For all its flaws, the American health care system does not generally allow people to die untreated in the streets due to an inability to pay.
Life-saving care is not an ordinary commodity where if you don’t have the cash you don’t get the service. But nothing about the rest of the system follows logically from that. If you have a heart attack and end up in the hospital, they will try to save your life. But as my podcast guest Amy Finkelstein explains, “if you're having cardiovascular disease, they have to stabilize you, but they don't treat the underlying condition. They just send you right back out.” But if you have untreated cardiovascular disease, you’re likely to end up back in the hospital again. It would be much more cost-effective and humane to give people useful medical care before they are on the verge of death rather than at the last possible minute.
That’s the intuition behind the idea that health care should be a right, not a privilege. At the same time, there are a lot of health care services that a person might want that they don’t necessarily need. Covering everything under that heading would be prohibitively expensive, but trying to deny people access to the care they want in the name of efficiency raises the specter of rationing and death panels.
In her new book with Liran Einav, “We’ve Got You Covered: Rebooting American Health Care,” Finkelstein proposes throwing out the current American patchwork quilt of coverage in favor of a more deliberate effort to pair fundamental moral commitments with economic realities. They call for:
A universal basic insurance system, covering both catastrophic and routine care but at a bare bones/no frills level of service.
A global budget, set by Congress, to determine how much money the basic plan has to spend on meeting the public’s basic needs, paired with expert panels to decide which services to cover.
An additive system of private top-up insurance that people could (and they anticipate mostly would) buy into to secure access to shorter wait times and more creature comforts.
In our interview, Finkelstein lays out the hows and whys of that system while also making the case that even though it’s politically inconvenient, we really should aim for fundamental transformation rather than one more tweak or patch. It’s a fascinating perspective that contrasts with the normal political alignment in which, if you favor dramatic transformation, that’s assumed to mean the full Bernie-style Medicare for All. If you’re more moderate, that’s assumed to mean incrementalism and tweaks. I frankly struggle to come up with a scenario in which anything resembling the Finkelstein/Einav program comes to fruition. But it also strikes me as an extremely correct diagnosis of what ails a health care system that continues to be badly flawed, and a compelling portrait of a better approach.
1×
0:00
-1:03:21
Paid members can read the full transcript of our conversation below and are invited to subscribe to the Slow Boring Podcast feed to get our audio content automatically in their podcast player.
Matt: Hello and welcome to another episode of the Slow Boring podcast. I'm your host, Matt Yglesias. My guest today is Amy Finkelstein, a professor of economics at MIT, and co-author, alongside Liran Einav, of a new book titled “We've Got You Covered: Rebooting American Health Care.” This title does what a book title should do and really explains what the book is about — how we should rethink healthcare policy in a really fundamental way, which is an interesting exercise. Welcome to the show, Amy.
Amy: Thanks so much for having me, Matt.
Matt: Let's start with the basic premise of the book. I've known your work for years and it's based on many empirical studies of individual questions in healthcare policy. Given the many facets of healthcare, this book seems like a significant shift. If I were to guess the kind of book you'd write, it would be one like, “here's 27 interesting things about health policy.”
Amy: I still hope to write that book, but you're completely right.
Matt: What made you decide to instead write a book with the tear down and start again concept?
Amy: So is your question why the answer, or why did we come in with the question of how to reform healthcare, or why we arrive at the teardown as the answer?
Matt: Why do it this way rather than “here are some tweaks?”
Amy: Once you start thinking about U.S. health insurance policy, it quickly becomes enormously complicated. It's an alphabet soup of different programs, each with their own rules. When I teach this to my students, we have to review all these institutions. The natural instinct, especially considering our work, has been very narrowly focused on various problems. For example, the Affordable Care Act extended coverage to many people, but there are still 30 million Americans without insurance. What's the best way to get coverage for those people? Which program to expand subsidies, mandates, yada, yada, yada? It all seems immensely complicated, confusing, and difficult.
What changed our minds about the whole approach was stepping back and realizing that although the policy attention and the research and academic attention tends to focus on the people who are uninsured — those 30 million Americans who lack health insurance at any given moment — what we've been forgetting is the fact that so many more Americans who are currently insured risk becoming uninsured. One fact we found and we discuss in the book is that although something like 10% of Americans under 65 will be uninsured in any given month, 1 in 4 Americans under 65 will have some substantial period of time without insurance over a two year period.
