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Bruce C. Valdeck, PhD

Are we in a health care crisis today?

Well, everybody's got a definite notion of what a crisis is. And it's important not to get hung-up on the semantics. We have very, very serious problems -- which are getting worse. We have almost 20 percent of non-elderly Americans who don't have insurance. As a result, they are much less likely to get health care when they need it. We have communities in this country where the health care institutions on which people have relied for their services for generations are in serious financial difficulty and could disappear at any time. We have a growing number of people with complex chronic illnesses of one sort or another who are finding holes in their coverage or an inability to pay for services that they know would benefit them.


What led us to this place in terms of health care?

Bruce C. Vladeck, PhD
Bruce C. Vladeck, PhD
Senior Vice President
for Policy Mount Sinai NYU Director of the Center for Medicare Practice and Professor of Health Policy and Geriatrics.
Mount Sinai School of Medicine

Well, there are really two things. One is, unlike essentially every other Western nation, the United States decided by default in the period after the Second World War not to have government assume responsibility for providing health insurance to the population, but rather, to insure the working age population through employment. And as the labor markets have changed and as the population has changed, as the economy has changed in the intervening 50 years, that system of employment-based insurance has become more and more fragile and more and more unstable, covering a smaller and smaller proportion of the work force. At the same time, modern medicine and medical science have really accomplished some extraordinary things, but some of them are very expensive. And in the absence of a single unifying social mechanism to figure out who's going to pay for them, we've essentially developed a system in which most of the major participants have as their principal objective not paying for it and making sure that somebody else pays for it. So, the absence of a centralized policy to ensure that everybody gets the services they need, creates all sorts of holes and all sorts of problems.

Do you think health care for
this country should be a social obligation?

Well, we do think it's a social obligation for large parts of the population. The notion that somehow another significant chunk of the population is allowed to fall between the cracks because they don't fit into any particularly good categories, doesn't make any sort of intellectual or ethical sense. So I think it's possible to get hung-up on all kinds of concepts of what you mean by guarantees or rights or so forth. But I have no qualms in saying that access to high quality care ought to be something that everybody who lives in the United States ought to be able to expect, and if no one else is going to guarantee it, the government ought to guarantee it.

How can we afford it?

Well, that's sort of a meaningless question from an economic point of view, and the fact is that we are already paying a large part of the bill for the most expensive parts of the system and the most expensive people in the system. And we're a very rich society and getting substantially more affluent all the time. When people ask, how can we afford it in a nation that bought seven million sports utility vehicles last year, I don't understand quite how to comprehend that question. The thing that's bothered policy makers and economists for years is that even though we cover a smaller proportion of our population than any other industrialized nation, we spend substantially more; everyone believes that if we were somehow more efficient in the ways we spent it, we could cover everybody without spending any more money. But since we've never managed to figure out how to reallocate the existing pie to cover the uninsured, and since we are so prosperous these days, it seems to me the first obligation ought to be to make sure that everybody's covered. Then maybe it becomes easier to run the system more efficiently if you're not busy trying to shift costs onto somebody else.

We pay twice what other countries spend on
health care. Why?

Well, we only pay about 50 percent more per capital than Canada or Germany, which have very extensive systems. I think there are two reasons for that. And one is, we pay a significant premium for decentralization and pluralism and for, multiple arrangements and lots of different private organizations of one sort of another. The administrative cost component of the American health care system is substantially higher than it is anywhere else, precisely because we have so fragmented and decentralized a system. Now the second reason is that every health care expense is somebody's income and the fact is that the income of the providers of health care, not only physicians, but other health professionals, administrators, investors, managers, are significantly higher relative to that of the rest of the work force in the United States than they are in any other country.

I think there's no question that it's been true for quite some time that the system of health insurance in the United States is collapsing, but whether the rate at which it's collapsing is highly indeterminant. And one of the things I think we've learned over the last 10 or 15 years is really a reaffirmation of the basic principle by which every New Yorker lives, that it can always get worse. We keep thinking things will get to a point at which they become unsustainable and they pass that point and life goes on. So again, I think there's a variety of reasons why politicians like to say, you know, "One more step and we're going to have to do something," but I'm not sure that the situation is such that we'll ever have the clear-cut right line which we cross and everybody knows, "Oh, now we have to do something."

Are the cost concerns we have due in part to the programs we have to improve access the health care?

Well, in terms of cost, Medicare and Medicaid, as far as anybody can tell, do relatively well. Given the people they cover and the range of benefits they cover, they're not terribly expensive. In fact, from an administrative point of view, they're much more efficient than most private health insurance. I think the concerns about the cost of Medicare and Medicaid are not what they're spending for what they're buying. I think the concerns are the classical political concerns that most citizens are paying taxes to provide services to some other subset of citizens, and people, or at least some people don't like paying taxes to provide benefits to other people. That's the complaint about the cost of Medicare and Medicaid.

Did you say we shouldn't expand Medicare?

