Health Insurance
The Uninsured
Managed Care
Long Term & Chronic Care
Healthcare Timeline
Glossary of Terms
Asking The Tough Questions
Interviews with the Experts
Classroom Materials
Production Credits
How to Order A Tape
Broadcast Schedule
Site Credits

Uwe E. Reinhardt, PhD

Uwe E. Reinhardt, PhD
Uwe E. Reinhardt,PhD
James Madison Professor of Political Economy
Professor of Economics and Public Affairs Princeton University

Are we in a health crisis?

I don't think we're in a health care crisis any more than we have been in the last 30 years. There are many crises within the systems that are stressed. Academic health centers have financial troubles. Millions of Americans don't have health insurance, can't afford the care. So these are small crises, but the system, overall, is in good shape.

Who's most at risk?

Well, at risk in this country are basically low income working stiffs, as I call them. Those are people not poor enough to qualify for Medicaid and yet their employer doesn't give them insurance and they're not rich enough to buy an insurance policy, which would cost them about six to eight thousand for a family of four. When you're making 25,000 and you have that big a hit, you often say, "I go bare. Maybe I won't get sick." They are at risk.

How do experts in other countries view our U.S. health care system?

When you go to international conferences, there's always two themes. They admire our medical clinical care, because we're advanced. They admire some of the stuff we try to do with quality control, and they abhor our insurance system. They call it "asocial", "inhumane", "inegalitarian". They really think it's a horror show. So you have this split attitude. They come here to learn how we practice medicine, but they abhor our insurance system.

Let's talk about the insurance system here.

Yes. In the United States now, close to half of all health care dollars flow through the public budget, that is, Medicare, Medicaid, the Veterans Administration. Then we have the private system, 90 percent of which comes at the place of work. Your employer, when you sign on, gives you a menu of health insurance companies. You pick one. You pay a little, they pay the bulk, but in fact, of course, you pay it through your paycheck. And there are over a thousand private insurance carriers in the country, so it's an extremely complicated hybrid system.

What about the problem of coverage for individuals and preexisting conditions?

There's a real problem in the United States that's faced by a low income, working person, whose employer does not offer insurance. They would have to find individually purchased insurance. And, of course, then you're not part of a larger pool over which risk is spread. So if you're sick, that will drive up your premium, but even if you're totally healthy, it is extremely expensive to do this piece meal enrolling of people. It's much, much cheaper to enroll 10,000 General Motors employees. The administrative cost per enrollee is trivial, but when it has to be done one by one, something like 30 to 40 percent of your premium just goes for administration. And that is what makes it in a way a double whammy for a low income working stiff who doesn't have employer-provided insurance. They pay this huge overhead, but it isn't that the insurance company is gouging. It costs that much to do.

It seems more and more people are without coverage.

I think the employment-based system in the U.S. had, of course, a virtue, and that is that the company provided the risk pool and made it simple for employees. On the other hand, the cost you pay is if you lose your job, you lose that coverage. So at the worst moment in your life, you also lose your insurance coverage. If you're part-time, you usually are not entitled to this insurance. If you're sick, until recently, you had to wait a year before you could get on the company's plans for preexisting condition. So it's an extremely brittle arrangement that when you're employed and you're healthy, you have it, but the minute you're unemployed you could be in real trouble. And that happens, of course, a lot to 50 year-olds when their company gets bought out, restructured, they're on the street. That is, ah, a weakness of the system, that it isn't permanent. Every other country had insurance system where you stay with your insurance company for life and you are never without insurance. It just can not happen. Can't happen in Canada, in France, in England, or in Germany. It's not possible to be without insurance.

However, I once actually addressed the National Governors Association. There were all these very pious-looking governors in front of me and I gave a talk about how the devil seduced America's soul, and I described how the devil systematically built our health insurance system that has the feature that when you're down on your luck, you're unemployed, you lose your insurance. And I said only the devil could ever have invented such a system. Humans of goodwill would never do this. So this has to be the devil's work, and I still believe that.

Talk about the issue of rationing.

Rationing is basically defined as withholding something from someone that is beneficial. That's what rationing means. And you can do it in two ways. You can either use the price system by saying, "If you don't have any money, you will hold it from yourself." But are rationing yourself. Or you can do what Canada and Europe does, where the money is there, but they say, "We will deny it on administrative reasons, that unless you have this condition, you won't get it, or if you're too old, we will not do a heart transplant."