There are two important implications. First, the whole purpose of insurance is to provide security and certainty in an insecure and uncertain world. The idea that insurance coverage itself is highly uncertain flies in the face of reason. Second, and this is why we realized we couldn't just patch our way to a solution, is that the fundamental problem with the current system is its complexity. This complexity makes it punch below its weight so that many uninsured people are actually eligible for free or heavily discounted insurance. Something like 6 in 10 of the uninsured at any moment could be insured. They just don't realize which program they're eligible for or have trouble fulfilling the documentation requirements, or they got coverage but didn't realize they had to re-certify their eligibility. That was the first key moment we realized we can't just patch our way to a solution. Whenever you have patches, you'll have gaps at the seams, and that's what we discuss a lot in the book.
Matt: We're living a version of this right now, where the pandemic halted the unenrolling people from Medicaid. As we return to the normal situation, some who are losing Medicaid are indeed no longer eligible, but there's just a lot of people who don't know what they're supposed to do.
Amy: 100%. Every time I read one of these articles about the end of the public health insurance emergency and people losing coverage, they’re written almost as if this is a new crisis. Whereas unfortunately, it reads to me like things are back to normal because living with the constant danger of losing coverage is what passes for normal in U.S. health insurance policy. Some may still be eligible but not realize they need to fill out the forms, or they may lose eligibility because they got a bit older or richer, or perversely, we have so many disease-specific programs. You get health insurance coverage if you have breast cancer, HIV, or end-stage renal disease. And then if the health insurance gives you access to medical care that treats and cures you, you lose that coverage. That's another reason you can lose your coverage.
Matt: Healthcare policy was a significant subject of debate around 2008, 2009, 2010. There was a big legislative drive. There's natural cycles of political attention and different things, and I understand why elected officials didn't want to do it again after the Affordable Care Act passed. But I kind of hoped as a as a health policy enthusiast that the pandemic itself would get people focused again on these questions: how does the healthcare system work? How do people get health insurance? But instead what we got was patches on patches where they declared an emergency and then, because I think people in the Biden administration think it's sad for people to lose Medicaid coverage, they just tried to extend the emergency for as long as it was politically viable to. But they they couldn't do it forever.
We never really had a conversation about who's going to pay for treatments and vaccines, which kept coming back again. We handled it 100% with spit and chewing gum and duct tape. You document in the book that just an incredible amount of the evolution of the system has that quality; someone was fired up about end-stage renal disease and thought there ought to be a law. Then you got a hyper-specific solution and a system that doesn't make sense.
Amy: Exactly. One thing that's indisputable about the U.S. health insurance system is that it was never deliberately planned, let alone deliberately constructed. It was put together, as you put it, with sticks, glue, and duct tape. I see it as some kind of Rube Goldberg machine where salient problems emerge or become politically feasible to deal with, and we put on a patch. Now, the elderly have coverage, low-income people have coverage, low-income kids have coverage, people with end-stage renal disease, the disabled, veterans — patch after patch.
If you’d asked me five years ago, I would have said we need a few more of those patches because we’re making progress every day — just like Verizon. But we still have 30 million uninsured and the more we looked at it, the more we realized that wouldn't work. There are two reasons. One — as we've touched on — is that wherever you have patches, there'll be gaps at the seams.
But the other thing is, we've talked about the problems of being uninsured and we've talked about the problems of being insured but losing your insurance. The third problem is that for most people, even if they are lucky enough to be insured and retain their insurance, when they get sick the insurance they have is highly inadequate. Health insurance is a bit of a misnomer, it's not actually to ensure your health. What is the purpose of insurance or what it's designed to do is to protect you financially in the event of major medical expenses, so that you won't have to either forego getting medical care because you can't afford it, or get that care but then not be able to pay your rent or your utilities or be plunged into medical debt.
It is shocking how badly that works. Before the pandemic, there was an estimate that came out that there was $140 billion in unpaid medical bills held by collection agencies. To put that in perspective, that's more than the amount held by collection agencies for all other consumer debt from non-medical sources combined and here's the kicker — three-fifths of that medical debt was incurred by households when they had insurance.
Matt: Is that due to co-pays and deductibles, or ineligibility? I had a lab test that I thought was covered, and I was like, this is going to be fine. They’re going to bill my insurance, but then the insurance didn't want to pay it, and next thing I know, somebody's coming after me.
Amy: Yes, a lot of it comes from the trend towards high deductible health insurance plans and high coinsurance. Not to get too wonky, but especially if you go out of network and you don't realize you went to a provider that your insurer doesn't cover. What's even more disturbing is that in Medicare — the health insurance program for the elderly and the disabled — it's written in that 20% of any doctor bills will not be paid by Medicare, and that's uncapped. That exposes you to potentially limitless medical expenses, which is not how insurance should be. The whole point of insurance is to prevent those really catastrophic expenses from coming home to roost with you.
