England Journal of Medicine.

Introducing the Junior Senator From Massachusetts

Massachusetts Governor Patrick today named Boston attorney Paul Kirk, 71, the former chairman of the DNC to take over Kennedy's seat in the Senate. The Massachusetts legislature changed the law to give the power of filling a Senate vacancy to the governor. This is a power the governor once had, but the legislature removed it in 2004, when the Democrats did not want the Republican governor Mitt Romney to fill a potential Senate seat in case John Kerry was elected president. They have now changed the law back to allow this appointment (I imagine if Massachusetts ever elects another Republican governor, a Democrat legislature would change the law again).

What may have led to Kirk's appointment was some pressure on his behalf by Kennedy's widow Vicki and two sons, Edward Jr. and Rep. Patrick Kennedy. His ties to Kennedy go back to 1969, when he started working for the senator on Capitol Hill. He became chairman of the DNC in 1985. He then co-chaired the Commission on Presidential Debates with former RNC chair Frank Fahrenkopf. Kirk is now chairman of the JFK Library in Boston.

Kirk has also been named as the executor of Kennedy's will. In a four-page will filed in Barnstable Probate Court on today, Kennedy named his longtime friend Paul Kirk as executor. The will was signed by Kennedy on Aug. 25, 2006 — exactly three years before he died.

Kirk said today he would not seek election to the seat. He will be sworn into office tomorrow. In a statement, President Obama called Kirk a "distinguished leader, whose long collaboration with Senator Kennedy makes him an excellent, interim choice to carry on his work until the voters make their choice in January."

Kirk is a registered lobbyist. Because of his new position he would be banned from lobbying activities for two years after his term ends. He has lobbied for the pharmaceutical industry and has deep ties to special interests, having sat on a board that oversees a health-insurance provider.

"Obviously, this is a conflict of interest and raises serious concerns," Craig Holman of the non-partisan watchdog Public Citizen, said of the potential appointment of Paul G. Kirk Jr. to Sen. Edward M. Kennedy’s seat. "It is distressing. There were many qualified people."

Kirk, 71, retired and living on Cape Cod, raked in $250,942 in salary and stock options as a board member for Hartford Financial Services, the umbrella for The Hartford, which sells health coverage to retirees. “Why in the world would they choose someone who has close ties to the insurance industry?” asked Wendell Potter, a former health insurance exec-turned-whistleblower. He noted the health insurance industry has much to gain in the current reform package, especially if coverage is mandated without competition from a government insurance option, as a bill now before the Senate finance committee proposes.

It will be very interesting to see how this appointment affects the health insurance reform debate that is happening in Congress. Stay tuned...

Innovation and Sustainable Growth

President Discusses Innovation and Sustainable Growth
at Hudson Valley Community College

SEPTEMBER 21, 2009

President Obama outlined a new report titled, "A Strategy for American Innovation: Driving Towards Sustainable Growth and Quality Jobs" in a speech at Hudson Valley Community College in Troy, N.Y. The President said his strategy aims to foster new jobs and businesses "by laying the groundwork and the ground rules" for unleashing innovation in the United States. The three-pronged plan entails investing in building blocks of innovation, policies to spur and promote entrepreneurship, and federal backing of emerging markets such as clean energy, smart grid, and healthcare technology that are deemed national priorities. "As we emerge from this current economic crisis, our great challenge will be to ensure that we don’t just drift into the future," he said.

The strategy's three prongs are:

Invest in the Building Blocks of American Innovation - We must first ensure that our economy is given all the necessary tools for successful innovation, from investments in research and development to the human, physical, and technological capital needed to perform that research and transfer those innovations.

Promote Competitive Markets that Spur Productive Entrepreneurship - It is imperative to create a national environment ripe for entrepreneurship and risk taking that allows U.S. companies to be internationally competitive in a global exchange of ideas and innovation. Through competitive markets, innovations diffuse and scale appropriately across industries and globally.

Catalyze Breakthroughs for National Priorities - There are certain sectors of exceptional national importance where the market is unlikely to produce the desirable outcomes on its own. These include developing alternative energy sources, reducing costs and improving lives with health IT, and manufacturing advanced vehicles. In these industries where markets may fail on their own, government can be part of the solution.