Well, it depends whether you mean horizontally or vertically. First of all, we absolutely have to improve the Medicare benefit package. We have to add a prescription drug benefit. We have do to something about catastrophic out-of-pocket expenses. We have to better rationalize the relationship between Medicare and supplemental policies. But the question I think I was asked, is should we use Medicare as a model for expanding insurance to other parts of the population, particularly to children? And I don't think that Medicare is very good model for health insurance for children because the out-of-pocket expenses are too great and the deductibles and co-payments are too high. I think it's inexcusable that we haven't already expanded Medicare on a voluntary buy-in basis to uninsured people between the ages, say, of 55 and 64 or 60 and 64. That's a fastest-growing component of the uninsured population. Those folks, if they can't get employment related insurance, have no alternative in the current market. They're going to become Medicare beneficiaries soon enough. It's relatively easy to enroll them early, to set an actuarially sound price to keep the Medicare program held harmless from their enrollment. There's just no reason not to do it other than ideological opposition to expanding a public program.

How about the working poor?

Well, take the simplest example. People I don't think adequately understand the economics, but take someone who makes $10 an hour, which is not quite twice the minimum wage, and works full-time year-round, whose gross salary, therefore, is something on the order of $22-23,000 a year before payroll taxes, before commuting costs, before the many local taxes they have to pay. In the Northeast, a halfway decent family health insurance policy, can run anywhere from five to seven thousand dollars a year, and that's not the Cadillac policy; that's the Chevrolet policy. Well, you can't expect folks who are just getting by to be able to afford health insurance, nor I think can you expect their employers to pay what is, in effect, a 35 percent surtax on their wages to provide them with health insurance. The fact is that employment, even at a multiple of the minimum wage, in the United States these days is not enough to provide a family with a reasonable standard of living if the family has to pay for its own health care

What is the solution?

Well, I think we've been doing this backwards. I think people read a political lesson, correctly or incorrectly, from the failure of President Clinton's proposal and have concluded that we need to proceed incrementally even though it's getting harder and harder to do that. My own view is that we need to start from the proposition that everybody gets some degree of coverage, everybody gets something, and work backwards from there. In other words, if we're not prepared at the moment to guarantee everybody a comprehensive level of coverage, then let's think about what it is we are prepared to guarantee everybody and let's be clear about whose responsibility it is, because the real economic problem is, if you have a government guarantee of coverage, the fact of the matter is the analyses are all based on the assumption that once you have that guarantee, the employers stop providing the coverage, certainly those employers who are most financially pressed. Well, if you extract the money from the employers through taxes for what they used to pay in premiums, from an economic point of view, that's a wash, but from a political point of view this is seen is a very horrible thing. It's not longer private; it's now public. You can require the employers to continue to pay it and that, of course, makes the small business lobbies crazy, but I don't think you ever get to a hundred percent starting at 80 percent and adding five percent at a time because you're subtracting seven percent at the same time. I think we have to say, "As of such-and-such a date we're going to be at a hundred percent

What about the thinking,
"The people want it, the country needs it,
but Congress will never do it"?

Well, I think there's two issues there. I think we've got our political system in a kind of vicious spiral as well. I think as the role of media and money and campaigning becomes more and more important, people, political candidates are more and more locked into a certain kind of insider, inside the beltway mentality in which the realm of what is politically acceptable to talk about keeps shrinking all the time. But one of the things that's coming about as a result of that is that a larger and larger proportion of the population is entirely turned off to the political process. And the question really is, is when is somebody going to have the courage and the leadership and the vision to step outside the box and try to mobilize the half of the population that is not totally outside the political system, with some unconventional kinds of ideas. Now, my friends with whom I talk about this remind me, that scenario works, you know, as well from the right as it does from the left, but the fact is that the political process itself in sense is imploding as well as a smaller and smaller part of the population participates at all.

Should ethical concerns play a role in health policy?

Well, the answer is yes, but, and it's complicated in a pluralistic and heterogeneous and constitutional society like that of the United States where values play a role and where ethics play a role. I think certainly as long as any politician put himself or herself in the posture of promoting values or promoting religious beliefs or promoting a certain set of ethics, then they've certainly made themselves fair game for questions about ethics involving basic treatment of one's fellow citizens in society. And I think one of the things that distinguishes health care -- it's a little bit different from many other kinds of commercial transactions in which the government's involved. For example, like regulation of television licenses or something where ethics are not at all an issue. So I think it's important in a variety of ways, but, again, ours is a society that tends too, at a political level, express its ethical commitments or its ethical concerns in constitutional ways, that is, through law or legal principles, and I suspect over time that's probably a sounder footing for advancing the health care policy discussion than an appeal to a particular religious or non-religious based ethical systems.

How do we deal with the high cost of
prescription drugs?

Well, the way we deal with high cost prescription drugs is to create some countervailing market power vis-a-vis the sellers. The fact is that prescription drugs are not only increasing very rapidly in cost, but they're more expensive in the United States than they are in any other industrialized nation because we have fragmented our purchasers so extensively. And the fact is, further, that the Veterans Administration or some of the big HMOs or some of the big hospital chains pay an awful lot less for the prescription drugs than the Medicare beneficiaries who buy retail. So there has to be some way to better mobilize the market powers of purchasers to reduce the extent to which American consumers are cross-subsidizing consumers in Europe and Canada and so on and so forth. Whether that comes at some point at the expense of some of the profitability of the pharmaceutical industry or not is not my worry particularly. It's clear that the industry is spending an awful lot of money on research and development. It's also clear that even after spending all that money on research and development, it's not only much more profitable than most other industries, but more consistently profitable from one year to the next than most other industries.

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