Matt: A lot of people, especially economists who aren't health economic specialists, get hung up on the point that health insurance in the United States doesn't have the structure of a normal insurance product. For example, with homeowner's insurance or car insurance, there's no network. There's an event threshold. If a bad thing happens, then you get money.
You could have a different threshold, your monthly payment might be different, but those are the variables that you adjust. That's insurance. It's risk mitigation. Every month, we give money to a car insurance company and in exchange, we get nothing — literally nothing. But if something really bad were to happen, then the insurance comes in. Our health insurance is not like that at all. We have all kinds of routine issues, pediatrician visits, vaccinations, where the insurance kicks in a little bit, and so we're glad we have health insurance. We're happy. But if catastrophe strikes, I don't know, I hope it will work out, but I've read enough to know that a lot of the time, people find out that they're not really having their downside risk eliminated. As you say, in Medicare, it's written right in that if you rack up, say, $10 million in medical bills, you're going to be out two million bucks.
Amy: I completely agree with you. If we’d had this conversation several years ago before I started on this book, I’d have just said yes, I completely agree and stopped there. Now, I’ll completely agree, but I think there is one crucial difference that I had not previously appreciated between car insurance and health insurance that I think is the motivating insight behind our proposal. If your car breaks down and you don't have insurance to cover it, that's on you. Nobody is going to step in and fix your car or lend you money for bus fare until you can get your car fixed. However, that is fundamentally not how we treat major health issues in the United States.
We've never treated them that way, and we go back through the history of our republic in the book and talk about how there's a clear social contract that when people become sufficiently ill and need medical care that they are unable to afford, the government doesn't stand idly by like they would if your car broke down and you couldn't afford to repair it. We step in through a very complicated, mind-numbing number of sticks and glue — a series of programs and patches — both to provide formal insurance in particular cases if you got a particular disease, or you're a kid, or you get too poor, and sometimes through informal programs. They're informal in the sense of that the uninsured don't have a little pamphlet that tells them what those programs are, but not informal in the sense of ad hoc — they're publicly regulated, publicly funded programs to provide medical care to people without insurance if they are sufficiently ill and cannot afford it and once.
And and you may say, how can you possibly say we have that social contract? We're the only high income country without universal coverage. We see what's happening all the time, but that represents our failure to adequately fulfill our contract, not its lack of existence. If you look at the history of all the policies we have enacted, and you go back even to the origins of hospitals in the nineteenth century when medical care couldn't really do anything— but as the historian Charles Rosenberg says, people could not be left to die on the streets — there's a clear impulse. We talk in the book about some of the philosophical origins of it. Whatever you think of the origins and whether you agree, our contract is inescapable. If you accept that, then it becomes clear that where we need to have universal coverage because the patches don't work and when they don't work, we just try more patches and more inefficient things. You could say, “well, we may or may not need universal car insurance, but without it, people break down by the side of the road and life goes on for the rest of us.” But that's not what happens with healthcare.
Matt: Yeah, I remember hearing a Cato Institute health policy guy years ago talking about LASIK and how it shows that Kenneth Arrow is wrong and you can have completely marketized provision of health services. That was what I thought was the difference. We’re not going to have a genuinely market-based healthcare system. You would have to be willing to say upfront, not just implicitly or through inertia or bureaucracy, “here's this guy. He’s got a problem. We could totally save his life, but we're just not going to because he doesn’t have the money.”
Amy: Right. We're willing to say, “here's a guy, he needs glasses. He can't afford Lasik surgery. That's his problem.”
Matt: We do that with lots of things. If you can't afford a car, you take the bus. If you can't afford a couch, you sit on a milk crate. Health, though, is challenging because as a progressive would say, we don't actually have a system that makes sense everybody gets the health that they need, but we sort of do, right? At least we definitely don't overtly allow hospitals to say, “sorry, we're not taking you here.” You instead get all of these patches and rules and evasion strategies. I read about a gunshot victim who was sent to the nearest appropriate emergency room, which happened to be a fairly fancy hospital, and then a question arose of when they could send this patient to a public hospital — at what point was this patient stable enough that they were going to be allowed to go dump them on some public hospital.
Amy: That’s totally insane, but we talk about similar examples in the book. That's an extreme version, but it makes the point even without the so-called “dumping.” Let's be clear, the law that says a hospital must stabilize someone who walks in the door with an emergency. This is an example of one of those well-intentioned but inadequate patches. They have to stabilize them, but they don't have to treat them. That means if you're having cardiovascular disease, they have to stabilize you, but they don't treat the underlying condition. They just send you right back out. That doesn't sound as bad as dumping on another hospital, but from the perspective of what we're trying to do, it's just as bad. They have to stabilize you, they don't have to treat you, and they certainly don't have to stabilize you for free. They can bill you after the fact.