Transcript of President's Remarks:

Now, you may ask, why are we here at Hudson Valley? We're here because this is a place where anyone with the desire to take their career to a new level or start a new career altogether has the opportunity to pursue that dream. This is a place where people of all ages and backgrounds -- even in the face of obstacles, even in the face of very difficult personal challenges -- can take a chance on a brighter future for themselves and for their family.

I was just talking to the Mayor of Troy, who was -- we were in a room, and he was saying how he had studied calculus in the room where we were taking a picture. And I had to inform him I didn’t take calculus. (Laughter.) But he was testimony, he was an example of what you can do because of an institution like this.

And I know that here in Troy, you want and need that chance after so many years of hard times. Communities like this one were once the heart of America’s manufacturing strength. But over the last few decades, you’ve borne the brunt of a changing economy which has seen many manufacturing plants close in the face of global competition. So while all of America has been gripped by the current economic crisis, folks in Troy and upstate New York have been dealing with what amounts to almost a permanent recession for years: an economic downturn that's driven more and more young people from their hometowns.

I also know that while a lot of people have come here promising better news, that news has been hard to come by, despite the determined efforts of leaders who are here today and many who are not. Part of the reason is that while people in this city work hard to meet their responsibilities, I have to confess that some in Washington haven’t always lived up to theirs.

For too long, as old divisions and special interests reigned, Washington has shown neither the inclination, nor the ability, to tackle our toughest challenges. Meanwhile, businesses were saddled with ever-rising health care costs; the economy was weakened by ever-growing dependence on foreign oil; our investment in cutting-edge research declined; our schools fell further short; growth focused on short-term gains and fueled by debt and reckless risk, which led to a cycle of precipitous booms and painful busts.

And meanwhile, too many in Washington stood by and let it happen. Now, after so many years of failing to act, there are those who now suggest that there's really not much the government can or should do to make a difference; that what we’ve seen in places like Troy is inevitable; that somehow, the parts of our country that helped us lead in the last century don’t have what it takes to help us lead in this one. And I'm here to tell you that that is just flat out wrong. What we have here in this community is talented people, entrepreneurs, world-class learning institutions. (Applause.) The ingredients are right here for growth and success and a better future.

These young people are testimony to it. You are proving that right here in the Hudson Valley. Students here are training full time while working part time at GE Energy in Schenectady, becoming a new generation of American leaders in a new generation of American manufacturing. IBM is partnered with the University at Albany; their partnership in nanotechnology is helping students train in the industries in which America has the potential to lead. Rensselaer is partnering not only with this institution but with businesses throughout the Tech Valley. And early next year, Hudson Valley Community College’s state-of-the-art TEC-SMART training facility is set to open side-by-side with Global Foundry’s coming state-of-the-art semiconductor plant. (Applause.)

So we know that Upstate New York can succeed, just like we know that there are pockets in the Midwest that used to be hubs of manufacturing -- they're now retooling; they're reinventing themselves. We know that can happen. We know that in the global economy -- where there's no room for error and there's certainly no room for wasted potential -- America needs you to succeed.

So as we emerge from this current economic crisis, our great challenge will be to ensure that we don't just drift into the future, accepting less for our children, accepting less for America. We have to choose instead what past generations have done: to shape a brighter future through hard work and innovation. That's how we'll not only recover, but that's how we'll also build stronger than before: strong enough to compete in the global economy; strong enough to avoid the cycles of boom and bust that have wreaked so much havoc; strong enough to create and support the jobs of the future in the industries of the future.

So today, my administration is releasing our strategy to foster new jobs, new businesses, and new industries by laying the groundwork and the ground rules to best tap our innovative potential. This work began with the recovery plan that we passed several months ago, which devoted well over $100 billion to innovation, from high-tech classrooms to health information technology, from more efficient homes to more fuel-efficient cars, from building a smart electricity grid to laying down high-speed rail.

But our efforts don't end there. For this strategy is about far more than just recovery -- it's about sustained growth and widely shared prosperity. And it's rooted in a simple idea: that if government does its modest part, there's no stopping the most powerful and generative economic force that the world has ever known, and that is the American people.