For most Americans we do not really ration yet at all. The sky is the limit, even under managed care. They deny very few procedures, about one percent of the procedures. So for most well-insured Americans there really hasn't been any rationing. Anything they want, ultimately they usually got. But for the 40 million uninsured, we have brutal rationing by price and their income. And I sometimes resent politicians or smug economists who say, "We can avoid rationing through the market, through the price system." That is so patently false, you would box the ear of a freshman in Congress for ever saying that, and here, you have grown-up politicians saying it. Markets ration. They ration by price and income. If you're a waitress, uninsured, and your child has an ear ache and you can not afford to go to a doctor, you have been rationed out of the system. And I'm appalled that there are politicians who can not understand this.

It seems we have a confusion about our approach to health care.

Well, Americans actually focus on the individual as the ethical unit and, therefore, that leads to the next step which every physician is taught, that you must do the best for that patient regardless of what the spill-over effects might be on other patients, because if you blow all the resources on one patient, you may not have money to look after the other. And this tension, it's really a contradiction, because, on the one hand, we pretend to be a community, but, on the other, we structure everything around the individual. We also do that with the legal system, where we'll blow millions on one case and then you condemn people to death, innocent people to death because we have no money for their lawyers. The foundation of any health system is the social ethic it should obey. And you have to actually make that explicit. If you go to the European Continent, they call about the principle of solidarity. That is the ethical principle, and because of that, they will not do certain things that may make economic sense. They say, "Oh, this would violate the ethical principle of solidarity." In the U.S., we really have never discussed ethics openly. It's something that's always swept under the rug and no one ever wants to engage in an open debate on what should be the social ethics that drives our health system.

Do you think Americans feel that health care is a social obligation or a commodity?

Well, first of all, when you say "Americans", there's such a variety when you do surveys. If you do surveys of ordinary working Americans, most will say health care should be a right. Health should be egalitarian. If you then go to the decision-makers, the corporate executives, the people who dominate in Congress, they can not openly say, "We disagree with this." But, in fact, if you know what they have done over the last 30 years, they believe health care is the individual's responsibility and it should be rationed by income and ability to pay. That is the official social ethic of the United States Congress. I wish they had the guts to say it, because if they said it, we could easier develop a health policy that matches that social ethic. But it is out of sync with what the people want.

How do we deal with the 40 million uninsured?

Well, the 40 million uninsured, most of them actually won't get sick in any given year. So it's not a problem. Those who do get sick, if they are mildly sick, ah, we let them fend for themselves. If they can afford to go to the doctor, fine. If not, they don't go. When they get really critically ill where it's life-threatening, they have a right, by law, to go to the nearest emergency room. And the emergency room, the hospital is obliged to stabilize them and to take care of them. And so ultimately there is a universal catastrophic insurance policy in force in this country, and it is the emergency room of your neighborhood hospital. That's, of course, an extremely inefficient way to provide health care, because you usually wait until people are really sick and then you have to do all kinds of expensive things. Plus we do know that uninsured people die earlier and die at a higher rate from the same illnesses simply because they go too late. Why do we let it go to this critical phase? Why can't we give these people an insurance policy? It might actually be cheaper.

If you look who are the uninsured, my answer often is they are the people that make America great. They're the people who get up in the morning, they work very hard, they make our life comfortable for the upper classes. They drive us. They fill our gas tanks. They're very proud people. And they usually don't beg. I mean they're really tough customers, but when they're sick, they don't really want to stand in the Medicaid line. They want what every other working stiff has, which is private insurance. My own sense is that while these people take care of us, serve us food, drive us when they're healthy and make our life comfortable, we owe it to them morally to look after them when they get sick. We ought to pay taxes to help these people.

Why can't we just maintain the status quo?

The problem with maintaining this catastrophic system, it is really a pin-the-tail on the donkey system. You go to the emergency room. You're deathly ill. They stabilize you. They can't kick you out. They have to treat you. And no one pays. So now what happens? You look around for someone who is paying to whom you can shift that cost, and it used to be the private insurance, employer-provided policy. But then came managed care and they said, "We've been hired by employers not to pay this anymore." And so then the hospital says, "Well, maybe we can stick it to the government." So the government passed a law that said "If you treat a lot of poor, we'll give you some extra allowances for the Medicaid and Medicare reimbursement to cover them." So we have sort of stopgap cost shifting, we call it. And that system, I think, is permanently maintainable if we have only about 30 million uninsured. When the number goes much above 40 million, then the hospitals and doctors find it a burden and you see agitation for universal coverage. So now you have a American Hospital Association and the American Medical Association and all these groups are agitating for universal coverage. But my personal belief is, secretly, they all will stop the minute we cover about ten million of them. It's always been the history, if you provide just enough relief so that they can sort of manage, the drive towards universal coverage stops.