Our moral reflexes kick in at the moment, and then we kind of forget about it. There's a huge analogy we talk about in the book to natural disasters. We all feel for the hurricane victims when their houses are destroyed, but if they return to a state of chronic poverty, that fades from the national consciousness. That makes no sense. I also can't help mentioning, since you mentioned the Cato Institute, that one of the things that surprised us in working on this book is that if you'd asked me, I would've thought that this blueprint for universal coverage was part of the liberal agenda. But if you actually look — not only historically, at the intellectual history, and even in modern times — many conservatives, even libertarians support the kind of basic universal coverage that we are proposing. They support it for the same reasons we've been discussing. Mitt Romney talked about this when he instituted universal coverage in Massachusetts. Libertarian thinker Charles Murray has a proposal for universal basic income because he wants to get rid of all government programs. The only exception he makes is healthcare. He’s going to get rid of every single program and replace it with a universal cash income, except of his $13,000 of universal basic income, he's going to take away $3,000 to provide compulsory health insurance.
Matt: I've now gotten twenty minutes into this without asking to describe the proposal. I think it's all by way of introduction to say, if you step back and think about this as an intelligent, inquisitive person, whatever your background political commitments are, I think you eventually get to this point which motivates the teardown. Look, if one of our ethical premises that is so widely shared, that nobody seriously wants to challenge, is that a person facing an acute emergency is entitled to have something done, then we should think logically about what flows from that and create a system that makes sense rather than this "stabilize and then who's to say" kind of system.
It costs real money to treat people in these acute emergencies. Their resources are consumed. It's easy to say, "okay, we should do it morally." But then, what actually follows from that? How can we do something that addresses that ethical concern without incurring huge amounts of waste or whatever else it is that someone who's more conservatively minded might worry about in terms of a government program?
Amy: Exactly. So, you know, you start with the current system isn't working. That's not going to make headlines. That's dog bites. We all know that, right? Although I do think it's important we focus on these problems of insurance insecurity and lack of full coverage because I think that's what tells us that patching won't work and then you say fine — we want to fix it.
But if we want to “fix it,” we have to decide what we're trying to accomplish and that's where exactly what you said, which is the whole second third of our book. It becomes clear that as a society, we are not going to stand idly by and let people not access medical care that they desperately need because they can't afford it. We at least try to do something and it's not just in the emergencies. There's a whole patchwork of programs to pay for care for low income individuals when they're ill even with chronic diseases. But it's not working, so the the key, as you said. And you said I'm sorry we haven't gotten to the proposal and we're 20 minutes in, but I actually am glad, because I don't think a proposal can be evaluated without first understanding what is the problem we're trying to solve and why.
Once you recognize what we've been trying but failing to do, the answer becomes almost embarrassingly simple, and that's where forget all the complication and all the wonky stuff. Fundamentally, we have a social contract to provide essential medical care for people regardless of resources. Let's just do that, automatic basic coverage, emphasis on the basic as well as the automatic, for everyone with the option to buy additional coverage if you have the resources and desire to do so to pay for things that aren't necessarily in the social contract, but that you might want insurance for. That's it. That's the bumper sticker.
Matt: So, conceptually, one of the main problems here is that in America most people have insurance that goes beyond the basics but it means that the basics are provided by that same non-basic insurance, so you have this fragmented system. You’re proposing instead a genuinely universal floor and then you still anticipate that it would be the case that most people have additional stuff, but there is going to be a formal basic system that everyone is in. Rather than saying we're going to try 20 different things to catch the people who fall through the cracks and then hopefully this basic program would have some kind of salience that that the current system doesn't have.
Amy: Everyone would know that they have it — as you put it, a formal floor. But let me be clear, as much as academics love to claim that they've discovered some new brilliant insight, this is literally what every other high-income country does. Often, when lay people just offer simplistic solutions, I want to roll my eyes back. But after all that hard work and careful thought, in this case it turned out that the obvious solution was the right one — that yes, an automatic basic floor for everyone and then the ability to buy more is the right solution.
Just to clarify, you said that most people who are currently insured have coverage that goes beyond the basics. That’s very true in terms of our basic coverage — which is about meeting essential needs and would entail longer wait times than what private insurance or Medicare currently has for non-urgent conditions. It would also impose restrictions or provide less choice regarding any test you want or any doctor you choose, which differs from what Medicare currently offers. You may not get your private or semi-private room in the hospital either. So on the amenities side, it would be less plush. With that in mind, we anticipate that most people who are privately insured or have Medicare would buy supplemental coverage as well.