Our strategy begin where innovation so often does: in the classroom and in the laboratory -- and in the networks that connect them to the broader economy. These are the building blocks of innovation: education, infrastructure, research.

We know that the nations that out-educate us today will out-compete us tomorrow. The ability of new industries to thrive depends on workers with the knowledge and the know-how to contribute in those fields. Unfortunately, today, our primary and secondary schools continue to trail many of our competitors, especially in the key areas of math and science. Hundreds of thousands of high school graduates who are prepared for college don't go to four-year or two-year schools because it's just too expensive; they run out of money. And roughly 40 percent of students who start college don't complete college. So all along that education pipeline, too many people -- too many of our young talented people -- are slipping through the cracks. It's not only heartbreaking for those students; it's a loss for our economy and our country.

I know that for a long time politicians have spoken of training -- of job training as a silver bullet, of college as a cure-all. It's not. I don't want to pretend that it is. We know that. But we also know that in the coming years, jobs requiring at least an associate's degree are projected to grow twice as fast as jobs requiring no college experience. Think about that -- twice as fast. We will not fill those jobs, or keep those jobs here in America, without graduating more students, including millions more students from community colleges.

That's why I've asked Dr. Biden to travel the country promoting the opportunities that community colleges offer. That's why I'm grateful that Senator Chuck Schumer, who couldn't be here today, has shown tremendous leadership on this issue. And that's why I've set this ambitious goal: By 2020, America will once again have the highest proportion of college graduates in the world. (Applause.) We used to be number one. We should be number one again. (Applause.)

Now, to achieve this goal, we're going to need motivated students, motivated families, motivated communities, local leaders who are doing their part, state leaders who are doing their part. But the federal government has its part to do, as well.

So to reach this goal we've increased Pell Grants and created a simplified $2,500 tax credit for college tuition. We've made student aid applications less complicated and ensured that that aid is not based on the income of a job that you've lost. I hear too much from folks who say, I can't get any student aid because they're still looking at my income taxes when I had a job as opposed to my situation right now.

We've also passed a new G.I. Bill of Rights to help soldiers coming home from Iraq and Afghanistan begin a new life in a new economy. (Applause.) And the recovery plan has helped close state budget shortfalls -- I think the Governor will testify -- because those shortfalls put enormous pressure on public universities and community colleges, while also we've made historic investments in elementary and secondary schools. So we're helping states get through some very tough times without having to drastically cut back on the critical education infrastructure that's going to be so important.

Now, finally, through the American Graduation Initiative that I’ve proposed, we're going to reform and strengthen community colleges to help an additional 5 million Americans earn degrees and certificates in the next decade -- (applause) -- because a new generation of innovations depends on a new generation of innovators.

And just last week, the House of Representatives passed a bill that will go a long way to reform the student loan system so that college is more affordable for more people. Right now, the federal government provides a subsidy to banks to get them to lend money to students. The thing is the federal government also guarantees the loans in case the students don’t repay. So we're subsidizing banks to take on the risk of giving loans to students, even though taxpayers are absorbing the risk anyway. That doesn't make much sense. It costs us more than $80 billion. If we just cut out the middle-man -- the banks -- and lent directly to the students, the federal government would save that money and we could use it for what's actually important -- helping students afford and succeed in college. (Applause.)

That's what the bill -- I want to emphasize this just because every once in a while you may not know what your members of Congress are doing for you. These three guys right here are standing up for young people. We need senators to do the same. (Applause.) The bill that they voted on -- the bill that I proposed -- here's what it does: It takes the $80 billion the banks currently get and uses it to make Pell Grants larger. It uses those funds to focus on innovative efforts to help students not only go to college but to graduate. And just as important, these savings will allow us to make the largest investment ever in the most underappreciated asset in our education system, and that is community colleges like Hudson Valley, which are so essential for the future of our young people. (Applause.) So we hope to improve on this bill in the Senate and go even further on behalf of students.

Ending this unwarranted subsidy for the big banks is a no-brainer for folks everywhere -- except some folks in Washington. In fact, they're already seeing -- we're already seeing special interests rallying to save this giveaway. And the large banks -- many who have benefited from taxpayer bailouts during the financial crisis -- are lobbying to keep this easy money flowing. That's exactly the kind of special-interest effort that has succeeded before, and we can't allow it to succeed this time. This is exactly the kind of waste that leaves people wary of government, leaves our country straddled with trillions of dollars of deficits and debt with little to show for it.