Is it important that we have a one-tier health system such that when someone has an illness, no one could tell whether they're rich or poor by the way their hospital treats them? Or is it acceptable to say, "Let's give everyone a basic package." Do we want a system that is egalitarian, and by that, I mean that once your clothes are off and you have a given illness, you get the same treatment regardless of whether you're rich or poor? Is that what we want? Or do we tolerate a system that says, "We give everyone a guarantee of a basic level of care, maybe generic drugs even if it has side effects, or hospital wards. People who want better can buy with their own money an insurance policy that gives them that," which will be a two-tier or three-tier or multiple-tier system? It seems to me that's the big question that this nation faces. We fudged it by saying, "We won't discuss it," and in the process put in place a three-tiered system where the uninsured low income people get rationed brutally, the middle class get rationed mildly through managed care, and the upper class is still in the open Disneyland no-holds-barred fee-for-service system.

Where do you see us going?

If I look the next ten years ahead, the first thing I notice that the cost control that we achieved in the mid-90s is already gone. Premiums for small business are rising 12-15 percent per year. For big business you're talking seven to ten percent. And the inflation rate, overall, is almost zero. So health care costs are escalating again. For the bottom, we will probably in this decade cover another 10-15 million uninsured. But if we have a recession, we will be stuck with 30 to 50 million uninsured and we will ration them quite harshly as we always have. And I think that's the system that I see unless a politician with traction could come along and say, "Enough already." But I think ultimately what'll carry the day in November will be a politician will a very minimalist increment approach to cover the uninsured.

Personally, I say let us have a two-tiered system that's accepted and let us focus on the bottom tier and say, "Let us make it good enough to that, as Americans, we could be proud of it." I think that could be done. That would probably be based around managed care. It would have HMOs and it would have gatekeepers in it. You could have all of that if you follow the advice that we should monitor the quality. And it would entitle every American to have at least a right to this basic package and they should pay maybe 10-12 percent of their income towards it, but if they're poor, we should subsidize them. We have to be our brothers' and sisters' keeper. That is the Judeo-Christian ethic. Would this cost an arm and a leg? No. It could all be done for less than a hundred billion additional national health spending a year. It will be less than that, because the uninsured already do get care, they just get the most expensive care too late in the stage of this disease. Is a hundred billion an awful lot of money? The federal budget is 1.8 trillion. Our GDP is nine trillion and growing. How is a hundred billion a lot of money?

Speak to the question of who has the political will to get it done?

I once asked a senator, "If Jesus came to your office and asked, 'How do you explain that you make health care cheaper for a rich man than a poor man?' After all I said, what would you tell Jesus?" This was a nice Born-Again Christian. "What would you tell Jesus?" And he was speechless, and I said, "That is probably the most you could tell Jesus." But that is really what it's all about, the amount of tax forgiveness well-to-do people in America get because their insurance is tax deductible. Where is that fair? That is what's wrong, in my view, and the politician alone is to blame for that. There's no one else to blame but the politician in Washington, D.C. They have to answer for what I consider a highly immoral tax policy on health care.

Speak to the problem of expensive medications.

Well, medications are rising in price in very strange ways. If you actually look at a particular product and say, "How has its price risen over time," that's been only two to three percent. There's not been that much inflation. What really costs is that you had a product that worked and then a better one, similar but better, comes along and its price is two-and-half times the old one and that new product is protected by a patent. So it essentially has a monopoly in that regard. And it is that phenomenon of substituting new or better drugs for older than is driving drug spending. Plus, let's face it, the industry does a lot of research and there are a lot of great drugs, particularly for depression, for upper respiratory condition. lifestyle, even such things as Viagra. There'll be more of these. And if you look where a lot of the drug spending is, it's really in areas that make life a lot more tolerable for chronically ill people. And the question is, how do you pay for this?

Let me give you some numbers on pharmaceutical spending. As a percent of Gross National Product, it's one percent. Only one percent, as we speak, of GDP goes for prescription drugs. It's about eight to nine percent of total health spending. Only eight to nine percent is drugs. If you take all the pharmaceutical companies' profits this year, it's probably in the neighborhood of 20 billion. That's about a quarter of one percent of GDP. So these are not big numbers. The point of these numbers is to say, can America afford drug therapy? Yes. What is unaffordable is that a family with a chronically ill person, somebody with depression, they can not afford -- or an elderly person -- we have 12 to 15 million elderly who have no insurance for drugs at all -- elderly people often use drugs for quality of life. They can not literally afford it. So the problem is one of sharing. How do we share the wonders of this industry so that everyone can partake? And that is a task for Congress, obviously.

Back To Top