That being said, there are two important ways in which that very basic coverage would be much better for a person, even one with good private health insurance through their employer. One, there's no risk of losing it if you lose or change your job, want to retire, or, God forbid, get sick and need to leave your job. And two, there's no risk of being stuck with unexpected bills or expenses for the things that we've agreed to cover. So, I don't mean to say that it's better for everyone as if it's a free lunch, but I want to be clear: it's not strictly worse for anyone.
Matt: Alright, let's back up a bit because you mentioned amenities. So, when you go to the hospital, there's different things happening. Some of it is medical, with healthcare professionals providing treatments, but some of it is having a bed and a room. And this room could be private or shared. It might have air conditioning or not. Before streaming video, there was cable. There's a lot of things going on there and in many countries they have strong distinctions around this, which is that the government provided plan will definitely cover the medical treatment part of the hospital, but you either pay out of pocket or have some kind of supplement to have the hotel stay aspect of the hospital.
Amy: Exactly, exactly. We talk about this in the book. We say that “health care” is actually two words, even though it's often mistakenly written as one. There's “health,” which refers to essential medical services, and there's “care.” Our idea is that basic coverage needs to get it right on the “health” part. The “care” part? Not so much. And that's exactly what, as you said, many other countries do. Some examples we give in the book are Singapore and Australia. My favorite example is from Singapore, which has a notoriously hot and humid climate. The basic coverage gets you a hospital ward with 10 beds to a room, a shared bathroom, and what the government policy euphemistically refers to as "natural ventilation." With top-flight supplemental coverage, you receive care in the same hospital and from the same doctor, but you have a private room with a private bath, air conditioning, and fast streaming internet.
Matt: Yeah, Singapore is hot as hell. Something that's interesting about the healthcare debate in the United States is we're kind of an outlier country in one direction. We're also adjacent to Canada, which also speaks English, and so Americans have a lot of information about Canada, which looms large in this debate. The United Kingdom is further away but also speaks English, so we have a lot of information about them too. However, both Canada and the UK are opposite outliers. Canada, in particular, goes out of its way to prevent the purchase of extra health services outside its insurance umbrella. I think a lot of Americans think that the only spectrum on which we could have a government insurance plan is a system where the government needs to cover everything that people might want or need, or there might need to be extensive government rationing. Australia, although it's far away, has a system much closer to what you advocate in your book. This system seems more common sense once you learn about it. Most Australians buy private supplemental insurance, and most Australian providers work within this supplemental system. But the basic system is there, and it's very important. Both parts are mainstream in Australia.
Amy: Yeah, I agree. One thing that was somewhat both humbling and reassuring for us is the way we developed our proposal. We tried to create it from first principles, identifying the problem we're trying to solve and what is essential to that solution. Once we developed our blueprint, we realized it doesn't require some crazy new invention dreamt up by academics on a blackboard. It's actually what every other high-income country does: universal basic coverage with a budget and an option to supplement. There are a few Canadian provinces that don't allow for supplemental coverage, and also North Korea and Cuba. But everyone else in the world does.
That being said, I don't think our specific proposal can be found lock stock and barrel in any existing country's system. One thing we emphasize is the commitment to provide care for people when they're sufficiently ill. We want to have a program that provides coverage automatically and in which patients pay nothing for their care. That's different from systems in Australia, Switzerland, or the Netherlands and is more akin to Canada and the UK. On the other hand, we would design supplemental coverage differently from Canada and the UK, more like countries like Singapore, Australia, Israel, or Switzerland, where they actually allow you to pay for the supplement. For example, you mentioned LASIK surgery.
Returning to something that's covered in the National Health System in the UK, such as cataract surgery, they cover the surgery with the basic lens, but there are now special lenses that you might want which are more expensive. In our design, if the regular lens was $500 — I'm making up numbers here — and the special lens was $750, you'd get your cataract surgery completely covered and you'd pay the additional $250 for the special lens. In the UK system, if you want that special lens, you have to pay not only the whole $750 for that special lens but also for the surgeon doing the surgery; none of it would be covered by the basic system. To us, that's not a sensible design at all.
Matt: So, to help people understand — in the United States, if you have a kid, you can send them to public school for free, or you could send them to private school and pay a lot of money. What you can't do in most states is tell the school district you would like the money that they would have spent on educating your kid in the public school and you want to take that and then just sort of top it up with a little bit of extra money and and go to the private school.
There are a lot of policy arguments around the wisdom of that. In the UK, you're strongly discouraging people from entering the private supplemental system. It's not that nobody does it, but you have to be really rich, as you're badly overpaying. So it's a different program design choice, a different intention. In a rich country like ours, a lot of people have money. Healthcare seems like a reasonable thing a person might want to spend money on, and you want to welcome that, right?