And that's why I went to Washington, to change that kind of stuff. (Applause.) And I look forward to winning this fight in the Senate, just as we won it in the House, and signing this bill into law. (Applause.)

Now, another key to strengthening education, entrepreneurship, and innovation in communities like Troy is to harness the full power of the Internet, and that means faster and more widely available broadband, as well as rules to ensure that we preserve the fairness and openness that led to the flourishing of the Internet in the first place. So today, FCC Chairman Julius Genachowski is announcing a set of principles to preserve an open Internet in which all Americans can participate and benefit. And I'm pleased that he's taking that step. (Applause.) That's an important role that we can play, laying the ground rules to spur innovation. That's the role of government -- to provide investment that spurs innovation and also to set up common-sense ground rules to ensure that there's a level playing field for all comers who seek to contribute their innovations.

And we have to think about the networks we need today, but also the networks we need tomorrow. That's why I've proposed grants through the National Science Foundation and through the Defense Advanced Research Projects Agency -- or DARPA -- which helped develop the Internet, to explore the next communications breakthroughs, whatever they may be. That's why I've appointed the first-ever chief technology officer, charged with looking at ways technology can spur innovations that help government do a better and more efficient job.

We also have to strengthen our commitment to research, including basic research, which has been badly neglected for decades. (Applause.) That's always been one of the secrets of America's success -- putting more and more money into research to create the next great inventions, the great technologies that will then spur further economic growth.

The fact is, though, basic research doesn't always pay off immediately. It may not pay off for years. When it does, the rewards are often broadly shared, enjoyed by those who bore it -- costs but also by those who didn't pay a dime for that basic research.

That's why the private sector generally under-invests in basic science. That's why the public sector must invest instead. While the risks may be large, so are the rewards for our economy and our society. I mean, understand it was basic research in the photoelectric effect that would one day lead to solar panels. It was basic research in physics that would eventually produce the CAT scan. The calculations of today's GPS satellites, they're based on basic research -- equations Einstein put on paper more than a century ago. Nobody knew they'd lead to GPS, but they understood that as we advance our knowledge, that is what is going to help advance our societies.

When we fail to invest in research, we fail to invest in the future. Yet, since the peak of the space race in the 1960s, our national commitment to research and development has steadily fallen as a share of our national income. That's why I set a goal of putting a full 3 percent of our Gross Domestic Product, our national income, into research and development, surpassing the commitment we made when President Kennedy challenged this nation to send a man to the moon. (Applause.)

Towards this goal, the Recovery Act has helped achieve the largest increase in basic research in history. This month the National Institutes of Health will award more than a billion dollars in research grants through the Recovery Act focused on what we can learn from the mapping of the human genome in order to treat diseases that affect millions of Americans, from cancer to heart disease. I also want to urge Congress to fully fund the Defense Advanced Research Projects Agency, or DARPA, because since its creation it has been the source of cutting-edge breakthroughs from that early Internet to stealth technology.

So as we invest in the building blocks of innovation, from the classroom to the laboratory, it's also essential that we have competitive and vibrant markets that promote innovation, as well. Education and research help foster new ideas, but it takes fair and free markets to turn those ideas into industries.

My budget finally makes the research and experimentation tax credit permanent. This is a tax credit that helps companies afford the often high costs of developing new ideas, new technologies, new products -- which means new jobs. And this tax incentive returns two dollars to the economy for every one dollar we spend. Time and again, I’ve heard from leaders -- from Silicon Valley to the Tech Valley -- about how important it is. I’ve also proposed reducing to zero the capital gains tax for investments in small or startup businesses, because small businesses are innovative businesses; they produce 13 times more patents per employee than large companies do. (Applause.)

Now, these tax incentives will spur entrepreneurship. But there are other important steps to foster markets that value and promote risk-takers and idea-makers who've always been the center of our success. That's why it's essential that we enforce trade laws and work with our trading partners to open up markets abroad; that we reform and strengthen our intellectual property system; that we sustain our advantage as a place that draws and welcomes the brightest minds from all over the world; and that we unlock sources of credit and capital which have been in short supply as a result of the financial crisis.