Amy: Your analogy to public and private school is helpful because it crystallizes why we want an incremental top-up system. If you have a bit of money and you want to spend it on getting your child a different education, it doesn't seem fair that you can't do that just because you can't take the money that would have been spent in the public system with you. On the other hand, it raises the real concern, which you see in healthcare systems as well as education systems, that if you can take your money out of the public system, it might ultimately cause the public system to go downhill. There's both a political economy argument that if everyone but the poorest 20-30% are in the private system, there won't be enough public will to adequately fund the public system. Or there's the concern that the best doctors or teachers will get attracted by the higher salaries. I think that's a very real concern and one we tackle at length in the book.
Our answer here is less conceptual than empirical. You can see this playing out across different countries and there is a solution to this problem through sensible and attentive public policy. For instance, we give the example of Israel. They started a universal coverage program with this ability to supplement or top up in the early 90s and then through a combination of factors, like rising healthcare costs and an influx of refugees, found that more and more people were supplementing and that wait times and quality of care in the public system was going downhill.
So what did they do about it? They studied the problem and introduced solutions. First, they realized they had to fund the public system better, so they did. Second, they introduced several types of reforms to incentivize physicians to practice in both systems, like in Australia and the UK. They did a bunch of different reforms that make it really unappealing to be a full-time private practitioner and they did a bunch of different reforms that may not make headlines but can actually make the program sustainable. This is something that we would have to do under the type of program we're suggesting, and most countries do. There are examples where this has gone horribly wrong, like in some Latin American countries.
Matt: Yeah, there are a lot of governance issues in Latin American countries. The other thing about this that I think is importantly different from the status quo is that you propose that the public system should have a global budget. There's some amount of money that has been explicitly allocated for the universal basic system. And then that money has to be allocated. This seems normal, like how the Navy has a budget or your town's fire department has a budget. However, Medicare does not have a budget. Medicare has a set of program eligibility rules that determine who can be covered and under what terms. There is a set of rules about which kinds of services can be reimbursed by Medicare and according to what rules. Providers then send the bill to the government and you see what happens. The Congressional Budget Office and other entities make forecasts about Medicare spending and how policy changes will alter the situation, but there's no budget. There's no line.
Amy: Exactly, sometimes politicians or the media talk about the Medicare budget as if it's something that's growing, exploding, or in danger. But they don't mean it in the sense that we usually talk about a budget as a limit on how much can be spent. When I give my kids a budget for when they go to get ice cream, that's not a guesstimate of how much they're going to spend. That’s saying, you can't spend more than five bucks on your ice cream. The Medicare “budget” is nothing more than a description of how much the government has spent or how much it's projected to spend, and that's crazy. We don't do this for education or highways or police departments, or anything else, and it's not how any other country does healthcare. So, it's our both our most radical and also banal proposal that there should be a healthcare budget.
Matt: I think that's a really important topic because the current way of thinking about it does not make that much sense. It's incentivized some of these odd downstream ideas where in the 90s, Congress got the idea that they should try to limit the number of medical doctors as a way to save money on medicare which at first, when I say to people that that's what they did, they're like “that's insane because it's going to be more expensive if you limit the supply.” That's true; the price goes up right, but it it is actually true that you can reduce aggregate spending by limiting the supply. If you have a open ended financial commitment — my uncle always tells me about how he wrote a book 40 years ago about the effort to reduce hospital expenditures by limiting the number of hospitals through regulation. Many states have this certificate of need laws where if you want to open a hospital, you need to demonstrate that in some sense the state “needs” more suppliers.
Matt: And the theory is that this saves money and that's all downstream of not having a budget, like if you had a budget, you would say, “okay, we would like as many people as possible to get coverage given our limited budget and so more doctors is obviously going to make it easier for us to do that.” We worry about overspending in our public healthcare system. However, we don't have any budgets for it, and we could address this in a different way.
This would be the most radical thing in the system. People can reasonably disagree about how much exactly should be considered as basic or non-basic. There's never going to be a definitive decision around that. And even if your plan was adopted, there would still be ongoing political arguments.
Amy: Yes, I totally agree. There are some things, as we discuss in the book, that we could all agree would fall under basic coverage, such as hospital care for acute illnesses. Treatment for basic chronic illnesses and emergencies, etc., all the stuff that we end up trying to provide for people, would clearly be part of the basic coverage. I also think we could agree on some things that would not be part of basic care, like LASIK surgery. Then there's a huge gray area, as we discuss in the book. How on earth will we sort it out? Or you could view it as an opportunity. There's no right or wrong answer. It's a social, collective, political decision that depends on how much we want to spend and how we prioritize the remaining services.
Some early readers of the book, health policy wonks, wanted a clear list of what's in and what's out. But we said no, that's going to be super boring, and that's not the point. We talked about the process by which these decisions would be made, which is more important than the outcome, in part that's because this could be relitigated politically. But also, it's not a fixed thing; it will change over time as incomes, social norms, and medical technology change. Just as high-speed internet was considered a luxury 30 years ago and is now essential, with public policies promoting its distribution to underserved areas, the list of basic healthcare services will evolve. We need a sensible process to make these decisions and iterate on them going forward.
Matt: So, what is a good process? This is a big issue that happens in the current system, when someone invents something new and cool, like the weight loss drugs that seem very effective, there are real health implications, from serious health issues like diabetes to people simply wishing they could lose some weight. In your system, how would we decide what new inventions do and don't become part of the basic system?
Amy: That's a great question. We should do it the way every other country does, which is to start with a budget. In Israel, there's something called the "basket committee" where a certain amount of money is allocated for new medical technologies. There's always a debate about how much should go to defense versus healthcare, but that's a political and social decision for society to make.
Then, within that budget, a committee composed of technocrats and general stakeholders makes the decisions. At the first level, the technocrats and economists score things based on cost-effectiveness. They evaluate how much it costs to improve health through different measures. Then, the committee, which includes physicians and public leaders, considers factors that go beyond cost-effectiveness, like the principle of need. It’s a sniff test of — is this actually what we care about? An example of a failed sniff test came up when the state of Oregon tried to apply cost-effectiveness rationing within Medicaid in the late 1980s and early 1990s. Their first attempt was purely on this economist cost-effectiveness and it led to some really counterintuitive results. For example, tooth capping was estimated to be more cost-effective than emergency appendectomy surgery.
This wasn't because the estimates were wrong; appendectomies are just a lot more expensive than tooth capping. So, even though the benefits from appendectomy are much higher than those from tooth capping, the costs were so much lower for tooth capping that the ratio of benefits to costs was higher for tooth capping. This was deemed absurd, and rightfully so. They recognized this and went through a new process that grouped treatments into categories based on some sense of urgency or importance, and then applied cost-effectiveness within those categories.
Matt: Right, so we need some kind of expert commission that applies a mix of technical cost-benefit analysis and a "fudge factor."
Amy: Yeah, and a fudge factor/common sense — that’s the silver lining in the U.S. being such a healthcare policy laggard. If I was coming to you and saying this is how we should do it — expert committees and and this and that, you would be well within your rights to say this is some crazy academic who dreamed up some solution on her whiteboard and doesn't understand how anything could work in the real world. And that is all correct, I am a crazy academic, I don't understand how anything works in the real world, but it just turns out that all of the things that we're proposing are what other countries are actually doing so you don't have to just have faith that our theories. It turns out like everyone else kind of got it right.
Matt: Right, so there's a tendency to converge on this. But, wasn't there the "death panels" controversy 10 or 15 years ago when there was talk of injecting more technocratic control into the American healthcare system? From a left perspective, there's a lot of emphasis on ways in which the US is unusually stingy, which is absolutely true. But there's also this aspect of the American system where we strongly resist saying no on certain things, even though the private system is heavily subsidized and the elderly are mostly in this government run system. It's challenging to even persuade people that this is true.
Amy: I agree, there's a lot of resistance to so-called technocratic control of our health policy. We want decisions in the hands of doctors, not bureaucrats. But I actually think that that's a rhetorical and political position, look at Medicare. There are technocratic committees of physicians who decide what is covered and how much every single procedure that any doctor in the country is reimbursed. Those are committees. There's the political aspect — messaging of how you don't make what we're proposing sound any more technocratic than that. But the substance of it is that we already do this type thing, Medicare decides whether to cover new touch new technologies all the time.
Matt: That's a good point. Logically, how else could it work? The system would be completely dysfunctional without some kind of rule-setting process.
Amy: Yeah, when we say everyone can have a free public education K-12 someone has to do this at the state or even the local district level. Someone has to decide what constitutes public education. How many days a week is school held? What's the minimum math that has to be taught? We make these kinds of decisions all the time, including in healthcare.
Matt: I wanted to ask you about the balance of state and federal roles in this kind of system. Right now we have a lot of both. State governments are very influential over Medicaid policy and set many healthcare rules. The federal government provides a lot of money. In countries like Canada and Australia, there's a good amount of decentralization even though there's some some convergence on basic principles. So, how do we think straightening that out? Because this is really an area where the the historical legacy is just like happenstance — like who was in the Senate in any given day and what did they want to do.