Now, there are some other fundamental barriers to innovation and economic growth that we're going to have to tackle in order to ensure American leadership, and prosperity continues into the 21st century. For as a nation we face enormous challenges, from ending our dependence on foreign oil to finally producing -- providing all Americans with quality, affordable health care. We've got to attack these challenges to create a climate for innovation. And innovation can then be an important part of how we meet these challenges.

So let me give you an example -- health care costs. They leave our small businesses at a disadvantage when competing with our large businesses, and they leave our large businesses at a disadvantage when competing around the world. We will never know the enormity of the costs of our economy to the countless Americans unable to become entrepreneurs, to start a small business, to follow their dreams, because they’re afraid of losing their health insurance. So to lead in the global economy, we must pass health insurance reform -- (applause) -- that brings down costs and provides more security for people who have insurance, and offers options to people who don't have health insurance. (Applause.) Health insurance reform will be good for business, and especially good for small business -- especially good for small business.

Now, in the meantime, the recovery plan that we passed earlier this year has begun to modernize our health system. So innovation can also help drive down the cost for everybody. We are taking long-overdue steps to computerize America’s health records. And this is going to reduce the waste and errors that cost billions of dollars and thousands of lives -– while protecting patients’ privacy. And it’s important to note, as well, that the records that are held -- each of us having our own medical records in digital form -- holds the potential of offering patients the chance to be more active participants in the prevention and treatment of illness. And health IT, health information technology, if implemented effectively, has the potential to unlock so many unanticipated benefits because it provides patterns of data that we don't yet collect but could reveal discoveries that we can't predict in terms of how to cure illnesses.

The same thing is true when it comes to energy. No area will need innovation more than in the development of new ways to produce and use and save energy. And you understand that here at Hudson Valley. I firmly believe that the nation that leads the clean energy economy will be the nation that leads the global economy. (Applause.)

And that's why we're doubling our capacity to generate renewable energy, building a stronger and smarter electric grid. And I was meeting some young people who are being trained right here so that they're going to be working on creating this smart grid.

We're investing in technologies to power a new generation of clean-energy vehicles. We've helped reach an agreement to raise fuel economy standards. And for the first time in history, we passed a bill to create a system of clean energy incentives which will help make renewable energy a profitable kind of energy in America, while helping to end our dependence on oil and protect our planet for future generations. This bill has passed the House. We're now working to pass legislation through the Senate. It is time to get this done. (Applause.) We have to lead on energy. We can't be lagging behind. (Applause.)

So that's an overview of our strategy. All these pieces fit together. It's a strategy that's essential for our recovery today, but more importantly, for our prosperity tomorrow. It's a strategy rooted in a deep and abiding faith in the ability of this country to rise to any challenge -- because that's our history. We're a people with a seemingly limitless supply of ingenuity and daring and talent. And at its best, our government has harnessed those qualities without getting in the way.

That's what led to the building of the Erie Canal, which then helped put cities like Troy on the map; that linked east and west and allowed commerce and competition to flow freely between. That's what led a pretty good inventor and a pretty good businessman named Thomas Edison to come to Schenectady and open what is today a thriving mom-and-pop operation known as General Electric. (Applause.)

A former senator from New York, Robert Kennedy, once told us, "The future is not a gift. It is an achievement." It was not an accident, not a gift, that America led the 20th century. It was the result of hard work and discipline and sacrifice, and ambition that served a common purpose. So it must be in the 21st century. Future success is no guarantee. As Americans we always have to remember that our leadership is not an inheritance; it is a responsibility.

So from biotechnology to nanotechnology, from the development of new forms of energy to research into treatments of ancient diseases, there is so much potential to change our world and improve our lives -- while creating countless jobs all across America. The question is if we are ready to embrace that potential, if we're ready to lead the way once more.

I think we're ready. I've seen it all across America. This generation, generation of young people sitting here, they have an unparalleled opportunity. We are called upon to help them seize that opportunity. That's what you're doing here at Hudson Valley Community College. That's what I intend to make sure that we do in Washington. That's what we will do as a nation.

Thank you very much, everybody. God bless you. God bless the United States of America. Thank you.