Amy: It's a good question and there are two ways to answer it. One is to say that focusing on what is the problem we're trying to solve not only clarifies the solution but it clarifies the many many areas of discussion... the many areas where reasonable people can disagree, so you could have the universal basic coverage that we're proposing with the ability to top up you could have that through a single-payer or a multi-payer through through government provided or private provided or both. These are important and difficult issues but the solution can accommodate either of those and I think you could accommodate this through a purely federal system, a purely state system, or a mix. It's not going to fundamentally impinge the major goal of this redesign. The second answer is: while in our wildest dreams, this would be adopted as national policy tomorrow, in our only slightly less wild dreams, this could be done at a state level. You need some federal waivers, but many states that experiment with in various health policy ways like Massachusetts and Oregon. If we can't convince the federal government in the near term, maybe we can persuade a state to try it.
Matt: So, the basic goal here, to cap it all off, is a dramatic change. I understand that elected officials would prefer not to undertake significant redesigns of the healthcare system. There's political science wisdom as to why that would be ill-advised. So, what kind of upside would you sell people on? Peace of mind seems a significant aspect: a system where you don't need to worry nearly as much about falling through the cracks and where we're saving money. Will people also be healthier?
Amy: People won't be sicker but I don't think they'll be healthier. The key to further population health improvements — which are direly needed — is not through health insurance policy. That's not because medical care isn't important for health. It's absolutely essential for health. As we've talked about the patchwork system we have —including all of the ways we have public programs to pay for care for the nominally uninsured when they get really sick... so when the uninsured get medical care, they only pay about 20 to thirty cents on the dollar for it and mostly the public sector pays the rest because of all that. The main sources of ways to improve health and in particular to reduce health disparities are not through improved access to medical care. They're through the social determinants of health — healthier behaviors, diet, exercise, air pollution. That's really what health is about: health insurance is kind of a misnomer. It's not about ensuring your health per se, it's about protecting you economically when you become sick.
On the one hand, there's a certain level of sophistication where everyone kind of knows these tricks, but it can still strike people as counterintuitive. I wrote a piece a few months ago about the gap between US and European life expectancy. So many people wanted me to delve more into the difference in the health insurance systems. It was a hard sell to argue that while the difference in health insurance systems is significant, it isn't a substantial determinant of health outcomes. You co-authored a recent paper highlighting how the peculiarities of the American health insurance system is a significant labor market phenomenon, but it's not that significant as a determinant of health outcomes.
Amy: Yes, I completely hear you and I also struggle with this. However, to me, the most clear and compelling way to understand and explain it is through a recent paper authored by Chen Yiqun, Petra Persson, and Maria Polyakova. They examined the differences in life expectancy and mortality rates across the income distribution for the rich and poor in Sweden. They compared this data to the United States. In Sweden, which not only has universal health insurance but also a cradle-to-the-grave social safety net, the same shocking and disturbing differences in life expectancy between the rich and the poor that we see in the United States are present. That’s even crazier considering the income distribution is much more compressed in Sweden. So, the differences in income between the top and the bottom are less, but the differences in life expectancy are the same as in the US. It's counterintuitive for all the reasons we've talked about but we have to take the data seriously. It's not to say that technological progress in medicine can't have a huge effect on life and health. However, if you consider the current huge inequalities in health in the United States, it's really not about medical care and health insurance.
Matt: So, what we're really discussing is a classic economist optimization problem. How can we take what we're already doing, which is providing people with the care they need, more or less, and do it more efficiently? How can we create a system that is less stressful, less wasteful, fairer, has benefits for the labor market, and reduces the tax burden on the public, etc? But, if we want to dramatically improve public health outcomes in the United States, we would need to tackle other issues like diet, exercise, drug use, the murder rate, car accidents, and air pollution.
Amy: Air pollution, for sure, for sure. But let me just clarify that when you describe it as a standard economist's optimization problem, how to make something more efficient, I agree to a certain extent. However, I think that makes it sound harder than it really is. If you consider it as starting from scratch and building up a solid foundation rather than cobbling it together with sticks and glue, that's essentially what we're saying. For a variety of political reasons, we've been cobbling things together, but that hasn't been working. It's not that we need a completely new system at a fundamental level, we just need to do what we've been trying to do, but design it from the beginning so that it's coherent.
Matt: Fantastic. I think that's a great way to think about it. You've written a really good book that's quite readable even though it's written by academics. It's very insightful. In a way, you come away from it thinking, of course this is true, but it's so far outside the domain of what we're discussing in politics right now that it can make you said. Personally, I found it almost thrilling to be unencumbered by the tedium of what's actually feasible here. I hope people read it, I hope people buy it. Thank you so much for your time, Amy.
Amy: Thank you so much, Matt.
25 Likes
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.